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Last Updated: 11/29/2016

Discounts and Coupons

​Discounts and coupons allow customers to purchase goods and services at a reduced price. Examples include:

  • Buy one, get one free
  • Deal-of-the day
  • Manufacturer coupons or discounts
  • Membership discounts
  • Retailer coupons or discounts

The price you charge tax on depends on if you are reimbursed for the discount or coupon being redeemed.

Are you reimbursed by a third party?

Charge sales tax on:

Yes

Total sales price before you subtract the discount amount

No

Sales price after you subtract the discount amount

In-store discounts that are reimbursed by a third party are treated like a manufacturer’s coupon or discount even though the customer does not present a physical coupon.

Note: Sales of coupon books are not taxable.

Quantity discounts

Quantity discounts are offered to urge customers to buy larger quantities. Charge sales tax on the discounted price.

Cash discounts

Cash discounts are given if the customer pays for an item before the payment is due. Charge sales tax on the discounted price.

You must keep records to document the discount.

Daily deal website vouchers and coupons

Generally, customers buy discount vouchers and group coupons online and then bring them to the retailer for the discount. The purchase of a discount voucher is not taxable. If the item (or service) is taxable, charge sales tax when the voucher or coupon is redeemed.

Do you know how much the customer paid for the voucher?

Charge sales tax on:

Yes

Amount paid for the discount voucher

No

Face value of the discount voucher

Note: Your records must support the tax calculation.

For more information, see Fact Sheet 167, Coupons, Discounts, Rewards, Rebates, and Other Forms of Payment.

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