When redeeming a coupon issued by a store, 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. Special rules may apply when calculating sales tax due when customers use food stamps and stamps. For example, store-issued coupons generally reduce the sales tax receipt, while manufacturers' coupons don't.
For more information, see Tax Bulletin Food Stamps and Stamps (TB-ST-140) and TSB-M-11 (1 S, Treatment of Sales Tax in Relation to the Sale and Redemption of Certain Prepaid Discount Vouchers). 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. These consumers claim that they used a manufacturer's coupon, such as when paying at a Massachusetts Walmart, but were charged sales tax on the total price of the item rather than the post-coupon price.
Other discounts may affect the total purchase price and coupons and sales tax price collected, including store discounts, store coupons, manufacturer coupons, and employee discounts. However, many of these consumers now claim that coupon prices and sales taxes were too high, meaning that the consumer had to pay the amount of sales tax on the total price of the normal item when it should have been reduced with the corresponding coupon discount. 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 some third party. Manufacturer coupons or promotions, which reimburse the retailer for the discount provided, are not used to reduce the sales tax base.
When retailers accept coupons or certificates as part of the sales price of any taxable item, the value of the coupon or certificate is excluded from tax as a cash discount, regardless of whether the amount represented by the coupon or certificate is refunded to the retailer. Instant refunds applied at the point of sale are typically treated as manufacturer coupons and taxed according to state rules for them. Food Stamps and Stamps (TB-ST-140), Quick Reference Guide for Taxable and Exempt Properties and Services (TB-ST-740), Sales Tax Rate Publications (TB-ST-820). If you used a coupon at a Walmart store in Connecticut, Massachusetts, Missouri, or Texas, and the retailer collected sales tax based on the purchase price before the coupon was applied, you may qualify to file a Walmart coupon class action lawsuit.
Many consumers choose to use coupons as a benefit to reduce the total price of the item being purchased, but also to reduce the total amount of sales tax applied. The rules for how sales taxes apply to coupons, discounts, promotions and refunds can be complicated and can vary widely by state. This includes the purchase price after each discount was applied, including coupons that were used at locations such as Massachusetts, Walmart, or Illinois Target. Consumers are now asking questions about coupons and sales taxes, especially those shopping at Walmart stores in Massachusetts.