Sales Tax on CECBs

[john120]

Should sales tax be charged on the $40 CECB coupon?

This is what the state of Wisconisn says. Sounds like if sales tax was charged on the $40 Coupon then we were overcharged!

There is a lot more detail in the pdf attachment but this brief quote contains the most important point.

Quote from the attachment
Wisconsin Sales and Use Tax Treatment

If the total selling price of the CECB is $40 or less
and the customer presents an NTIA-issued coupon to
the retailer for the purchase of the CECB, no Wisconsin
sales or use tax will be due on this transaction
since the reimbursement is made directly from the
NTIA to the retailer. The $40 or less that the retailer
receives directly from the NTIA towards the purchase
of the CECB is not taxable since this is considered a
sale to the federal government.

End of quote from pdf attachment

[john120]

I have noticed that some stores seem to charge sales tax on the coupons where others don't

[john120]

I recently purchased a couple of CECBs and was improperly, I believe, charged state sales tax over my objections. From posts I have read here in the past I see some places charge sales tax on the $40 coupon while others don't. I think I remember RS and CC as being two who did improperly charge sales tax on the coupon. The State of Wisc has specifically ruled on this specific issue that SALES TAX SHOULD NOT BE COLLECTED ON THE $40 COUPON

If you would like to read for yourself the Wisc clarification can be found on page three of the document. found at this URL

http://www.dor.state.wi.us/ise/sales/08-1.pdf

[tvropro]

My first box was bought at Walmart, they did not charge me tax on the $40 coupon. My second box I bought at Radio Shack they charged me on the coupon and my cash. I think it boils down to who wants to ripoff who more

[seatacboy]

Originally Posted by john120

Should sales tax be charged on the $40 CECB coupon?

This depends on the tax laws of the purchaser's state. In some states, the $40 coupon is treated as a cash payment and not as a discount of the purchase price. In a state with 9% retail sales tax, a $60 CECB would ring up as $65.40, and the $40 subtracted from that amount.

Your state may vary, but in the State of Washington the Department of Revenue treats the $40 coupon value as analogous to a gift card. The basis for sales tax is not lowered. Your state might be more lenient.

[CasualOTAer]

I think the word "coupon" has folks confused with manufacturer's coupons, which typically reduce the sales price before the sales tax is calculated. The NTIA's cards are, to my thinking, more like a debit card that can only be used to purchase certain approved items.

Or, think of it like this: Generally, sales tax is collected by state and local governments.
To them, the fact that a federal government agency is helping you pay for a purchase doesn't change the amount collected by the seller. They (the local taxing agencies) will still legally bind the seller to turn in tax based on the normal percentage of the full retail price - Uncle Sam's contribution to the purchase, notwithstanding.

Those sales tax dollars to be turned over won't come out of the retailer's hide, and the NTIA coupons are for a flat $40. So, guess who gets to shell out for the sales tax?

Any retailer who does decide to cover the sales tax out of their receipts for the sale, is being very generous to their customers, IMHO. I'd expect the number of these sellers to be small.

[CasualOTAer]

Or, imagine if the NTIA had sent you two $20 bills. You take them into a retailer and purchase a CECB, and the sales tax would be on the sales price (e.g., $59.99 or whatever). I think that would be easily understood.

Now, I suppose that a state legislature could waive the sales tax on CECBs, but I don't know of a one that has done that...

[john120]

The $40 coupon enables a payment from the federal government, which does not pay state use tax usually, to the merchant. The only involvment the purchaser has is to pay the diffeence between the coupon and the purchase price and as a rep of the federal gov present the coupon to allow payment of the $40 from the federal gov as per the merchants prior arrangement with the federal gov. States can try to call this a gift all they want to but it is not a gift it is a purchase by the federal gov from the merchant.

[john120]

See page 3 of the attachment. I have not tried this before and don't know how this will work.

[john120]

If anyone has an official written ruling from any other state please post it or a link to it. I would be very interested as would probably a lot of other people.

[johnied]

No, it's treated as a debit card.. it's that simple.. Purchase price + sales tax -
debit card = final cost.


John

[golinux]

Circuit City (Austin, TX) did NOT charge me tax on the $40 coupon. Only on the out-of-pocket expense.

[johnied]

Originally Posted by golinux

Circuit City (Austin, TX) did NOT charge me tax on the $40 coupon. Only on the out-of-pocket expense.

I understand.. but they treated it as a coupon off.. rather than a gift card/debit card. :P

[Roger Lococco]

Originally Posted by golinux

Circuit City (Austin, TX) did NOT charge me tax on the $40 coupon. Only on the out-of-pocket expense.

do all CCs not charge tax on the Zenith, I wasn't too thrilled being taxed by Target on the mediocre Venturer.

