Coupons Are Taxable – Why Do We Have To Pay Sales Tax on Them?

coupons are taxable

It seems everything is taxable — even coupons! I never questioned the small print on the coupons I use, at least not the part about the customer paying sales tax. (I don’t understand why a manufacturer can say a coupon shouldn’t be doubled when it’s the retailer that makes a doubling offer, but that’s not my point here.) I never questioned the sales tax, but I know others have.

Recently, when we were about to pay for new car tires, I overheard the customer in front of us questioning the sales tax on his bill: “Why should I pay sales tax on this $40-off coupon? You don’t charge sales tax when the price is lower because of a store sale. Using a

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12 Responses to Coupons Are Taxable – Why Do We Have To Pay Sales Tax on Them?

  1. Hilary says:

    Ugh, I just paid sales tax on a cell phone that was literally free with my contract renewal. The tax ended up being $11, which isn’t a big deal for a new phone, but since it was an in-store discount, it sounds like it was bogus. Bummer.

  2. Tax Man says:

    In general, you pay sales tax on what the retailer charges for the item (e.g. $10 sale x 10% tax = $1 sales tax). If the retailer, reduces the price, the tax is also reduced (e.g. $2 discount so now we have an $8 sale x 10% tax = $0.80 sales tax). However, with coupons from outside parties (not coupons the retailer creates) the retailer still receives full price after reimbursement by the vendor for the coupon (e.g. $10 sale x 10% tax = $1 sales tax; $9 paid by customer, $2 paid by mfg.). That is why the customer pays sales tax, even if the item is free. The retailer is still receiving full value for the item and that is what the tax is based on. In an ideal world, the mfg. would pay the sales tax on the coupon, but when a retailer submits coupons to the mfg., they could be for sales that occurred in all 50 states and neither the retailer nor the mfg. would know all the correct tax rates or be able to report the correct tax back to the correct taxing authority. So taxis collected from the customer at the time of sale. With counties, cities, and special districts, there are over 7,000 different authorities who collect sales tax.

  3. Tim says:

    Using that logic, it would seems that someone should be paying tax on the handling fee that retailers receive for each coupon they remit, which is in addition to the face value of the coupon. To me, it’s all just another way to part citizens and their money (and a clever one as most people do not notice–unless the item would otherwise have been free).

  4. steve says:

    Your wrong in saying a that 6% your paying 94% of the value. $100 is not $94. To be exact your only pay just under. DOIN THE MATH

  5. Anne Marie says:

    I would have to say that my biggest problem with having to pay tax is that the store gets the value of the coupon plus a handling fee (on my 50 cent coupon it was 8 cents plus the value of the coupon) so why doesn’t the tax come out of that???

  6. cptacek says:

    Totally depends on the state. If you have a problem with it in your state, hit up your state representatives. They might be more receptive to changing the sales tax laws than you think! In fact, they might not even know what they are at the moment…

  7. ncooty says:

    This extra charge is a small portion of the price we pay (sometimes literally) for poorly educated fellow citizens.

    One other point that’s not mentioned here: the superfluous “tax” charge we pay on those seller-issued coupons is likely never paid to the state as tax. It’s usually kept by the seller as revenue, because the accountants are smarter (or more conniving) than most customers are. Taxes are calculated and paid in aggregate, and because the accountants don’t count the full product cost as sales revenue, they don’t pay taxes on it.

    As with the article’s author, I just try just to consider the value I’ll actually get from the coupon, not what I SHOULD get. I’m long past the point of trying to argue with imbeciles who don’t understand math, taxes, logic, etc. and don’t have the authority to override the cash register anyway.

  8. Josh says:

    Your wrong in saying a that 6% your paying 94% of the value. $100 is not $94. To be exact your only pay just under. DOIN THE MATH

    It’s funny that you can’t communicate at an 8th grade level but you think you’re (see that – “you’re” – not “your”) qualified to give a math lesson. It’s really pretty simple (although obviously too complicated for you); you have a coupon worth one dollar, but it costs you six cents in tax. Ergo, you only get 94% of the value of the coupon. If this is too complicated for you, any non-retarded 10 year-old should be able to explain it to you.

  9. Josh says:

    …because the accountants don’t count the full product cost as sales revenue, they don’t pay taxes on it.

    Of course accountants don’t count the product cost as sales revenue, because, generally speaking, the point of having a business is to have sales revenue that exceeds the cost of goods sold. If not, a business won’t last very long!

    You seem to be implying that the accountants leave out the revenue received from manufacturers due to coupons – you’re incorrect. Or I should say, any accountant that wishes to keep himself employed and free from legal trouble would not do such a thing because that would be tax fraud. It wouldn’t take long at all for an independent auditor (or worse, an IRS auditor) to find that.

  10. Stephanie says:

    I’ve just started collecting printed and cut-out coupons a few days ago. It’s a good thing I stumbled upon this post so now I won’t be surprised if the supermarket charges me for tax when I use these coupons. This is all new to me so thanks a lot for giving a very simple explanation!

  11. Sean says:

    Josh,
    While steve’s comment indicates a lack of education, your comment shows a lack of civility. Probably not, but for all we know steve may be a 9 year old child. He was wrong. Was the contempt you voiced right?

  12. Kevin says:

    Josh, I totally agree with Sean. Using that form of degrading reference is bringing you down too a very low level. Sometimes people are looking for the right thing to say but it just doesn’t come out right. You don’t want to be another Ann Coulter do you?

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