When it comes to taxes, it can be difficult to know what is taxable and what isn't. This is especially true when it comes to coupons and vouchers. In this article, we'll take a look at the tax implications of coupons and vouchers, and how they should be treated when calculating FICA income and withholding taxes. The Internal Revenue Service (IRS) released a Technical Advisory Memorandum in 2004 that concluded that certain employer-provided gift vouchers are taxable income for employees who receive them.
The Florida Department of Revenue (“Department”) provides some examples of cases where a coupon is taxable. Sales price reductions resulting from the use of coupons or coupon codes are treated in the same way as discounts. If the manufacturer refunds a coupon, the coupon amount is still taxable in the transaction even though the amount paid by the customer is reduced by the coupon amount. This includes any coupon where the manufacturer fully or partially reimburses the retailer for the coupon.
In these cases, the coupon amount is still taxable even though the customer pays less for the item. The rules for how sales taxes apply to coupons, discounts, promotions and refunds can vary widely by state. However, beginning March 1, 1990, free meals received by people using such cards or coupons are now subject to sales tax on the price that would have been paid for the food if it had been purchased. Manufacturer coupons or promotions that reimburse the retailer for the discount provided are not used to reduce the sales tax base.
For consumers, this means that there is usually no difference between a coupon and a discount when it comes to sales tax. Since the taxable base is the amount of receipts you receive for selling the product, states generally do not distinguish whether the payment comes from the customer or a third party. The Internal Revenue Service has recently provided guidance on the tax treatment of vouchers, vouchers and gift certificates that employers provide to employees for special occasions, such as birthdays and employee awards. These are considered taxable income for employees once received.
Sales tax should be calculated based on the amount actually paid by the customer plus any nominal value or higher value assigned by the retailer of any redeemed coupon. Instant refunds applied at the point of sale are typically treated as manufacturer coupons and taxed according to state rules for them. In other words, a tax is levied on the coupon amount if the manufacturer refunds any amount to the retailer.