[dattier]

It will vary from state to state but should not vary from store to store within a state.  If you got two different treatments at stores in the same state, either the one who reduced the tax was being generous [as CasualOTAer said] or the one who did not was cheating you.

In Illinois there was a court case on coupons back in the late 1970s or early 1980s.  The ruling was that a coupon issued by the vendor reduces the taxable price, but a coupon from the manufacturer or any other third part is money to use to pay for the purchase, just like Seatacboy's example of a gift card or CasualOTAer's example of being given two $20 bills, and sales tax is due on the full price.

But, counting the District of Columbia and estimating that maybe three states don't tax the sale of small electronics, by telling you Illinois law I've given only about 1/48 of the answer.  There certainly will not be one single flat answer to this question that applies throughout the US.

That said, sales taxes (unlike use taxes) are an obligation on the merchant, but the merchant has the option to pass them on to the customer, and they all do..  So in a jurisdiction where the coupon does not reduce the tax, the merchant is allowed to eat the portion of the sales tax corresponding to the portion of the price covered by the coupon, or for that matter to eat all the sales tax, but don't count on it.  The only times I've ever seen a merchant decline its option to pass the sales tax along to the customer are big blowout sales by furniture stores.

It might have been clearer if these things had been called "gift cards" rather than "coupons" in the first place.

[john120]

Originally Posted by dattier

It will vary from state to state but should not vary from store to store within a state.  If you got two different treatments at stores in the same state, either the one who reduced the tax was being generous [as CasualOTAer said] or the one who did not was cheating you.

In Illinois there was a court case on coupons back in the late 1970s or early 1980s.  The ruling was that a coupon issued by the vendor reduces the taxable price, but a coupon from the manufacturer or any other third part is money to use to pay for the purchase, just like Seatacboy's example of a gift card or CasualOTAer's example of being given two $20 bills, and sales tax is due on the full price.

But, counting the District of Columbia and estimating that maybe three states don't tax the sale of small electronics, by telling you Illinois law I've given only about 1/48 of the answer.  There certainly will not be one single flat answer to this question that applies throughout the US.

That said, sales taxes (unlike use taxes) are an obligation on the merchant, but the merchant has the option to pass them on to the customer, and they all do..  So in a jurisdiction where the coupon does not reduce the tax, the merchant is allowed to eat the portion of the sales tax corresponding to the portion of the price covered by the coupon, or for that matter to eat all the sales tax, but don't count on it.  The only times I've ever seen a merchant decline its option to pass the sales tax along to the customer are big blowout sales by furniture stores.

It might have been clearer if these things had been called "gift cards" rather than "coupons" in the first place.

Please read the attachment to my first post on this subject. The gentleman from Wisconsin gives a very specific and detailed answer based on CECB purchase and the $40 NTIA Coupon.

The key word here is not Coupon, or Gift, or state law, but federal law that I feel will make state law on this issue inmaterial.

This is a $40 purchase by the federal government with a merchant who has entered into an agreement with the federal government(Ntia) and the merchant is paid directly by the federal government.

It is my understanding that states are not allowed to tax the federal governmnet.

How can the $40 be taxable in any state?

Anyone know of any written opinions by experts that cast additional light on this issue?

[dattier]

Originally Posted by john120

The key word here is not Coupon, or Gift, or state law, but federal law that I feel will make state law on this issue inmaterial.

This is a $40 purchase by the federal government with a merchant who has entered into an agreement with the federal government(Ntia) and the merchant is paid directly by the federal government.

It is my understanding that states are not allowed to tax the federal governmnet.

Another state could argue that the box is not purchased by the federal government but by the consumer.

A ruling by authorities for the state of Wisconsin applies in Wisconsin.  So far there hasn't been one from the federal government.  Unless there is, I don't expect to get back the $7.40 of sales tax I paid in Illinois on the $80 value of my coupons.  If in your view I'm out $7.40, well, that's less than the cost of a round trip from Chicago to Kenosha to buy the boxes in Wisconsin.

[HomeVideoGuy]

Here in Louisiana, I was charged tax on the full $60 on both my Insignia purchased at Best Buy and my Zenith purchased at Circuit City; both this weekend. They rung me up for the full price and then ran the CECB card afterwards to discount the total $40.

[seatacboy]

Originally Posted by john120

The key word here is not Coupon, or Gift, or state law, but federal law that I feel will make state law on this issue inmaterial.

This is a $40 purchase by the federal government with a merchant who has entered into an agreement with the federal government(Ntia) and the merchant is paid directly by the federal government.

