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Wisconsin Sales Tax For Online Coupons


Wisconsin sales tax applies to online coupons when the vouchers are redeemed, rather than when they are sold, explains a recent tax release by the Wisconsin Department of Revenue. 

The Wisconsin tax release provides guidance on the taxability of "discounted certificates" or "product vouchers" offered through third party promotional companies, such as Groupon.

A Merchant will enter into an agreement with a promotional company wherein the promotional company sells coupons for the merchant via its website.  Customers purchase the coupons online and then redeem them with the Merchant for a good or service.

In Wisconsin, sales tax only applies at the time when the customer redeems the coupon from the merchant.

Sales tax applies to the "sales price" of the good or service, which includes "...all consideration received by the merchant for the sale, without deduction for any expenses incurred by the merchant and paid to the promotional company for its services...."

Sales tax does not apply to the ". . . difference between the face value of the certificate and the amount the purchaser paid the promotional company for the certificate."

Example

A merchant operates a hotel in Outagamie County, Wisconsin, and enters into an agreement with a promotional company. The promotional company will sell vouchers for $100, good for two nights of lodging at the Merchant's hotel. For each voucher sold, the promotional company remits $60 to the merchant and retains $40 for its services.

When a customer redeems a voucher, the merchant "...has taxable receipts of $100 from its sale . . . unless an exemption applies." Thus the merchant "...is liable for Wisconsin state sales tax of $5 ($100 x 5%)."*

*Outagamie County does not impose a county sales and use tax and is not part of a special district imposing a tax so no county or special district tax is due on this transaction.

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Avalara Author
Will Frei
Avalara Author Will Frei
Will Frei covers sales tax news including best practices, legislation and sales tax technology. He is the Social Media Manager at Avalara.