Kansas Addresses Taxability of Deal-of-the-Day Transactions
Wednesday, September 26th, 2012
The Kansas Department of Revenue (DOR) recently issued an opinion letter explaining how sales tax applies to "deal-of-the-day" retail promotional deals. Kan. Op. Ltr. No. O-2012-004 (Dept. of Revenue Sept. 11, 2012). In general, "deal-of-the-day" transactions involve a consumer purchasing an instrument that is roughly akin to a retailer coupon or gift certificate (the "deal-of-the-day" voucher) from a third party website. The consumer can then redeem the voucher for the specified product or service from the participating retailer, typically at a discount for the consumer.
There are two taxability questions involved. First, is the purchase of the coupon or gift certificate from the third party website taxable? Second, is the price of the product taxable at the full sales price or at the discounted coupon or gift certificate price?
As explained in its sales tax regulations, Kansas does not tax the initial purchase of instruments like gift certificates or meal cards redeemable for cash value. Kan. Admin. Regs. R. 92-19-16a(f). Rather, Kansas imposes sales tax when such an instrument is redeemed.
In the recent opinion letter, the DOR reasoned that "deal-of-the-day" vouchers are like gift certificates. Thus, "deal-of-the-day" vouchers are not taxable when purchased. Instead, the retailer must collect tax on the full retail price of the product when the "deal-of-the-day" is redeemed. The DOR explained that when the consumer redeems the voucher, the retailer should calculate sales tax on full selling price of the taxable sale. And then, after tax has been calculated on the full price, the retailer applies the value of the promotional voucher to the transaction.
With the release of this opinion letter, Kansas has joined the growing collection of states that have addressed the sales tax implications of "deal-of-the-day" transactions. Follow these links to see our earlier reporting: Illinois, Iowa, Kentucky, Massachusetts, and Washington.
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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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