I bought 500 rounds of winchester 223. They are loose packed in the white box. It came 20 rounds per box. The brass on this ammo is discolored around the neck, I asked the guy why that was and he told me that it was becuase it is heat treated for strength. Is this true, and is this good ammo? Thanks.

The discoloration is normal.

Ammo Oracle

The ammo should be fine. Shoot it up!!

I asked the guy why that was and he told me that it was because it is heat treated for strength

The first thing I will tell you is that guy doesn't know what he's talking about, the cases are annealed in the shoulder area, the annealing makes the brass softer to prevent it from splitting so easily.  

He is right that it's normal and nothing to worry about.  Most commercial ammunition is polished after the annealing, the polishing removes the discoloration, but that is done for cosmetic reasons only.