It is my understanding that states are not allowed to tax the federal government.

How can the $40 be taxable in any state?

Very good arguments. Unfortunately, the actual wording in the legislation passed by Congress failed to explicitly prohibit states from taxing the $40 portion of the CECB purchases. Therefore, the CECB program has provided an indirect one-time sales tax windfall for several states due to CECB retail sales funded by Uncle Sam's UHF airwave sale trust fund.

[justfred]

I believe California sales tax law says we should be taxed on the after-coupon price.

Here's what the law has to say:
"Where payment for tangible personal property sold or consumed in this state is made partly by the United States or its instrumentalities and partly by nonexempt persons, the payment is exempt to the extent of the United States’ or its instrumentality’s share provided it is made directly to the vendor by the United States or its instrumentality."

The above comes from mid-page at:
www . boe . ca . gov / pdf / reg1614.pdf
(sorry, us noob's can't post a real url yet... you'll have to remove spaces)

So I just bought my box from RS today and they charged me sales tax on the full list price of the box. When I complained about the tax and showed the guy behind the counter a copy of the pdf w/Calif tax law, he barely looked at it and promptly said "it doesn't apply"! He started spewing some nonsense about how "the coupon amount goes directly to the manufacturer, not RS. There are always ways to get around the law". Yikes!

The kid says I should call RS hq in Texas, because they're not going to doing to do anything for me in the local store. Of course, I'm **so** looking forward to wading thru the RS phone tree, only to talk to some clueless, powerless 1st-level cust. service person who has no idea of what I'm talking about, much less the law. We'll see how it goes. Not holding my breath.

[milehighmike]

Perhaps I can shed some light on this issue.

I worked (now retired) for the Federal gov't and travelled extensively. There were two ways I paid for my travel expenses. About 95% of my air, local transportation (taxi, subway, car rental), hotel, and meals expenses were paid with a credit card authorized by the US Gov't but in my name. It was a MasterCard, Diners Club, etc. and looked like any other credit card except that it had US Gov't plastered all over it. I was responsible for the charges, billed by MasterCard, etc., which I received reimbursement for via submitting a claim (travel voucher). My air fares were all booked under contracts each airline had with the Federal gov't, and most hotels charged a max rate based upon GAO per diem studies, by locality. In other words, airlines and hotels knew I was travelling on US gov't business. Nevertheless, I paid local taxes on all of these expenditures, despite the fact they were funded by the US gov't to conduct official US gov't business. The only exception involved a few states, such as Texas, California and Florida, which did not charge sales tax on lodging for Federal employees, upon completing an exemption certificate and showing an official gov't ID. I can't imagine telling a waitress at a restaurant that I couldn't be charged sales tax because my meal was a Federal expenditure.

The other 5% involved arrangements, usually for large meetings, where the gov't directly contracted with the provider of the lodging and paid the provider directly. Under this scenario, the direct payor to the merchant was the gov't, not a third party as an intermediary (an employee-me).

I equate the $40 coupons to my gov't credit card. The only difference is that with the coupons, I'm technically getting reimbursed before I make the expenditure rather than vice versa. If a state, such as Wisconsin or California, elects to treat the coupon as a US gov't expenditure, they are certainly free to do so. Absent that specificity in state law, I'd have to conclude that the coupon is not a direct government purchase and, as such, is subject to sales tax.

[justfred]

I just got off the phone with a "tax adviser" from the Calif. State Board of Equalization (at 800-400-7115). They confirmed that Calif BOE Regulation 1614 applies in this case. The amount of sales tax should be calculated on the after-coupon price of the box. My next call will be to RadioShack corp hq to try to get my excess sales tax back.

[may_queen]

I bought two boxes from DigitalStar locally and they charged tax only on after-coupon price.

[john120]

Originally Posted by milehighmike

Perhaps I can shed some light on this issue.

I worked (now retired) for the Federal gov't and travelled extensively. There were two ways I paid for my travel expenses. About 95% of my air, local transportation (taxi, subway, car rental), hotel, and meals expenses were paid with a credit card authorized by the US Gov't but in my name. It was a MasterCard, Diners Club, etc. and looked like any other credit card except that it had US Gov't plastered all over it. I was responsible for the charges, billed by MasterCard, etc., which I received reimbursement for via submitting a claim (travel voucher). My air fares were all booked under contracts each airline had with the Federal gov't, and most hotels charged a max rate based upon GAO per diem studies, by locality. In other words, airlines and hotels knew I was travelling on US gov't business. Nevertheless, I paid local taxes on all of these expenditures, despite the fact they were funded by the US gov't to conduct official US gov't business. The only exception involved a few states, such as Texas, California and Florida, which did not charge sales tax on lodging for Federal employees, upon completing an exemption certificate and showing an official gov't ID. I can't imagine telling a waitress at a restaurant that I couldn't be charged sales tax because my meal was a Federal expenditure.

