New York, for instance, requires that sales tax be charged on the full (non-discounted) value of the transaction if what’s been issued is a “Stated Face Value” voucher – one which allows a customer to choose from the retailer’s offerings and apply the voucher’s value like cash. However, New York allows sales tax to be charged on the discountedvalue of the transaction (what the customer pays for the deal) if what’s been issued is a “Specific Product or Service” voucher – one where the customer purchases a specific product or service (e.g., one oil change or a specific item) and isn’t allowed to redeem the voucher for any other product or service . (See my AllBusiness.com Groupon article for a detailed discussion of New York’s rule, including an example of how a customer who obtains the exact same item can owe a different amount of tax based on what type of voucher is redeemed and how merchants who allow customers to use a portion of a voucher’s value to cover the sales tax due could end up with a financial loss on their offer. )
Finally, note that both California’s and Maine’s guidance allow the discounted value to be the sales tax base. California’s rule states that sales tax is due on “the amount paid by the customer for the deal-of-the-day instrument plus any additional cash, credit or other consideration given at the time of redemption”. (See examples on page 2 of California Publication 388 and my AllBusiness.com Groupon article for more details.)
Maine’s guidance states that “Groupon type” discounts are to be treated in the same manner as a retailer’s discount. (See page 4, example 4.C.1 in Maine Revenue Services Instructional Bulletin No. 39. Also see my original Groupon post, “Wondering How Sales Tax Applies to a Groupon? So Are Many of the States“, for a discussion on the general rules relating to retailer’s and manufacturer’s discounts.)
Oh course I can’t predict what the final Directive will look like, but one thing I can assure you of is that I’ll be reporting on it! Stayed tuned!
“Wondering How Sales Tax Applies to a Groupon? Massachusetts Issues Draft Guidance“, The State and Local Tax ‘Buzz’, September 28, 2011
“Groupons & Sales Tax – New Guidance for Small Business“, AllBusiness.com, November 17, 2011
Note B: Note that the e-mail response I received from the Rules and Regulations Bureau should in no way be construed to be binding upon the Department. Until the Department issues its FINAL Directive on the Application of Sales Tax to Sales and Redemptions of Third Party Coupons, Massachusetts merchants who offer a “Groupon” should follow the Department’s Draft guidance and charge sales tax on the full (non-discounted) value of the product or taxable service offered through any third party e-coupon “deal-of-the-day” transaction OR should consult the Massachusetts Rules and Regulations Bureau for guidance specific to their transaction.