When a grocery purchase used both a reimbursed manufacturer coupon and food stamps, which part was subject to Illinois tax?

Plain-English summary

In a mixed payment, the reimbursed manufacturer-coupon value was taxable, but the portion paid with food stamps was not. A reimbursed coupon formed part of the retailer's gross receipts even though the customer did not pay that value in cash.

The coupon issuer technically owed corresponding Use Tax on the reimbursed value. The GIL said coupon language often required the purchaser to assume that liability.

An unreimbursed retailer coupon was different: because the retailer received no reimbursement, the coupon value did not enter taxable gross receipts. Food-stamp payment was treated as a sale to a governmental unit and was not taxable under the cited rule.

What this means for you

Split the transaction by funding source. Do not treat the entire sale as exempt merely because the remaining balance was paid with EBT when a reimbursed coupon funded part of the price.

Common questions

Q: Was the manufacturer-coupon portion exempt because the rest was paid with food stamps?
A: No. The reimbursed coupon value remained taxable.

Q: What if the retailer was not reimbursed for the coupon?
A: That coupon value was excluded from gross receipts.

Citations and references

• 86 Ill. Adm. Code 130.2125
• 86 Ill. Adm. Code 130.2080
• 2 Ill. Adm. Code 1200.110 and 1200.120

Subject

Gross Receipts

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0021.pdf

Original ruling text

ST 10-0021-GIL 03/19/2010 GROSS RECEIPTS
If a retailer accepts a coupon for which he will receive full or partial reimbursement, the value
of that reimbursement must be included in the retailer's "gross receipts" that are subject to
Retailers' Occupation Tax. See 86 Ill. Adm. Code 130.2125 (This is a GIL.)

March 19, 2010

Dear Xxxxx:
This letter is in response to your letter dated November 16, 2009, in which you request
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
ABC would like a written opinion on the taxability of manufacturer coupons combined
with a purchase using food stamps.
Here are a few examples:
Example 1
Customer purchases $1.50 grocery item. The customer gives the cashier a $.50
manufacturer coupon. The customer’s total before tax is $1.00 and tax is due on the
gross amount of the sale.
Example 2
Same purchase as example 1 except the payment is made with food stamps/EBT card.
Would this sale be exempt from sales tax or would tax be due for the item being
purchased with a coupon and EBT card?
Thank you in advance for your time and assistance.

DEPARTMENT’S RESPONSE:

Please see the Department’s regulation at 86 Ill. Adm. Code 130.2125, Trading Stamps and
Discount Coupons which can be found on the Department’s website. As you can see from this
regulation, if a retailer accepts a coupon for which he will receive full or partial reimbursement, the
value of the coupon constitutes "gross receipts" that are subject to Retailers' Occupation Tax. The
coupon issuer, technically, owes the corresponding Use Tax on this value. However, most times, the
issuer will incorporate language into the coupon that requires the bearer (purchaser) to assume this
Use Tax liability. Consequently, the purchaser owes tax on the value of the coupon. If, however, the
retailer accepts a coupon for which he will receive no reimbursement, then the coupon value does not
become part of the gross receipts subject to tax.
Sales made to customers paying with food stamps are not taxable, since they are considered
sales to a governmental unit. See 86 Ill. Adm. Code 130.2080. However, if part of the sale was paid
for by a coupon for which the retailer received reimbursement, the value of the coupon would be
subject to tax. That portion of the selling price that is paid for by food stamps is not subject to tax.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Debra M. Boggess
Associate Counsel
DMB:msk