Are sales of discount coupon books redeemable at third-party merchants subject to Kansas sales tax?

Plain-English summary

A company asked whether its sale of discount coupon books is subject to Kansas sales tax. The coupons give discounts at various third-party merchants (not the seller's own store).

The Department said yes. K.S.A. 79-3603(a) imposes sales tax on "the gross receipts received from the sale of tangible personal property at retail within this state." It is the Department's policy that an organization engaged in the retail sale of coupons or discount cards that are redeemable by third-party merchants is the retailer for Kansas sales tax purposes. As a result, the selling organization must collect and remit sales tax on its gross receipts from selling the coupon books.

What this means for you

Companies selling coupon books, discount cards, or "savings" booklets

If you sell coupons or discount cards redeemable at other merchants, you are the retailer of a taxable product. Charge and remit Kansas sales tax on your gross receipts from those sales.

Fundraisers and membership programs

The same treatment applies regardless of who redeems the coupon — the tax is on your sale of the book, not on the later discount at the merchant.

Common questions

Q: The coupons are only redeemable at other businesses — is my sale of the book still taxable?
A: Yes. The Department treats the seller of coupons or discount cards redeemable by third-party merchants as the retailer, so the sale of the book is a taxable retail sale under K.S.A. 79-3603(a).

Q: What amount is taxed?
A: The gross receipts the selling organization receives from selling the coupon books.

Citations and references

• K.S.A. 79-3603(a) — imposes Kansas sales tax on the gross receipts from the sale of tangible personal property at retail; the basis for taxing the sale of discount coupon books, with the seller treated as the retailer.

Source

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2004-007

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

April 26, 2004

XXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX

Dear Sirs:

The purpose of this letter is to respond to your request dated March 29, 2004. In it you asked if the sale of discount coupon books by your company are subject to sales tax. The coupons are for discounts at various merchants other than XXXXXXXXXX. The answer to your question is yes.

K.S.A. 79-3603(a) imposes a sales tax upon: “The gross receipts received from the sale of tangible personal property at retail within this state. . .”

It is the policy of the Kansas Department of Revenue that an organization engaged in the retail sale of coupons or discount cards (that are redeemable by third party merchants) is the retailer for purposes of the Kansas retailers’ sales tax act. Therefore, the selling organization is required to remit sales tax on their gross receipts.

This is a private letter ruling pursuant to K.A.R. 92-19-59, based on the representations you have made. To the extent those representations are incomplete or inaccurate, this ruling is void. This ruling will be revoked by operation of law without further department action if there is a change in the controlling statutes, administrative regulations, revenue rulings or case law that materially effects this determination.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 04/30/2004 Date Modified: 04/30/2004

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