Some of the questions I have been asked a lot over the years concern 'core deposits/charges'. For those who would like to understand this topic better, I submit the following.
What is a 'core' and why are you charging me for it?
I have found that a 'core' charge is best explained as if the word were an acronym:
Credit
On
Receipt of
Exchange
Everyone's 'going green' these days, right? If you really think about it, the auto parts industry was one of the original 'green movement' founders. There are certain auto parts that are essentially recycled, so that the old ones that are removed from vehicles are used to make future replacement versions.
Some parts have a sizable metal housing that would be expensive to reforge (think of engines, transmissions, brake calipers, and some starters and alternators), so the housing is cleaned and restored, but the internal 'guts' are replaced with new components. Other parts (e.g. batteries) have components that are considered 'haz-mat'(e.g. lead plates, battery acid), so government regulations require special processing of those items. If your old part is needed for the recycling process, you will have to pay a 'core charge' as a deposit on top of the base price of the part. The deposit/charge is refunded to you when you bring back your old part, so that is your incentive to recycle.
Will I have to pay sales tax on the core charge/deposit? And if so, will get the tax back when I return the old part?
This is actually a trickier set of questions. Why? Because sales tax regulations vary from state to state.
At one point in my career, one of my peers had found a statement that mentioned Ohio was one of four states that charges sales tax on the core charge/deposit, but refuses to return it when only the core is returned. At that point, I recall North Carolina being mentioned as one of the other four. But, that is all I remember of that 'memo'. And, I was not able to keep a legible copy for future reference.
In preparation for creating this page, I did some independent research on this topic. I was not able to find any definitive source that mentioned all 50 states in 'yea/nay' fashion, so I committed to looking up each state's official stance. Suffice it to say, that is still an ongoing project, but I will share with you now what information I have found. I must stop short - for now - of citing the state law/code that proves what follows, because I do not have them in front of me. However, I will add that information in as I find the opportunity.
States that do *not* refund sales tax when only the core is returned:
California
Ohio
These states essentially view the core charge/deposit as an anticipated rebate. Ohio's wording specifically refers to the core charge as 'part of the aggregate value' of the merchandise in question. Think of all those mail-in rebate offers that you may or may not follow-through on completing. You pay full price in the store, plus sales tax, and then ask the manufacturer for your rebate check. Have you ever expected the manufacturer to reimburse you also for the sales tax that rebate would have saved you in the store?
[Update on 3.15.12 regarding North Carolina's stance: See Section 6-10, paragraph B, subparagraph 2 (it's on page 3 of this link). Note that in North Carolina, automotive parts are not taxable on the core deposit portion, with the exception of tires and batteries. So, buy tires or batteries, pay the tax on the core charge; return the old ones, the state keeps the tax; buy any other automotive part, and the only tax you pay (ever!) is on the base price of the part. I'm guessing that's an environmentally-based decision.]
[Update on 2.5.13 regarding Alabama's stance: See item (10) on page 2 of this link. It references Section 40-23-2(1), paragraph 2. Note that tax is generally charged on the "net difference [in] price", but "shall not be construed to include batteries".]
I don't recall now, but I believe Idaho keeps the sales tax on battery core deposits (probably for environmental reasons) while refunding the state sales tax on all other core charges. I need to re-verify that.
Let's call this page a work-in-progress. Until I have a definitive 50-state list included here, I will have my work cut out for me. Once I locate all the state 'legalese', I will not only reference it here, I will find a way to post a link to the original source.
Be Blessed!
