Sales Tax on Discounts, Coupons and Promos
When coupons or certificates are accepted by retailers as a part of the selling price of any taxable item, the value of the coupon or certificate is excludable from the tax as a cash discount, regardless of whether the retailer is reimbursed for the amount represented by the coupon or certificate.
With few exceptions, sales tax applies to the gross receipts received or gross selling price received from the sale of products or taxable services. The specific definition will vary by state but, for example, Georgia sales tax law defines the term “sales price” to be the selling price of the product less any “ discounts, including cash, term, or coupons that are not reimbursed by a third party that are allowed by a seller and taken by a purchaser on a sale.”
In layman’s terms, that means if the original price of something you sell was $100, but you offer a 50% discount, then the taxable price is $50.
Discounts-Percent and Dollar
Because discounts are generally offered directly by the retailer “store” and reduce the amount of the sales price and the cash received by the retailer, the sales tax applies to the price after the discount is applied. For example, your normal selling price is $30 but you are offering a 5 percent discount for first time customers. The tax base is $28.50. The same holds true if you are offering a dollar discount rather than a percentage discount. The normal price is $30.00 but you are offering a $5.00 discount for returning customers. Your tax base (prior to any taxable shipping) is $25.00.
If, however, the discount is sponsored by the manufacturer or the distributor and you will be reimbursed by either of these parties for offering the discount, the sales tax base is the full sales price and not the reduced sales price. As noted below with manufacturer’s coupons, because the tax base is the amount of receipts you receive for selling the product, the states generally don’t distinguish whether the payment comes from the customer or by some third party. As noted above in the Georgia definition, coupons that are reimbursed by a third-party are NOT treated as a sales price adjustment. This rule is pretty uniform across the country.
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