Do manufacturer coupons reduce the price Kansas charges sales tax on?

Plain-English summary

Kansas Notice 24-05 explains a change to what counts as the taxable "selling price" for Kansas retailers' sales tax, made by 2024 House Bill 2098 (New Section 4) and effective July 1, 2024. The change amended K.S.A. 2023 Supp. 79-3602(ll) to add new subsection (ll)(3)(G).

Under the new subsection, the selling price does not include coupons issued by a manufacturer, supplier, or distributor of a product that (1) entitle the purchaser to a reduction in sales price and (2) are allowed by a seller who is reimbursed by the manufacturer, supplier, or distributor. When the seller accepts such a coupon, only the amount the purchaser actually pays is included in the taxable sales price.

This matters because another part of the statute, K.S.A. 79-3602(ll)(2), generally treats consideration a seller receives from third parties (such as a manufacturer reimbursement) as part of the price. New subsection (ll)(3)(G) overrides that where they conflict, so a reimbursed manufacturer coupon always reduces the taxable price.

The notice also confirms that store coupons -- coupons a specific retailer issues and that can be used only at its locations (found in newspapers, apps, or mailers) -- likewise reduce the selling price, so only the amount the purchaser pays is taxed.

What this means for you

Retailers

• When a customer uses a manufacturer, supplier, or distributor coupon that you will be reimbursed for, charge sales tax only on the amount the customer actually pays -- not on the coupon value.
• The same is true for your own store coupons: tax only the amount paid after the coupon.
• This applies to sales on or after July 1, 2024.

Shoppers

• With a reimbursed manufacturer coupon or a store coupon, Kansas sales tax is figured on the reduced price you actually pay.

Common questions

Are manufacturer coupons subtracted before sales tax? Yes -- for reimbursed manufacturer, supplier, or distributor coupons, only the amount the buyer pays is taxed, effective July 1, 2024.

What about store coupons? They also reduce the selling price, so only the amount paid is taxed.

Why did this need a law change? Another part of the statute treated third-party reimbursements as part of the price; the new subsection overrides that for these coupons.

When did it take effect? July 1, 2024.

Citations and references

• House Bill 2098 (2024) -- New Section 4 changed the definition of "selling price" for coupons.
• K.S.A. 79-3602 -- definitions for the Kansas retailers' sales tax act.
• K.S.A. 79-3602(ll) -- the "sales or selling price" definition; new subsection (ll)(3)(G) excludes reimbursed manufacturer coupons, overriding the third-party-consideration rule in (ll)(2).

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 24-05

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.gov
Mark A. Burghart, Secretary Laura Kelly, Governor

                                         NOTICE 24-05

                 CHANGES TO SALES TAX DEFINITION OF SELLING PRICE
                                    COUPONS

                                        (JUNE 11, 2024)

   During the 2024 Legislative Session House Bill 2098 was passed and signed into law.

Effective on and after July 1, 2024, New Section 4 of the Bill changes the definition of "selling
price" for purposes of the Kansas retailers' sales tax.

   K.S.A. 79-3602 defines various terms used in the Kansas retailers' sales tax act. New Section

4 of the Bill amends K.S.A. 2023 Supp. 79-3602(ll) to change the definition of "selling price" by
expanding the list of items that are NOT included in the selling price of goods or services.
Specifically, the amendment creates new subsection (ll)(3)(G) which provides:

         (3) "Sales or selling price" shall not include:

         ..........

        (G) notwithstanding the provisions of paragraph (2), coupons issued by a
   manufacturer, supplier or distributor of a product that entitle the purchaser to a
   reduction in sales price and allowed by the seller who is reimbursed by the
   manufacturer, supplier or distributor. When the seller accepts such coupons, only the
   amount paid by the purchaser is included in the sales price.

   The reference in the new provision to "paragraph 2" is to K.S.A. 79-3602(ll)(2), which

addresses when "sales or selling price" includes consideration received by a seller from third
parties. The language of new subsection (ll)(3)(G) indicates it overrides any provisions in
subsection (ll)(2) that conflict with (ll)(3)(G). In other words, coupons issued by a manufacturer,
supplier, or distributor of a product, that entitle the purchaser to a reduction in sales price and that
are allowed by a seller who is reimbursed by the manufacturer, supplier, or distributor, will always
reduce the selling price, and only the amount paid by the purchaser is included in the sales price.

   Please note another type of coupon that is frequently used is a store coupon. Store coupons

are coupons issued by a specific retailer and can only be used at specified locations. These coupons
are typically found in newspapers, in retailers' online apps, or in flyers received in the mail, and
the phrase "store coupon" may be in the fine print on the coupon. Store coupons also reduce the
selling price of an item, and only the amount paid by the purchaser is included in the sales price.

                               TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.gov. If you have questions about this Notice, please contact:

                            Taxpayer Assistance Center
                           Kansas Department of Revenue
                           Scott Office Building, 1st Floor
                                  120 SE 10th Ave
                                   P. O. Box 3506
                              Topeka, KS 66601-3506
                                Phone: 785-368-8222
                                 Fax: 785-291-3614