Back-to-Back Credit

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Back-to-Back Credit

An agreement by a bank to guarantee payment by a seller made at the same time another bank guarantees performance by a buyer. Back-to-back credit is intended to reduce the risk of a transaction to a minimum. Back-to-back credit is also called countervailing credit or reciprocal credit. See also: Back-to-Back Letter of Credit.
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The rules applicable to the various states are detailed in Publication 39, A Guide to New York State Reciprocal Credits for Sales Taxes Paid to Other States, available at www.
If the state where the purchase occurred allows a reciprocal credit for both the state and local portion of the tax, then New York's credit is the sum of the state and local taxes paid by the buyer in the purchase state.
If the state where the purchase occurred allows a reciprocal credit only for New York's statewide tax, the use tax credit is limited to the New York State portion of the use tax obligation (not the local portion) and cannot exceed the amount of state tax the New York buyer paid in the purchase jurisdiction.
If the state where the purchase occurred allows a reciprocal credit only for New York's local taxes, then the New York credit is limited to the local share of the New York use tax and cannot exceed the local tax paid in the purchase state.