Illinois – Non-Reimbursed Coupons Are Not Taxable Receipts

SALT Report 1759 – The Illinois Department of Revenue issued a Private Letter Ruling regarding the taxability of discount coupons.  The Taxpayer owns a chain of retail stores and as a promotional program he offers his customers a coupon to be used on a future purchase.  The coupon is for a fixed amount and must be used during a certain period.  If the coupon is not redeemed during the specified period it expires.  When the customer redeems the coupon the Taxpayer does not receive reimbursement from any vendors or manufacturers.

The Taxpayer requested guidance regarding the sales tax treatment of a retailer provided discount coupon that reduces the selling price.

Ill Admin. Code86 §130.2125(b) states that, “If a retailer allows a purchaser a discount from the selling price on the basis of a discount coupon for which the retailer receives no reimbursement from any source, the amount of such discount is not subject to sales tax.”

Based on the above information the Department determined that the coupons that the Taxpayer’s customers redeem should be treated as non-reimbursed discount coupons.  The values of these coupons should not be included in the gross receipts and are not subject to Retailers’ Occupation Tax.

For Further Information:

Illinois Department of Revenue – Private Letter Ruling ST 12-0006-PLR