When a coupon issued by a store is redeemed, sales tax is based on the discounted price of the item cost after the coupon is applied. However, manufacturer-issued coupons, which are normally issued by manufacturers of goods, generally do not reduce the amount of sales tax owed by the consumer. If the item is for sale at a reduced price or with a seller-issued store coupon, sales tax is charged on the reduced price. If the reduced price is the result of a manufacturer's refund, such as a coupon or refund from the manufacturer or a refund from a third party, sales tax will be charged on the total price of the item regardless of the refund to the seller.
Coupon sales involving price reductions given after the sale, following presentation of the coupon at the retailer's service counter, counter or similar, are also subject to tax only on the reduced price, provided that the retailer cannot be reimbursed for the coupon. The rules for how sales taxes apply to coupons, discounts, promotions and refunds can be complicated and can vary widely by state. When food stamps and stamps are used to make purchases, or when used in combination with cash or other forms of payment, this affects the way sales taxes are calculated. Sales tax should be calculated based on the amount actually paid by the customer plus the nominal value or higher value assigned by the retailer of any redeemed coupon.
CASH EQUIVALENTS Retailers should continue to charge sales tax on the total retail price of purchases made with vouchers, gift certificates, commercial stamps, or similar items (whether called coupons or not) that are in the nature of cash equivalents rather than price reductions. When a coupon does not show a manufacturer discount, but the manufacturer refunds it to the seller, the seller collects tax from the customer on the reduced price. In such cases, the coupon refund results in a price reduction by the retailer, and sales tax will be calculated on the reduced price, regardless of the face value of the coupon. However, the tax must be declared in the seller's return based on the total price of the item, without subtracting the amount of the coupon.
PRICE REDUCTION COUPONS In general, the treatment of sales tax on purchases made or items obtained through coupons that result in a reduced price for the consumer is based on whether or not the manufacturer or another third party can refund the voucher to the retailer. Since the seller will receive a refund from the manufacturer for the coupon amount, the actual sales price will not be reduced, even if the amount paid by the buyer is reduced. When a customer redeems a manufacturer's coupon and the store also offers its own store discount equal to the amount of the manufacturer's coupon (double coupons), the tax is calculated on the cost of the item, minus the store discount. The coupon amount is part of the sale price of the item and is taxable if the purchased item is taxable.
When a customer uses a manufacturer's coupon, sales tax applies to the total price of the item, not the discounted price. Store coupons are price reductions offered directly by the retailer and are not reimbursed by the manufacturer or distributor.