questionswould you argue this on principle?

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here is an answer you might not like: I work in retail and have had customers ask me similar questions regarding the application of coupons before and after tax. and the answer is... whatever the company decides.
So neither you nor they are correct or wrong. Sorry to say.

I have seen coupons applied both ways, it just depend on how the system is set-up.

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Either way, the store isn't getting the extra money, the state is.

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I would argue it, since you should be taxed on what you spend. It's not like you'd be taking money away from them, it's tax.. which they just collect... based on what you spend.

So, yes. I would totally argue it.

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@theant: That's not correct. Sales tax is applied on the total sale amount (hence.. sales tax). People are taxed on what they spend, not what they didn't.

If you are collecting taxes on money you are not receiving, you are doing it wrong.

EDIT: I recall an issue where Best Buy sent checks to people a few years ago for charging tax on coupons. May have to Google for that.

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Depends on what kind of coupon it is. Here's an example:

Victoria Secrets just had a "secret" gift card that they gave to customers that spent over $10. The card could be worth $10, $50, $100, or even $500. Mine was randomly selected to be worth $10. I bought another $10 item, used the gift card for $10 but still had to pay 70 cents in tax. That's because it was considered a payment method for the product and not an actual price reduction coupon.

Most manufacturer coupons reduce the price of the product and you pay taxes only on the final price. However, if you look closely, they usually have a disclaimer that you may be responsible for all appropriate taxes. That's because different jurisdictions handle them differently.

So, in conclusion, since it's only a couple cents, I wouldn't argue it because I'm not sure of the tax laws in your state, county, or city. Logically it seems you shouldn't have to pay the tax on the full amount but I'd pay it and forget it.

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I found this article for my state. I believe this scenario is covered under the very last section:

http://www.iowa.gov/tax/educate/78628.html

Coupons issued by the retailer

These are treated as a discount.
Example

The Burger Doodle offers a two-for-the-price-of-one coupon for its super hamburger. Each hamburger normally sells for $2.00 each. The coupon can only be redeemed at Burger Doodle’s retail store. A customer uses the coupon to buy two super burgers. The purchase price was $2.00 for both hamburgers. The tax is due on the $2.00 because this amount is the gross receipts, even though the value of the two hamburgers would normally be $4.00. The retailer has no avenue for reimbursement.

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I wouldn't. Have you ever gotten an extra eggroll thrown in? or extra fries, or extra whatever? Do you tell them to take them back because you didn't pay for them? Sometimes they decide not to charge for the extra cup of dipping sauce I ordered. In my experience when it comes to purchasing food, this kind of thing gets evened out in the end. Maybe I'm weird but I'd feel like arguing over .24 now would stop me from benefiting later (particularly if it's a restaurant I'd frequent)...some strange karmic food cycle.

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I personally wouldn't argue it. When all is said and done, you did get the $4 taken off your order.

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@jesseroo: More often then not, I'm the guy that always manages not to get the extra dipping sauce that I paid for. I do however understand your view and maybe arguing would just prevent them from issuing any coupons at all. I did in fact still save $3+, although I also ordered more than I normally would have without the coupon.

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@lichme: I often end up with incorrect orders, but I look on the bright side and end up discovering foods I wouldn't have normally eaten (how I found out that Wendy's has a tasty spicy chicken sandwich).

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the question is, would you rather keep going to this place for chinese food, or would you rather save a little extra cash?

it took me a long time to find a chinese restaurant that i liked (e.g. hole in the wall place). if they just took $4 off the total, i'd let it go just on the fact that i really like the food there.

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@kmeltzer: let me clarify, (although the post below mine does a pretty good job of that).

If you buy an item (4.99) and pay 10% tax (.50) - this example is to make the math easier
you apply coupon for 1.00 off... is the total 3.99+.50 (tax on the pre-coupon amount) OR is it 3.99+.40 (tax on the post-coupon amount)?

And this is where it varies, it all depends on how the system does the accounting for coupons. if they are treated as cash-equivalent then they are applied AFTER tax has been added and you pay tax on the full amount (this is what I see most often) BUT if they are treated as an item discount then they reduce the price BEFORE tax is applied, and then you pay a lower tax amount. I can say that 99% of the time manuf. coupons are cash-equivalent but store-sponsered coupons could be applied either way depending on how they do the bookkeepping internally.

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@theant: No matter what the system does, you are not supposed to collect tax on money that wasn't spent. If an accounting system is charging tax to people on money they haven't spent, then it is collecting more taxes than it should.

Again. It's a sales tax. It's based on money spent. If I spent $100, I'm (in my area) charged 7% tax, so $107 is collected. If I buy something with a price of $100 and use a 50% coupon, then I should be charged $3.50 tax, since the sales price is $50.

The "cash equivalent" is like a voucher, which isn't the same as a coupon. A coupon lowers the price of an item. A voucher is the same as cash towards the price of an item. Vouchers basically have cash value. Coupons do not.

