(a) Manufacturer's and Retailer's Coupons. For purposes of 830 CMR 64H.1.4(2), a "manufacturer's coupon" is a coupon issued by the manufacturer, supplier or distributor of tangible personal property to be redeemed by a retail purchaser of that property. A "retailer's coupon" is a coupon issued by a retail vendor. Generally, manufacturer's coupons and retailer's coupons that entitle the retail customer to a reduction in the sales price at the time of the sale will be treated like cash discounts. See 830 CMR 64H.1.4(1). Other types of coupons will not be treated as cash discounts. See 830 CMR 64H.1.4(2)(c).
If a vendor offers customers, upon presentation of a manufacturer's or retailer's coupon, a discount from the usual price of merchandise, the amount of such a discount is excluded from the sales price of tangible personal property upon which the sales tax is based, regardless of whether the retail vendor receives any reimbursement from the manufacturer, supplier or distributor.
If a vendor offers customers, upon presentation of a manufacturer's coupon, a discount on the usual sales price of tangible personal property at double the value of the coupon, the tax is levied on the discounted sales price of the property, regardless of whether the vendor receives any reimbursement from the manufacturer, supplier or distributor.
(b) Scan Cards. Manufacturer's and retailer's coupons in paperless form will generally be treated the same as paper coupons.
(c) Other Coupons. Coupons, certificates or vouchers issued in connection with "bundled transactions" are not manufacturer's or retailer's coupons and any resulting reduction in the amount paid by the retail customer will not be treated as a cash discount. A "bundled transaction" includes, but is not limited to, one in which a vendor transfers tangible personal property to a retail customer for a reduced price in exchange for the retail customer's agreement to purchase services for a minimum service period, either from that vendor or another party that has a contractual arrangement with the vendor of the tangible personal property.
(d) Coupons for Free Merchandise. If a 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, the sales price subject to tax is the amount the vendor charges the customer. If a vendor gives a customer an item unconditionally free of charge upon presentation of a retailer's coupon, the vendor is generally considered the consumer of that item and is responsible for the payment of a sales or use tax based upon the amount the vendor paid for the item.
Example 1: A manufacturer's coupon entitles retail customers to a 50¢ discount on Brand X detergent. Retailer E accepts the coupon and $2.50 in payment for the detergent which the retailer would otherwise sell for $3.00. The manufacturer of the detergent reimburses E 57¢, which includes 7¢ for handling, for the coupon. The sales tax is 13¢. (5% of $2.50).
Example 2: Retailer F offers customers two hamburgers for the usual price of one, upon presentation of its retailer's coupon. Customers obtain these coupons free of charge either from the retailer or from a newspaper. Each hamburger usually sells for $1.50. F is not reimbursed for the coupon. The sales tax on the two hamburgers is 8¢. (5% of $1.50).
Example 3: Retailer G offers customers a 50¢ discount on all packages of paper plates priced at $1.50 upon presentation of a retailer's coupon clipped from a newspaper and a purchase of $10.00 or more. G is not reimbursed for the coupon. The sales price subject to tax is $1.00. ($1.50 less 50¢ discount).
Example 4: An internet service provider gives each new subscriber a coupon entitling the subscriber to $100.00 off any computer purchased from Retailer J. The internet service provider buys the coupons from Retailer J for $75. The subscriber purchases a computer from Retailer J costing $600.00 and pays with $500.00 in cash and the $100.00 coupon. The sales price subject to tax is $600.00 because the coupon is neither a retailer's coupon nor a manufacturer's coupon.
Example 5: Retailer K offers customers who present a manufacturer's coupon a discount at double the face value of the coupon. A soap manufacturer offers retail purchasers a coupon worth 20¢ off a bar of its soap which K sells for $1.00. A customer presenting this coupon receives a discount of 40¢ from K. The manufacturer of the soap reimburses K 27¢ for each coupon. The sales tax on the soap bar is 3¢. (5% of $ .60).
Example 6: With the purchase of a $40.00 pair of shoes (a nontaxable item), Retailer L offers customers a free bottle of shoe polish (a taxable item) upon presentation of his retailer's coupon. L is not reimbursed for the coupon. L's customer pays no sales tax on this transaction. L's purchase of the shoe polish is subject to tax.
Example 7: Retailer M mails each of his customers a coupon redeemable for one free bottle of detergent. M receives no reimbursement for the coupon. M must pay a use tax on each bottle he gives away based upon the amount he paid for the detergent.
Example 8: Grocery store N offers a "scan card" program, which entitles holders of the card to savings on certain advertised merchandise, which varies from week to week. N offers scan card holders a 40¢ savings on paper towels regularly priced at $1.20. A scan card customer purchases the paper towels and also redeems a 30¢ manufacturer's coupon. N must collect tax of 3¢ (5% of 50¢). N has no use tax liability even though the towels are sold for 50 per cent or less of the vendor's cost. The paper towels are not a promotional item within the meaning of 830 CMR 64H.1.4(1).