Tax Type
Retail Sales and Use Tax
Description
Digital-to-Analog Converter Box Coupon Program
Topic
Computation of Tax
Property Subject to Tax
Records/Returns/Payments
Taxable Transactions
Date Issued
02-28-2008
February 29, 2008
Dear *****:
Thank you for your recent letter requesting guidance on the Retail Sales and Use Tax treatment of converter box coupons that will be issued pursuant to the Digital-to-Analog Converter Box Coupon Program conducted by the federal government.
The program will authorize eligible households to request up to two coupons, worth $40 each, to be used towards the purchase of up to two coupon-eligible converter boxes. The coupons will be redeemable at participating stores, including *****. The Department of Commerce's National Telecommunications and Information Administration will reimburse ***** for the dollar value of the coupon. You question whether this coupon will reduce the taxable sales price of the converter box.
The tax treatment of retailer and manufacturer coupons in Virginia is well-established, and set out in Title 23 of the Virginia Administrative Code, Section 10-210430. This section provides that the value of a manufacturer's coupon is included in the sales price of the advertised merchandise. The regulation further provides that the value of a retailer's coupon is not included in the sales price of the advertised merchandise.
Thus, when a retailer accepts cash and a manufacturer's coupon for a product, the tax is computed on the full value of the cash and the manufacturer's coupon. As indicated in Public Document 84-195, items that are purchased, for which a manufacturer's coupon is presented, are valued at the full price listed for the item because the retailer will receive his full retail price, a portion of which is received from the manufacturer and the remaining of which is received from the customer.
However, when a retailer accepts cash and a retailer's coupon for a product, the tax is computed on the value of the cash only. The coupon is of no value to the retailer, who merely absorbs the loss resulting from the discount.
Like the manufacturer's coupon described above, the coupons at issue in this case will permit the retailer to receive his full retail price, a portion of which will come from the consumer, and the remaining $40 of which will be reimbursed by the federal government. As such, the converter box coupons shall be treated as manufacturer's coupons for purposes of the Retail Sales and Use Tax. The value of such coupon shall be included in the sates price of the advertised merchandise. Thus, if a ***** retailer accepts $30 in cash and a digital-to-analog converter box coupon valued at $40 for the purchase of a converter box with a sales price of $70, the tax will be computed on the entire $70. The converter box coupon will not reduce the taxable sales price of the converter box.
I hope this has addressed your questions. The Virginia Administrative Code sections and public documents cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this determination, you may contact ***** in the Policy Development Division at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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Rulings of the Tax Commissioner