SALT Report 2295 – The Minnesota Department of Revenue updated their sales tax fact sheet regarding coupons, discounts, and other forms of payment. The fact sheet explains how to properly calculate sales tax when the following affect the price of an item:
- Gift certificates
- Scrip, and
Generally, the value of a manufacturer’s coupon is taxable as part of the selling price of a taxable item because the manufacturer reimburses the seller for the value of the coupon. However, the value of a retailer’s coupon is not taxable because the retailer is not reimbursed by a third party for the value of the coupon.
Rebates for all taxable items are taxable and sales tax is due on the full purchase price of the item. This applies if the rebate is used at the time of sale to reduce the purchase price or if the rebate is mailed to the customer after the sale. However, motor vehicle rebates are treated differently than other rebates and are not taxable because the law specifically excludes motor vehicle rebates from sales tax.
Gift cards and gift certificates are considered an alternate form of currency issued by the seller for the purchase of goods or services. No tax is charged on the sale of gift cards and certificates. However, sales tax should be charged when the gift card or certificate is redeemed for taxable goods or services.
The issuer of the gift cards or certificates is responsible for paying sales or use tax on all inputs, such as printing, paper, or cards, as well as any packaging, such as envelopes, boxes, or bags, used for the gift cards or certificates.
Discounts offered by the retailer reduce the selling price and are not taxable. Therefore, sales tax should only be charged on the discounted selling price.
The fact sheet also addresses the application of sales tax to quantity discounts, cash discounts, and group discounts.
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