An IRS Technical Advisory Memorandum released in 2004 concludes that certain employer-provided gift vouchers are taxable income for employees who receive them and, therefore, should be considered when calculating FICA income and withholding taxes. 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.
It also includes any coupon where the manufacturer fully or partially reimburses the retailer for the coupon. In Examples 1 and 2, the manufacturer reimburses the seller for the coupon (or factory refund), which keeps the reduction attributable to the coupon taxable. The rules for how sales taxes apply to coupons, discounts, promotions and refunds can be complicated and 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, according to the justification for the treatment of other cash equivalents.
Manufacturer coupons or promotions, which reimburse the retailer for the discount provided, are not used to reduce the sales tax base. For consumers, the difference between a coupon and a discount doesn't make much of a difference most of the time. As indicated below with manufacturer coupons, 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.
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. The advice, recently provided by IRS Federal, State and Local Government (FSLG) specialist Marilee Basaraba of Oregon, states that all gift certificates, vouchers and other cash equivalents are taxable for the employee once received. REFUNDABLE COUPONS Redeeming a voucher by a retailer for which the retailer can obtain a refund, whether the coupon is issued by a manufacturer, another third party, or the retailer itself, is part of the consideration for a sale. 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.