South Carolina Addresses Sales Tax on Items Purchased through Loyalty Points Programs

Friday, October 7th, 2011

 
 
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South Carolina
General

The South Carolina Department of Revenue recently issued a private letter ruling concerning loyalty points programs offered by telecommunications companies to their subscribers. These programs allow subscribers to accumulate points over a period of time and exchange them for discounts on phones and accessories.

Property that is purchased at a discount using loyalty points is only taxable based on the actual sales price, not the retail value. For example, a cell phone that normally costs $200 but is purchased by a customer redeeming loyalty points for $175 is only subject to tax on the $175 paid by the customer.

However, purchases of property for a nominal amount or greatly reduced sale price after a customer redeems their loyalty points will be considered promotional items withdrawn from inventory and used or consumed by the company. Thus, they will be taxable at the full retail value. For example, if a customer redeems their loyalty points to purchase a $200 cell phone for one cent, the cell phone will be deemed a promotional item and the retailer will be required to pay tax on the fair market value, $200.


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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