I bought something at Liberty House, using a gift certificate. The purchase price and tax were rung up before the certificate was subtracted. But at Taco Bell, the manager reminded a worker to subtract the discount coupon from the price first, before adding the tax. Obviously, there's a bigger savings to the customer when this is done. Is there a consistent policy on this by Liberty House or other retailers?
Taxes charged differently
on coupons, certificates
First, there is a difference between gift certificates and discount coupons, said June Yamamoto, spokeswoman for the state Department of Taxation.
It also is up to businesses as to whether they pass on the general excise tax (GET), which is not a sales tax, but a tax on businesses.
Given that, businesses offering gift certificates can pass on the GET only once. It would be "inappropriate" to pass it on both at the time of purchase and the time of redemption, Yamamoto said.
In the case of Liberty House, the store's policy is to pass on the tax at the time of redemption, said spokeswoman Barbara Tunno.
Regarding coupons, subtracting the value of the coupon before or after tax is added depends on whether the seller will be reimbursed by a third party.
If there is reimbursement, the seller will have to pay the GET on the full sales price before the coupon is deducted, Yamamoto said. For example, you have a 50-cent coupon for a $5 item. The seller will receive $4.50 from you and 50 cents from the manufacturer for a total of $5, on which the 4 percent GET must be paid.
However, if the seller itself issues the coupon, then it is, in effect, giving customers a cash discount. So, if the customer has a 50-cent store coupon for a $5 item, the store will receive only $4.50 in actual payment and will be taxed on that amount only.
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