Discounts and Coupons
Discounts and Coupons
Discounts and coupons allow customers to buy prepared food and drinks at a reduced price.
Examples of discounts and coupons:
- Buy one, get one free meals
- 50% off the purchase of second entrée
- Free drink with a purchase of an entrée
- Free child meal with the purchase of an adult meal
What do I charge sales tax on?
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 |
Online Discount 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 Coupons, Discounts, Rewards, Rebates, and Other Forms of Payment.
Employee Meals
If employees receive a discount on meals, charge tax on the price an employee pays for a meal. For example: Your employees get a 15 percent meal discount. The menu price (before tax) is $10.00. The $8.50 discounted price is taxable.
If employees receive free meals, you owe use tax on the cost of any taxable items used in the meal. For more information, see Free Meals and Drinks.
Free Meals and Drinks
Free meals and drinks are given away with no purchase necessary, which does not include two for one meals, free child meals (with adult purchase), or coupon meals.
You must pay use tax on taxable items provided or included with a free drink or meal.
Examples include:
- Disposable cups
- Napkins
- Prepared food
- Soft drinks in cans or bottles
- Straws
If you serve free drinks, you must pay use tax on the cost of liquor used in the free drinks. Use tax includes the state general use tax rate, the liquor gross receipts use tax, and any applicable local taxes.
Note: Use tax is not due on the cost of nontaxable food.
Complimentary Hotel Meals
Meals and drinks are considered complimentary when they are included in the price of a room, and the room charge is the same whether or not the customer consumes the meal or drink.
Examples include:
- Appetizers
- Beverages (alcoholic and nonalcoholic)
- Continental or hot breakfast
- Cookies and snacks
- Evening dinner
Note: Tax is due on any taxable items used to provide complimentary meals or drinks.