Are the gross receipts from selling discount dining cards subject to Kansas sales tax?

Plain-English summary

The question was whether the gross receipts from selling discount dining cards are subject to Kansas sales tax. The Department ruled that they are.

The imposition statute. The Department quoted K.S.A. 79-3603(a), which taxes "the gross receipts received from the sale of tangible personal property at retail within this state."

The seller of the cards is the retailer. "It is the policy of the Kansas Department of Revenue that an organization engaged in the retail sale of coupons or discount cards (that are redeemable by third party merchants) is the retailer for purposes of the Kansas retailers' sales tax act. Therefore, the selling organization is required to remit sales tax on their gross receipts." So the group that sells the discount dining cards - not the restaurants that later honor them - is the retailer that owes the tax on the card sales.

Bottom line: selling discount dining cards (or similar coupons/discount cards redeemable at third-party merchants) is a taxable retail sale, and the selling organization must collect and remit Kansas sales tax on its gross receipts from those sales.

What this means for you

Groups selling discount cards or coupon programs

If you sell discount dining cards - or comparable coupons or discount cards that customers redeem at third-party merchants - you are the retailer. Collect Kansas sales tax on the price of the cards and remit it on your gross receipts.

It doesn't matter that a third party honors the discount

The redemption happens later at participating restaurants, but the taxable sale is your sale of the card. The Department places the retailer obligation on the organization that sells the cards.

Consistent with other discount/coupon rulings

Kansas treats the sale of such cards as a sale of tangible personal property, the same way it treats other coupon-book and discount-card sales - the selling organization owes tax on its receipts.

Common questions

Q: Are discount dining card sales taxable in Kansas?
A: Yes. The Department ruled that the gross receipts from selling discount dining cards are subject to Kansas sales tax.

Q: Who owes the tax - the card seller or the restaurants?
A: The selling organization. It is the retailer for Kansas sales tax purposes and must remit tax on its gross receipts from the card sales.

Q: What is the legal basis?
A: K.S.A. 79-3603(a) taxes the gross receipts from retail sales of tangible personal property, and the Department's policy treats a seller of coupons or discount cards redeemable by third-party merchants as the retailer.

Citations and references

• K.S.A. 79-3603(a) - imposes Kansas sales tax on "the gross receipts received from the sale of tangible personal property at retail within this state." Under Department policy, an organization that sells coupons or discount cards redeemable by third-party merchants is the retailer, so it must remit sales tax on its gross receipts from selling discount dining cards.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-059

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 15, 2000

XXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXXXX

Dear XXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated August 23, 2000. In it, you request advice on the taxability of the gross receipts from the sale of discount dining cards.

K.S.A. 79-3603(a) imposes a sales tax upon: “The gross receipts received from the sale of tangible personal property at retail within this state. . .”

It is the policy of the Kansas Department of Revenue that an organization engaged in the retail sale of coupons or discount cards (that are redeemable by third party merchants) is the retailer for purposes of the Kansas retailers’ sales tax act. Therefore, the selling organization is required to remit sales tax on their gross receipts.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially effects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 11/16/2000 Date Modified: 10/11/2001

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