The California State Board of Equalization (BOE) has updated its Dining and Beverage Industry publication to reflect recent changes in tax policy. In particular, a section on Deal of the Day Instruments has been created to explain how sales tax applies to such internet coupons.
According to the BOE, most Deal-of-the-Day Instruments (DDI) offered by third party internet-based companies such as Groupon or LivingSocial “are considered retailer coupons” and the retailer is considered the issuer. Therefore, the “sale of a DDI to a customer is not subject to tax.”
When the coupon is redeemed for taxable goods or services, however, “gross receipts subject to tax include the consideration paid by the customer for the DDI plus any additional cash, credit, or other consideration paid to you by the customer at the time of the sale.”
If sales tax would not normally apply to a cash/credit transaction, tax does not apply to sales transactions made with deal-of-the-day instruments.
Additional information is available on BOE Publication 113, Coupons, Discounts and Rebates.
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