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Michigan consumers will no longer be taxed on the full purchase price of new or used motor vehicles, recreational vehicles, or titled watercraft when a consumer provides a trade-in towards a purchase.

Starting December 15, 2013, Public Act 160 phases in an exemption from sales tax on the agreed upon value of a trade-in on the purchase of a new or used motor or recreational vehicle. The "agreed-upon value" of a trade-in must be stated on the invoice given to the purchaser. The exemption that is not subject to sales tax is currently limited to the lesser of the agreed-upon value or $2,000. Starting January 1, 2015, and each January 1 thereafter, the exemption is increased by an additional $500 per year. In the year in which the exemption exceeds $14,000 and each January 1 thereafter, the full amount of the agreed-upon value is exempt from sales tax.

As of November 15, 2013, the agreed-upon value of a titled watercraft will be exempted from sales tax when used as part payment of the purchase price of a new or used titled watercraft if the agreed-upon value is separately stated on the invoice.

If you have additional questions about the exemption, please contact your local UHY LLP professional.