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Illinois trade-in cap affects out-of-staters differently

January 24, 2020
Dealers should be aware that of all the states bordering Illinois, Indiana is the only "non-reciprocal" state. That means that an Indiana resident who trades in a vehicle when purchasing from an Illinois Dealer is subject to the Illinois $10,000 trade-in tax cap. Conversely, when a resident of any other bordering state (Wisconsin, Iowa, Missouri, etc.) purchases a vehicle from an Illinois Dealer, the rule hasn’t changed.
That means the Illinois Dealer can provide a driveaway sticker, subject to rules in place for qualification (customer must be a "resident" of that reciprocal state, sign an Illinois DOR approved affidavit to that effect, and provide a copy of an out of state driver’s license or other approved identification to the selling dealer), and the customer then can register the vehicle in, and pay tax to, the reciprocal state without any Illinois tax obligation.
The tax laws of the reciprocal state will dictate the amount of tax paid, and the Illinois trade in cap will not impact the transaction.