Texas Comptroller Imposes Sales Tax on Full Face Value of Discounted Certificates

In a recent issue of the Texas Comptroller’s Tax Policy News, the Comptroller announced that a coupon or certificate that is sold for a discounted price will be “treated like cash” when redeemed. The Comptroller’s new policy provides that retailers must collect sales tax on the full face value of coupons and certificates when used to purchase goods or taxable services, even when the certificates are sold at deeply discounted prices.

This new policy contradicts the definition of “sales price” in the Texas Tax Code, which excludes discounts from the amount subject to tax. The agency’s regulation, 34 TAC § 3.301, originally adopted in 1976 and amended in 1988, provides that discounts, coupons, or certificates should be excluded from the amount subject to tax. In fact, the regulation provides that “[t]he actual selling price of taxable tangible personal property is the measure of the tax due…”

Prior to this announcement, retailers were instructed to collect tax on the amount customers paid for goods and taxable services. Discounts and coupons, including manufacturer’s coupons, were subtracted before computing tax due.

The agency’s announcement does not include an effective date or whether the agency will attempt to impose sales tax on discounts retroactively.

TECHNICAL INFORMATION CONTACT:

Susan Traylor Bittick
Principal
Ryan
512.476.0022
susan.bittick@ryan.com