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Last Updated

November 26, 2025

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Coupons and Other Forms of Payment

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This publication explains how sales tax applies to coupons, discounts, rewards, rebates, and other forms of payment.

Definitions

Coupon
Allows customers to purchase goods or services at a reduced price.

Reward
A prize or other incentive given to a customer to encourage customer loyalty. Rewards are typically obtained through a reward program offered by a seller or third party.

Rebate
A discount given at the time of purchase, or money sent to a customer after they’ve paid full price. Rebates can reduce the purchase price or be sent to customers as cash or credit after the sale has taken place.

Sales Price
The amount subject to sales tax is based on the total amount of consideration received for the personal property or services sold. Consideration may be valued in money, or otherwise. For example, reward points used to purchase items does not reduce the sales price but are part of the total consideration received on the transaction.

Applying Sales Tax

The type of coupon or reward will determine when sales tax is charged. The tax treatment of any reward program will depend on the facts and circumstances of the specific program and does not depend on how the rewards program provider characterizes the program.

Note: Retailers must maintain records to support their tax calculations.

Charge Sales Tax Before Reducing the Price

Sales tax is charged on the full retail price before:

Using manufacturer (or third-party) coupons
Applying reward program discounts that are refunded in store credit, including enrollment discounts or discounts for buying certain products or services
Receiving rebate vouchers for future use with the same retailer or store
Redeeming rewards when used on taxable items or services, even if earned, purchased, provided in exchange for services, or reimbursed by a third party

Note: Motor vehicle rebates are not taxable. See Motor Vehicles.

Charge Sales Tax After Reducing the Price

Sales tax is charged after the coupon or discount is applied when using:

Retailer or store coupons, for specific retail locations and not reimbursed by a third party
Competitor coupons

Bundled Rewards

When a taxable reward is combined with a nontaxable reward, the whole reward is taxable unless the retailer can provide documentation showing otherwise.

Retailer Discounts

Retailers may offer other discounts that reduce the sales price and are not taxable.

Quantity Discounts

Quantity discounts are price reductions given to buyers who purchase large quantities of an item. Quantity discounts reduce the price of the items purchased. Sales tax is charged on the discounted price.

Cash Discounts

Cash discounts are a deduction allowed to customers who pay a bill either in a specified time or payment method, often by cash or check. Sales tax is charged on the discounted price.

Promotional Discounts

Promotional discounts are different from rewards programs as they are not offered on a continual basis.

Promotional discounts are typically offered as a percentage discount or a dollar value for use only at the sellers’ store. Certain promotions may provide the customer with a promotional discount for use on future purchases or reduces the sales price of the current transaction. When the discount applied will determine what price to charge sales tax on.

Discount on Present Transaction
If the promotional discount is applied to the current transaction, charge sales tax on the discounted price.

Discount on Future Transactions
If the customer receives a promotional discount for a future purchase, this does not reduce the sales price of the original transaction. Charge sales tax on the full sales price of the transaction. When the promotional discount is used on a following transaction, charge sales tax on the discounted price.

Daily Deal Website Vouchers and Coupons

Discount vouchers and group coupons are purchased online and brought 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.

Note: The retailer’s records must support the tax calculation.

Do you know how much the customer paid for the group discount voucher?	Charge sales tax on
Yes	Amount the customer paid for the discount voucher
No	Face value of the discount voucher

Trade-Ins

If you trade in an item that is both taxable and something the seller usually sells in their business, you may deduct its value before calculating sales tax.

Note: Special rules apply to motor vehicle trade-ins. See Motor Vehicles.

Other Forms of Payment

Gift Cards and Gift Certificates

Gift card and gift certificate sales are not taxable. Treat them as cash and include the sale amount in your gross receipts.

When a gift card or gift certificate is redeemed for taxable goods or services, charge sales tax on the full sales price before subtracting the gift card or gift certificate amount.

The issuer owes sales or use tax on any inputs used to produce and package the gift cards and gift certificates. For example, printing, paper, card stock, envelopes, boxes, bags, etc.

Barter

Barter (or trading) is the exchange of goods or services between two or more parties. If the goods or services are taxable, sales tax must be handled in one of two ways:

Include sales tax in the value of the goods or services being exchanged
Charge the other party for the sales tax separately

Alternate Forms of Currency

All alternate forms of currency used to buy goods or services are treated the same as cash. For example, scrip and cryptocurrency.