Ezel / Tax Rulings / TX
TX 8908L0951C01 Sales and/or Use Tax (State,Local,MTA) 1989-08-30

How was Texas sales tax calculated for buy-one-get-one-free promotions and seller-accepted coupons?

Short answer: Tax applied only to the paid item in a buy-one-get-one-free transaction; the free item was not taxed to the customer. When a coupon reduced the selling price, tax applied to the discounted amount—for example, $9.79 after a $3 coupon, not the $12.79 pre-coupon amount.

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This page answers the general question as of 1989. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1989
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

When a customer bought one item and received a second item free, tax was due only on the paid item. The free item was not taxable to the customer.

When a seller accepted a coupon as part of the selling-price calculation, tax applied to the discounted price. In the letter's example, a customer used a $3 coupon and paid $9.79 for cigarettes, so tax was based on $9.79 rather than $12.79.

Common questions

Was the free BOGO item taxed to the customer? No.

Did a coupon reduce the taxable amount? Yes.

What amount was taxable in the example? $9.79.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

August 30, 1989

Dear ***:

Thank you for your letter concerning the taxability of "buy one
get one free" items and coupons.

When you buy one item and get a second one free, tax is only due
on the one item. The second free item is not taxable to the
customer.

If coupons are accepted by a seller as part of the selling price,
then tax is due on the discounted price. In your example, you
give a $3 coupon and $9.79 for cigarettes. The tax is due on the
$9.79 not on $12.79.

This opinion is based on the facts presented. If there are
additional or different facts, the opinion may change.

If you have any questions, please contact Tax Correspondence. You
may call toll free 1-800-252-5555, or our regular number is
512/463-4600. My extension is 3-4658.

Sincerely,
Sherry Buckley
Tax Correspondence

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