Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 295.0940.175


295.0940.175 Credits Given to Purchaser of Sample Merchandise. A distributor of advertising specialties, i.e., pens, ashtrays, calendars, coffee mugs, etc., purchases sample merchandise from the suppliers of the merchandise. The sample merchandise is shown by the distributor to potential customers. The suppliers bill the distributor for the sample merchandise but the amounts billed are reduced by subsequent credits. If samples were not billed and if suppliers were to offer unlimited free samples and catalogs, there would be substantial and almost uncontrollable waste of resources. The basis for the credits from the suppliers are not uniform. Some of the bases from which the credit is determined are as follows:

(1) Based on prior year's purchases.

(2) A memo billing is sent with the samples. These are totaled at the end of the year and credited out in whole or in part in accordance with purchases made (other than samples) during the current year.

(3) Bill and collect for samples as they are shipped and a check or credit is issued at the beginning of the following year in accordance with established policies.

The above credit or rebate is not an adjustment of the sales price of the samples but rather is consideration applied to pay for them. section 6011 expressly provides that the "sales price" includes any "amount for which credit is given to the purchaser by the seller." The rebate is a credit given to the distributor, purchaser, by the suppliers, sellers, in consideration of its making a certain volume of purchases of resale merchandise. While the credit may, by reason of the agreement, be limited to the value of the samples, this does not preclude its classification as consideration received for making the volume purchases. Absent a specific volume of purchases, the credit would not have accrued and the price of the samples would necessarily have been required to be satisfied from other sources. 10/28/85.