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Every once in a while, however, some people go off the reservation and push the envelope and create a potential problem for the rest of the tribe. We are starting to see something along those lines now that you need to be aware of to help avoid having your LKE transactions reversed.

What we are starting to see are pass-through transactions where machines are provided to a dealer who sends them to auction, receives the sales proceeds to offset the cost of the new unit with the customer believing this transaction is a LKE. In addition, dealers are taking this same transaction and treating the used unit provided to the dealer as a "trade-in" thus charging a lower sales tax (where applicable). In our example they are charging sales tax on the $150,000 and not the $200,000.

So the question becomes:

- Can the auction sales proceeds be treated as a trade-in for sales tax purposes?

The answer is MAYBE to the first question and PROBABLY on the second depending on how the transactions is structured and documented.

Reviewing this transaction you find no third party intermediary is used to hold the restricted funds. In addition, the "sold" unit was actually sold and proceeds collected, thus potentially negating the trade-in for tax purposes.