Tax Treatment of "Deal-of-the-Day" Transactions in Illinois

Thursday, March 8th, 2012

 
 
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Illinois
General

The Illinois Department of Revenue recently issued preliminary guidance regarding the treatment of "deal-of-the-day" offers (e.g., Groupon, Living Social) purchased by Illinois residents (Ill. Gen. Info. Ltr. ST 12-0009-GIL (Dept. of Revenue Feb. 28, 2012)). Sales tax is not due when the customer first purchases the deal-of-the-day voucher because a taxable sale has not yet occurred. Instead, tax is charged when the customer redeems the voucher. The tax base is determined by whether the retailer knows the amount that the customer paid for the voucher. If the retailer knows how much the customer paid for the voucher, then that amount is taxable when the voucher is redeemed. However, if the retailer does not know how much the customer paid for the voucher, tax is charged on the full face amount of the voucher.

For example, suppose a customer pays $25 for a $50 voucher. If the retailer knows that the customer paid $25 for the voucher, then sales tax will only be charged on that $25 amount when the voucher is redeemed by the customer. However, if the retailer does not know how much the customer paid for the voucher, sales tax will be charged on the full $50 face value of the voucher when it is redeemed by the customer.


About TTR

Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at www.ttrus.com or call 866.578.8193.

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