Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 295.0941


295.0941 Discount Coupons. A taxpayer, who is in the restaurant business, sells coupon booklets for $1.00 each which contain multiple discount coupons entitling the purchaser to various discounts on meals sold by the taxpayer.

The sales of the coupon books by the taxpayer are regarded as sales of nontaxable rights to discounts on its meals. The actual coupons are a record of the rights to receive the discounts and do not constitute a sale of tangible personal property at the time the coupon books are sold. However, when a coupon is presented by a customer, it is regarded like that of a manufacturer's coupon since the taxpayer will have received compensation from the customer via the amount previously paid by that customer for the coupon. This means that the taxpayer's gross receipts from the sale of a meal to customers presenting a coupon will consist of any amounts received from the customer for the meal plus an amount representing a pro rata share of the $1.00 coupon allocated to the coupon used by that customer. This prorata share equals the $1.00 coupon booklet allocated to the coupon booklet divided by the number of coupons in that booklet that the retailer, in good faith, believes a customer might redeem toward the purchase of meals. Thus, if a coupon booklet contains ten coupons, an additional $.10 should be allocated to the gross receipts from the taxpayer's sale of taxable food products to a customer presenting a discount coupon. Tax does not apply on the pro rata share allocated to coupons that are not redeemed for discounted meals since the taxpayer is not regarded as having received additional compensation from the customer as part of the sale of taxable food products as a discount rate. 3/13/96.