The Rhode Island Department of Revenue decided that complimentary drinks are not taxable when they qualify as discounts.
The taxpayer was a restaurant that gave complimentary alcoholic drinks to dining customers who (1) had to wait for a table and (2) then purchased a meal. The taxpayer would charge the drink to the customer's entire dining bill and then apply a credit for the same dollar amount, reducing the drink price to zero.
Rhode Island taxes the sale price of tangible personal property that is sold at retail or used in the state. "Sale price" is the total dollar amount of consideration received for the sale tangible personal property. It does not include discounts given to a purchaser by the seller. There is no statutory or regulatory definition of "discount," so the plain meaning applies. The plain meaning of "discount" is an amount taken off a regular price, or a price reduction.
The complimentary drinks qualified as non-taxable discounts. The taxpayer reduced the sale price for the entire meal by the price of the complimentary drink.