Could a retailer claim a merchandise-return deduction after charging a customer to keep trading stamps issued with the purchase?

Plain-English summary

A customer bought a $2 item, paid $0.06 sales-tax reimbursement, and received trading stamps that cost the retailer $0.05. The retailer deducted that stamp cost from gross receipts as a cash discount.

When the customer returned the item but could not return the stamps, the retailer charged $0.10 for keeping them and refunded $1.96. California treated the cash discount as the retailer's $0.05 stamp cost, making the effective original selling price $2.01.

Because the retailer refunded only $1.96 rather than $2.01, the official annotation says the full price was not returned and the merchandise-return deduction was unavailable.

Common questions

What amount counted as the trading-stamp cash discount?

The $0.05 the retailer paid for the stamps.

What effective sale price had to be refunded?

$2.01 in the example.

Did the $1.96 refund qualify?

No.

Citations and references

• Eisenberg's White House, Inc. v. State Board of Equalization, 72 Cal.App.2d 8 — cited for measuring the cash discount by the retailer's stamp cost

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/490-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/490-0320.pdf

Original ruling text

STATE BOARD OF EQUALIZATION
OFFICE CORRESPONDENCE

490.0320
To:

REDACTED TEXT

From:

W. W. Mangels

Re:

Trading Stamps

Date:

July 17, 1953

This is in answer to your memoranda of June 12 & July 13.
We understand that this store issues green trading stamps, the cost of which it deducts as a cash discount. You inquire whether a deduction for returned merchandise should be allowed in connection with the following transaction. A customer purchases a $2.00 article paying 6 cents sales tax reimbursement and is also given green trading stamps which cost the store 5 cents. A few days later the merchandise is returned by the customer who is unable to return the stamps. The store therefore charges her 10 cents for keeping the stamps, returning to the customer $1.96. We believe the case of Eisenberg’s White House, Inc. v. State Board of Equalization, 72 Cal. App. 2d 8, can be regarded as holding that the amount of cash discount is the amount paid by the retailer for the S & H Green Trading Stamps. Therefore, it is the view of the legal staff that, in effect, the original selling price of the article was $2.01 and unless that amount is refunded to the customer it is our opinion that the deduction for returned merchandise should be allowed. W. W. Mangels WWM:ja