By Suzanne Palms and Open Weaver Banks
The Louisiana Court of Appeal held that GameStop, a video game retailer, correctly applied trade-in credits to reduce the sales price of new items in determining local sales tax due. GameStop accepted used games from its customers in exchange for a trade-in amount on a stored value card (an “Edge Card”) for use by the customer at GameStop at a later date. In computing the tax due on purchases paid for using an Edge Card, GameStop charged sales tax on the sales price of the new purchase, less the trade-in amount taken from the Edge Card.
Relying on a regulation, the Department argued that the trade-in amount on the Edge Card could not offset the taxable sales price unless the trade-in occurred simultaneously with the sale. The court found that the statute, which excludes the market value of any article traded in from the determination of sales price, does not define “trade-in” and does not set forth any time frame within which a trade-in must occur. Construing the term “trade-in” liberally in favor of GameStop, the court held that Edge Card transactions came within the generally prevailing meaning of “trade-in.” Furthermore, the court determined that the Department’s regulation, requiring a simultaneous trade-in and sale, impermissibly expanded the taxing jurisdiction of the statute. GameStop, Inc., v. St. Mary Parish Sales and Use Tax Dep’t, No. 2014 CA 0878 (La. Ct. App. Mar. 19, 2015).