questionsare companies like groupon cheating on sales tax?


I believe Groupons are treated like coupons and, generally, for coupons, tax is charged on the price before the coupon. So it is correct that you are charged the tax for a $20 purchase. Not as good a deal for the consumer, but the way that it's supposed to be done.


As far as I know, all sales tax jurisdictions consider a coupon to be a form of payment and they expect tax to be collected for the full value of the item.. For your pizza you are paying $10 cash and getting a $10 coupon for a total of $20 of taxable product. In some jurisdictions you would not need to pay the sales tax if the pizza was take-out, but you would pay the tax if you ate in the restaurant. Also, realize that when you use the Groupon coupon, the store does not get the $10, they get a small portion of it. It's a loss-leader for the store (but they still have to collect the sales tax). A pizza joint I frequent suddenly got inundated with a Groupon special they had never agreed to. Instead of half-price, people were getting $20 coupons for $2 and the store was losing money hand over fist. Groupon also takes forever to pay the store their minimal share, so the individual getting "cheated" the most is the store owner.


@gt0163c: Thanks, but I believe you are wrong and what you describe is an illegal collection of sales tax. Sales tax should be based on the actual sales price. If you were buying a new car and dealer marked it down from $30k to $20k, would you pay tax on $30k? Keep in mind that when you pay sales tax, that money isn't going directly to local governments - the business periodically reports how much actual sales they made, and apply the tax rate to that ammount to determine how much sales tax they owe. I believe it is in this fashion that many businesses unfaairly overcharge customers for sales tax, then keep the overcharge and only pay local governments the amount fairly collected.


@nortonsark: Next time you use a coupon at the grocery store, you'll likely find on receipt that coupon was deducted BEFORE sales tax is collected. My contention is that this is the letter of the law, and what you describe is unlawful. For sales tax purposes, a coupon is no different from the price being lowered. Would you pay taxes for a $30k car, if the dealer marked it down and sold to you for $25k?


@mtw1057: It is true that a business pays the sales tax on the income they report and so there is room for some hanky panky. If they are audited, though, the state revenue people are going to expect taxes to have been collected on whatever the full retail price was, prior to the use of a coupon. In the case of an automobile sale, there are no coupons, so the selling price agreed to is the price that the sales tax is collected on. When the vehicle is registered, the state is going to want proof that the sales tax was paid. In a private sale, the state will use the bill of sale as a reference price.


@nortonsark: When is the last time you saw a coupon that didn't state explicitly that it had no retail value (beyond fractions of a penny)? It is called sales tax because it should be based on the ammount of the sale, not on the msrp or any other figure. It isn't called "regular-price tax."


Are you a car salesman? You used that analogy in back-to-back comments on your own question. I doubt that you are, but I was just curious. I believe that it varies by local grocer takes the coupon amount off after the total. YMMV


Imagine two competing businesses in your neighborhood each sell same nintendo wi model for $300. Sales of the model began to lag, so store A marks it down to $200, while store B offers a $100 off coupon. Who thinks the two stores would face different sales tax burdens for items sold at the same $200 price point?


@jsimsace: I'd like to answer your question by asking you what is the highest monthly payment you could live with?

p.s. I think your grocer is cheating you and all others using coupons there, and that what might seem small change to the individual adds up to big unwarranted profits for the grocer. Worst of all is everyone complains about paying sales tax, but in this scenario the sales taxes are in fact paid to the retailer, but aren't fully conveyed to the local governments.


Why would any business ever print a coupon if the conditions alleged above were factual? Why not print a (coupon-sized) piece of paper that reads: "you can buy this item at the reduced price of $x.xx?"; Wouldn't it have occurred to some biz owner by now that customers would much prefer the method that doesn't needlessly incur a higher ammount of sales tax?


The difference between methods of collecting sales tax on coupons at my place of employment is whether the coupon is deemed a store coupon or a manufacturers' coupon. If we receive a store coupon (stated at the top), then no sales tax is collected on the price difference. If, however, it's a manufacturers' coupon (also stated at the top), we collect sales tax on the price difference.

Since Groupon is an outside entity, my company might decide to treat a deal as a manufacturers' coupon. On the other hand, there are fundraiser cards sold by groups from fundraising companies, and my employer treats them as store coupons.


@msklzannie: Thanks for the input. Going back to 80s/90s, I managed/kept books for a few retail operations that included a couple larger chains, and a regional chain. There are many ways companies handle such scenarios, but I strongly believe the only lawful method is as I've described above. Certain fundraising efforts are legally exempt from sales tax, but far more assert such privilege and are granted it wrongly but routinely.


@mtw1057: You obviously feel passionately about this sales tax issue since you have responded to your own question so many times. I am quite certain you are mistaken, but I suggest you call your state's Department of Revenue this week and ask them their thoughts. Please report your findings back here, whether you agree with them or not.


The answer to this clearly varies from state to state. Here and here are links to the NY State rules on salestax and coupons, but they really do not address Groupon-type discounts, at least not all of them.

This blog post and the article it referecnes make it clear that some states tax the Groupon deals at full value while others do not.

Thus, it is clear that your opinion is wrong in at least some states and nothing more than an opinion in others.

In which state do you live?


regarding coupons IN GENERAL:
MANUFACTURER COUPONS are legally considered a form of payment,
STORE COUPONS, like a Target, Kohls or Penney's coupon for $10 of a $30 transaction are a STORE DISCOUNT, which is why you can almost always use a store coupon AND a manufacturer coupon on a single item at target or a grocery store. Sales tax laws vary from state to state regarding tax on pre or post-discount price when using a coupon.

When using a groupon, I believe that if you are getting a $20 credit for $10, it's legally similar or the same as a getting a $20 gift card for half price... You're getting $20 to spend at the establishment on $20 worth of goods, services, or food. If you have a $20 gift card for chilli's, for example, they don't care what you paid for the gift card, they just know that the gift card is worth $20 towards your total bill. Thus is evidenced by the recent lawsuit and settlement about expiring groupons... the argument that groupon basically agreed to is that


what you are buying from groupon is in fact a gift card that can not be expired.

If you don't like it, then don't buy these deals, but it's pretty plain that your groupon is the equivalent of a gift card valued at whatever value it was stated to have.

GROUPONS, for all intents and purposes are in fact NOT COUPONS, but instead are treated as a gift card.