What is the CA sales tax consequence of exchanging a defective product for product of equal or greater value?

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In the case of product exchange as you describe, if the value of the replacement product is equal to the value of the defective product, no additional sales tax should be charged. The vendor will void the original sale and report and remit the tax on the replacement "sale." If the replacement product has a value greater than the original product, sales tax on the additional value should be charged to you by the vendor.

We confirmed this with a representative at the California Board of Equalization, who indicated that this is covered under Regulation 1655. Should you wish to talk to a representative at the California BOE yourself, you can reach them at 800-400-7115.

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