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@cengland0:
"Most manufacturer coupons reduce the price of the product and you pay taxes only on the final price."
no no no!
MANUFACTURERS' coupons like those on coupons.com or in the sunday paper are legally a form of payment, like cash/credit/check, with the manufacturer reimbursing the retailer, so usually tax is still paid on the amount BEFORE coupon. Some states DO NOT charge tax on pre-manu-coupon price, but MOST DO.

STORE/RESTAURANT coupons are usually considered a DISCOUNT, and therefore the amount of the coupon is usually not taxed.

It can vary from state to state, some states don't tax on pre-coupon price when using manufacturer's coupons, but I am not aware if any states charge tax on pre-coupon price when it's the retailer's coupon.

Here in california there should not be tax charged on the amount/value of the coupon, if it was in fact a COUPON. If the sore/restaurant treats it like a gift card, however, then you pay tax on pre-discount price.

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@kmeltzer: I guess you and me will have to agree to disagree then... see the other post below your last one for another thought on the same.

It all boils down to how the coupon is treated... discount-on-price or like-cash...

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@lichme: I too am from Iowa, but my experience says that the way store coupons are treated differs from business to business. The company I work for does not charge sales tax on the price difference discounted by store coupons, but the competition down the road does. Once a year the competition sends out a mailer that is a coupon to get your choice of certain products "free", but the catch is that you have to pay the sales tax on the original price (plus any applicable deposit).

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I wouldn't have argued the point, but that would be enough cause for me to quit going to that restaurant and choose another to be my regular spot. This is a place that you are a regular, and because of that fact I would expect them to treat you as such--a loyal customer that is helping them stay in business. Where I work, we cherish our loyal customers and will go as far as we possibly can to make them happy, because our business is dependent on our repeat customers. It seems like your restaurant doesn't quite grasp that concept.

But, lucky for me, I'm fortunate to live in a city where there are PLENTY of restaurant options. I've got about three Chinese places within a mile of where I am right now, so I can be incredibly picky about the quality of service, food, etc.

Also, this: http://www.hulu.com/watch/347535/rifftrax-shorts-remember-me#s-p1-so-i0 -- I promise, it's relevant!

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@theant: You can disagree, but you're wrong. Coupons are pre-tax. They have no cash value, and you can't tax them. Vouchers have cash value, and can be included in the sale price, and taxed.

All the thoughts about it won't change the fact that if you charge tax on a sale price which isn't the actual sale price, you are in the wrong.

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I hate to keep this going, but the consensous from what I have read from all these posts is that it is and can be done both ways... whether that is correct or not, I'll leave to the laywers and government agencies... in practice it seems that most people agree with me that it IS done both ways... oh well... it's what happens on the street that matters anyway, not whats in the rulebooks.

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@lichme: Was the "it didn't quite sit well with me" supposed to be a food pun? Sometime Chinese food doesn't sit well with people either... :p

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@kmeltzer: What does it matter if he's wrong or not? The restaurant did it. It's done. According to his argument, the merchant might do it one way or another, and according to your argument, the law explicitly states that it may only be done one way. Do you really believe those two viewpoints are mutually exclusive? Why aren't you arguing with the OP that the restaurant couldn't possibly have done this, because they're not allowed to?

Maybe you want the merchant's information so you can report them to IRS, and make them return the ill-gotten $.24 to everybody they ruthlessly stole from in flagrant violation of the Tax Code?

I have to agree with Carl669. Is the food worth it? Most Chinese restaurants are independently owned and operated, and their margins are probably not all that high to begin with. Even if they're specifically gaming the system to eke out a slight larger profit margin, you may only be paying an extra $.24 for great food. Consider it a slight addition to your tip.

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@stark: Because, being wrong on how it works... matters.

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@stark: But if it is collected as Sales Tax, it should be reported as Sales Tax and submitted to the state as tax.

Now if they are keeping the difference, I do truely see a problem.

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@kmeltzer: Clearly it doesn't, because you being right about it this whole time didn't prevent the restaurant from doing it wrong, now did it? Again, what are you alleging, that it is impossible for the restaurant to have done this, or that it's illegal? Because (and I want to stress this, because you haven't managed to understand it after like seven posts) theant NEVER SAID IT WAS LEGAL.

@jkaleda: Well, then get the OP's information on the website and correct this injustice, superhero. I don't think either of you are able to reconcile the letter of the law, which you are apparently consumed with, and reality, which is what the rest of us are dealing with. I'm all for taxes being paid correctly and in full. This restaurant is maybe, at a stretch, collecting $250 of sales tax annually, as profit. Is this wrong, unethical, and illegal? Yes, of course. But what's to be done? I'm too lazy to do anything about it. I imagine that you two are not. So get to work, shutting this place down.