The other 5% involved arrangements, usually for large meetings, where the gov't directly contracted with the provider of the lodging and paid the provider directly. Under this scenario, the direct payor to the merchant was the gov't, not a third party as an intermediary (an employee-me).

I equate the $40 coupons to my gov't credit card. The only difference is that with the coupons, I'm technically getting reimbursed before I make the expenditure rather than vice versa. If a state, such as Wisconsin or California, elects to treat the coupon as a US gov't expenditure, they are certainly free to do so. Absent that specificity in state law, I'd have to conclude that the coupon is not a direct government purchase and, as such, is subject to sales tax.

The CECB coupon is not a credit card and only has value to merchants who have entered into prior agreement with the federal government(NTIA) to submitt data from the coupon to obtain payment or partial payment for CECB purchases by the federal government. The merchant receives payments directly from the federal government.

I did a little survey by phone calls to different merchants and from information from this forum.

1. It appears that WM, KM, the local merchants in my community, do not charge tax on the $40 coupon value. (only the difference)

2. RS corporate, BB corporate as well as RS B&M stores are taxing the customer for the entire purchase (including the gov purchase via direct contract with the gov.)

3. CC was inconsistent according to comments from the forum.

4. I don't know about the others.

It would be good if everyone on the forum reported their experience here to see if a pattern shows up! Where did you buy your CECBs Corporate or B&M and were you charged tax on the $40 coupon portion or just the difference?

[milehighmike]

john120,

I did not say the coupon was a credit card. Please re-read my post.

The points of my post:

- The Federal government is not buying anything. They are reimbursing consumers for part of the cost of the CECB's.

- If states elect to not tax the $40 coupon, that's their call.

[uniquelyme]

Originally Posted by milehighmike

john120,

I did not say the coupon was a credit card. Please re-read my post.

The points of my post:

- The Federal government is not buying anything. They are reimbursing consumers for part of the cost of the CECB's.

- If states elect to not tax the $40 coupon, that's their call.

California law (reg1614.pdf) seems pretty clear that sales tax should NOT be collected on the $40 coupon amount:

=====
Where payment for tangible personal property sold or consumed in this state is made partly by the United States or its instrumentalities and partly by nonexempt persons, the payment is exempt to the extent of the United States’ or its instrumentality’s share provided it is made directly to the vendor by the United States or its instrumentality. If the nonexempt party makes full payment and then seeks reimbursement from the United States or its instrumentality, the entire amount is taxable even though the United States or its instrumentality may reimburse the party in full or in part.
=====

[WeThePeople]

For what it is worth, Texas updated It's sales tax laws to include any equipment required to comply with the DTV transition.

Radio Shack @ Houston TX DID NOT charge me sales tax on my sale for the $40 coupon part.

[WaltA]

Originally Posted by Roger Lococco

... , I wasn't too thrilled being taxed by Target on the mediocre Venturer.

Yea, I was charged sales tax on the full amount by Target too.

If I look at the receipt, Target is indeed processing the "coupons" just as if they were a $40 gift card.

[WaltA]

Pennsylvania official ruling on collecting sales tax:

SUT-08-006--Purchase Price Federal Digital TV Converter Box Coupon

[sfhub]

It just depends on your state. Nebraska ruled that the amount is taxable (under their state taxation rules) even if the 3rd party making reimbursement is the Federal government.

IMO if your state doesn't charge tax on sales to the Federal Government, then the DTV coupon portion should not have tax applied. If it does, then tax should be charged.

http://www.revenue.ne.gov/converterbox.html

Nebraska & Local Sales Tax and TV Converter Box Coupons

Retailers in Nebraska have asked how to handle the $40 coupons provided to consumers by the National Telecommunications and Information section of the U.S. Department of Commerce. These coupons were authorized by Congress so that consumers without cable or satellite access or digital televisions could purchase converters to allow their television sets to continue to receive TV signals after February 17, 2009, when broadcasters convert their signals to the mandated digital format.

Under Nebraska Sales and Use Tax Regulation 1-037.03A, the value of a coupon which is accepted by the retailer as part of the selling price, and upon which the retailer is reimbursed for the amount of the coupon by a third-party, cannot be subtracted from the selling price when determining the taxable amount of the sale. This is the rule even when the third party making the reimbursement is the Federal government.