Tax Type
Retail Sales and Use Tax
Description
Coupons, premiums, and cash discounts; Coupons for free meals and sports tickets
Topic
Basis of Tax
Date Issued
09-26-1994
September 26, 1994
Re: Request for Ruling: Retail Sales & Use Tax
Dear****************
This will reply to your letter seeking a ruling on the tax treatment of coupons which entitle the purchaser to buy one sports ticket or dinner and get the second free.
FACTS
Your client sells coupons which allow the purchaser to buy one sports ticket or one dinner and get a second free of charge. Your clients remits a portion of the amounts received for the coupons to the vendor to whom the coupon is ultimately presented. You suggest that the coupons are nontaxable as they are intangible property and seek a ruling to that effect.
RULING
I am enclosing a copy of a ruling letter issued by the department, P.D. 93-31 (2/22/93) which deals with a similar situation. Relating that ruling to the instant case, the department finds that your client's coupons merely represent the right to receive a ticket to a sporting event or a meal at no charge upon the purchase of a ticket or meal at regular price. Accordingly, the charge for the coupon itself is not subject to the tax.
When the coupons are redeemed by the purchasers, in the case of the sporting event ticket, no retail sales tax is due on the purchase of the tickets as Virginia does not tax admissions. However, in the case of the coupon for the free meal, if the restaurant is to be reimbursed for the discount by your client, through whatever means such as free advertising or with money, the tax is to be computed on the bill amount prior to the discount. This is expressly contemplated in Va. Code § 58.1-602, which defines the term "sale" as including the exchange or barter of tangible personal property. However, if the restaurant absorbs the loss resulting from the discount and will not be reimbursed by another organization, sales tax is due only on the amount of the bill after the discount has been computed. [See P.D. 88-174 (6/29/88), copy enclosed]
If you have any further questions regarding this matter, please let me know.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/7510H
Rulings of the Tax Commissioner