A retailer who collects sales tax on the discounted value could end up undercollecting tax and be required to cough up the additional tax if his state takes the position that tax was due on the full sales price. In some ways this dilemma is a "doomed if you don't" or "doomed if you do". But the states' positions on this issue are largely undefined at this time, making this a question that most states can't offer an absolute answer to. This is where I'd normally caution readers to consult their tax advisor, CPA or their particular state's Department of Taxation or Revenue for further guidance. In the former, an actual sale of a product or service has occurred (even if possession doesn't take place until a later date), while the latter operates like a gift card (which aren't generally subject to sales tax).įinal Thoughts: I said earlier that how sales tax applies to a Groupon should be part of the analysis of whether a Groupon makes sense for your business. In some Groupon transactions, the consumer is prepaying for a specific item or service, while in others the consumer is buying a voucher that can be used to purchase from the retailer's offerings. In comparison, when a retailer applies a manufacturer's discount to a sale, most states require that sales tax be charged on the full sales price since ultimately the retailer will be reimbursed for the discount by the manufacturer or another third party. Because the retailer incurs an economic loss, sales tax is calculated on the discounted sales price. In general, states treat a retailer's discount, such as one where a retailer creates its own coupon, as a "cash discount allowed and taken". How a particular state views a Groupon could impact the amount of sales tax a state expects to be collected. But how does sales tax apply to a Groupon? What exactly is a Groupon? Is it a retailer's discount, a manufacturer's discount, a gift card equivalent or some type of hybrid.
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