Tax Type
Retail Sales and Use Tax
Description
Coupons, premiums, and cash discounts; Certificate books
Topic
Basis of Tax
Date Issued
12-27-1996
December 27, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear*******************
This will reply to your letter of October 21, 1996 in which you request a ruling as to the retail sales and use tax application to Certificate Books which will be sold by you (the "Taxpayer") in the state of Virginia.
FACTS
The Taxpayer is selling Certificate Books to customers. Each book contains twenty-two certificates valued at $10.00 each. Each $10.00 certificate may be redeemed for $10.00 worth of manufacturer coupons of the customer's choice. The customer may then redeem the coupons at any retail establishment that honors the coupons.
The Certificate Books are produced by a company located outside Virginia. This same company maintains a coupon clearinghouse, also located outside Virginia. The company sells the Certificate Books to distributors, i.e. the Taxpayer, at wholesale, who then resells the books at retail to the final consumer. The Certificate Books sell for as much as $30.00 on the retail level, and contain certificates with a coupon value of $220.00. The Taxpayer is requesting a ruling on the application of the sales and use tax on the retail sale of the books
RULING
Virginia Regulation (VR) 630-10-27.2.A, copy enclosed, addresses manufacturer's coupons and provides that "the value of a manufacturer's coupon is included in the sale$ price of the advertised merchandise". In the Taxpayer's situation, the value of the manufacturer's coupon, which is ultimately redeemed by the purchasers of the Certificate Books, is included in the sales price of the tangible personal property being purchased. Based on this information, I find that the sale of the Certificate Books by the Taxpayer merely represents the right to receive manufacturer's coupons, the value of which will be taxed at the time of redemption. Accordingly, the charge made by the Taxpayer for the Certificate Books will not be taxable.
If you should have any questions, please contact********Office of Tax Policy, at***********
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner