May 14, 1984

You request a ruling as to the application of the sales tax to coupon discounts offered by __________ ("Company"). The Company owns and operates seven franchise restaurants in Massachusetts. The Company distributes promotional coupons and receives no reimbursement from any source for the coupons. You inquire whether the sales price subject to the sales tax should be reduced by the amount of the discounts.

A five percent sales tax is imposed on the sales price of retail sales of tangible personal property. (G.L. c. 64H, § 2). In determining the sales price, cash discounts allowed and taken on sales are excluded from the amount paid. (G.L. c. 64H, § 1(14)(c)(i)).

The Massachusetts Sales and Use Tax Regulation on Discounts, Coupons and Rebates provides that

"[i]f a retail vendor offers customers, upon presentation of a coupon, merchandise unconditionally free of charge, merchandise free of charge with the purchase of other merchandise, two items for the usual price of one, or a discount from the usual price of merchandise, and the retail vendor receives any reimbursement from a manufacturer, distributor, promoter or other source for the coupon, the sales tax is levied on the usual sales price of the property. The reimbursement may be in any form, including cash or credit towards the purchase of additional merchandise. If a vendor receives no reimbursement for the coupon from any source, the sale price subject to tax is the amount the vendor charges the customer." (830 CMR 64H.09(2)) (emphasis added).

The underlined language of the above quoted Regulation is specifically applicable to the facts as presented in your inquiry. Therefore, the sales price subject to the sales tax is the actual amount charged by the Company to the customer.

Very truly yours,

/s/Ira A. Jackson

Commissioner of Revenue

IAJ:JES:mf

LR 84-35