Was a manufacturer coupon's redemption value taxable gross receipts when the retailer gave the product to the customer and later received cash from the manufacturer?

Plain-English summary

A consumer presented a manufacturer coupon for a free bottle of product. The retailer charged for the product and tax, then refunded the product price, and the manufacturer was assumed to reimburse the retailer in cash.

The coupon therefore had value equal to the retail price and functioned as payment. Section 6012 included cash, credits, and property of any kind in gross receipts.

The redemption value was included in the retailer's taxable gross receipts even though the consumer's product price was refunded.

Citations and references

• California Revenue and Taxation Code § 6012(b)
• Sales and Use Tax Law pamphlet containing section 6012 — identified as enclosed; edition and copy not reproduced in the official PDF
• Consumer's Aug. 11, 1967 letter — question and facts recited; letter, coupon, attachments, and dealer receipt not reproduced in the official PDF
• Free bottle, dealer price and tax charge, product-price refund, assumed manufacturer cash reimbursement, and 39-cent retail redemption value — facts supplied or assumed; product identity and price evidence, coupon terms, retailer-manufacturer agreement, redemption submission, cash reimbursement, books, return, and tax payment not reproduced in the official PDF
• Official Annotation 280.0700's manufacturer distribution, local-retailer redemption, cash reimbursement, product sale, and gross-receipts summary — annotation generalizes the product, omits the 39-cent amount and consumer refund sequence, and supplies no additional transaction record
• Possible later manufacturer reimbursement, return filing, audit, assessment, payment, consumer refund claim, appeal, or other agency action — not supplied in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 280.0700
• Original supporting opinion: 280.0700 PDF

Original ruling text

280.0700

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 12, 1967

Dear Mrs.
In your letter of August 11, 1967, you ask a question relating to the tax status of merchandise that you were to receive by virtue of a gift coupon. The facts, as we understand them, are that you received a coupon from the manufacturer of "P" entitling you to 'a free bottle of the product upon presentation of the coupon to a dealer. When you sought to redeem your coupon, the dealer charged you for the soap, plus sales tax, and then refunded the price of the soap. We assume that the manufacturer reimbursed the dealer by redeeming the coupon for cash. The sales tax is an excise tax on the retailer for the privilege of selling. The amount upon which he is obligated to pay tax (reimbursed by the consumer) is categorized as taxable gross receipts. Section 6012 of the Sales and Use Tax Law, pamphlet enclosed, defines taxable gross receipts to include, “(b) All receipts, cash, credits and property of any kind.” The coupon, in this case, has a value determined by the retail selling price of the soap (in this instance 39 cents). Therefore, when the dealer accepts the coupon as payment for the soap, he is accepting an item of value (since he can redeem the coupon for cash from the manufacturer) which is properly includable in his taxable gross receipts. Should you have further questions, please feel free to write.

Very truly yours,

T. P. Putnam
Tax Counsel

By A. Wells Petersen
AWP :ph [lb]