Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP
Posting-Version: version B 2.10.1 6/24/83; site brl-tgr.ARPA
Path: utzoo!watmath!clyde!burl!ulysses!mhuxl!houxm!vax135!cornell!uw-beaver!tektronix!hplabs!hao!seismo!brl-tgr!wmartin
From: wmartin@brl-tgr.ARPA (Will Martin )
Newsgroups: net.consumers,net.legal
Subject: Sales tax on coupon items
Message-ID: <4345@brl-tgr.ARPA>
Date: Thu, 30-Aug-84 15:49:05 EDT
Article-I.D.: brl-tgr.4345
Posted: Thu Aug 30 15:49:05 1984
Date-Received: Sat, 1-Sep-84 13:38:09 EDT
Organization: Ballistics Research Lab
Lines: 60

Does anyone have any knowledge regarding state laws or revenue codes that
cover this point?

When you buy an item in the grocery store, here in Missouri, you have to
pay sales tax on it (foodstuffs are not exempt, as they are in some
states). If you have a coupon for some amount off on the item from
the manufacturer, it usually says somewhere in the fine print that the
consumer is responsible for any taxes due, and the usual way the
store handles it is to charge full price for the item, compute the
sales tax, and then deduct the coupon amount from the total owed. I
don't have any disagreement with this procedure -- you are using the
coupon essentially as scrip money in this case.

However, when the coupon is issued by the store (or chain) itself,
the same procedure is followed. In this case, I disagree with the
process, especially in the situation where the store advertises
that you are getting something "free". The percentage sales tax on 
something free is, like any other sales tax computation, based on
the cost of the item. Any percentage of "free", or zero, is zero.
The store should compute the amount owed by totalling the bill,
subtracting the credited amount for the "free" goods, and THEN
computing sales tax on the remainder.

Is this distinction called out explicitly in any state tax codes or
regulations? I called the "Consumer Relations" office of the store
chain, and they took my name & number and said they'd get back to 
me, so I don't have their "official" position on it yet. 

(By the way, what inspired this query was a deal from Schnuck's
markets in St. Louis; they had a promotion in which you had to
buy $15 worth of groceries each week for 7 out of 8 weeks and
they stamped a form -- at the end you got 10 lb of hamburger or
one of a couple other "free meat" deals. This was implemented
by giving you a coupon good for $15.80 credit on hamburger, for
example -- the current cost of 10 lbs bulk-packed. So we're 
talking about the stores collecting sales tax on $15.80 from
thousands of customers -- a tax which I don't think they are
legally obligated to turn over to the state, and which they can
keep.)

While I'm on the subject, does anyone know how stores which have
a large percentage of their sales in tiny amounts, below the minimum
level at which sales tax is charged, have to compute their sales
tax returns and pay the state? Can they certify that, for example,
30% of their income is from candy sales of 10 cents or less to
schoolkids, and therefore 30% of their business income is not subject
to sales tax payments to the state? (I realize that this question is
not very current; sales tax is now charged on purchases of much
lower value than it used to be, and everything costs much more now,
so most purchases get caught by the tax tables. This wasn't so back
in the 50's, though; can someone respond with historical information
that would be appropriate for times when you paid no tax for a purchase
under 50 cents or so, and a neighborhood candy store did a lot of
business selling a dime soda or 5 cents worth of penny candy?)

The eternal nitpicker,

Will Martin

seismo!brl-bmd!wmartin      or     wmartin@almsa-1