Are purchases made with WIC benefits or food stamps, including for candy or sodas, subject to Texas sales tax — and how does a manufacturer's coupon used alongside them affect the tax?

Subject

Food Stamps And WIC Purchases — Candy, Sodas, And Manufacturer's Coupons

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9307L1248G13

Plain-English Summary

A taxpayer asked the Comptroller how sales tax applies to food purchases made using the WIC program or food stamps, in connection with manufacturer's coupons.

The Comptroller confirmed that purchases made through the WIC program or with food stamps are not taxable. Most of these purchases are of food and food products that are already not subject to tax. But the letter goes further: even if food stamps are used to buy candy, sodas, or other items that would otherwise be subject to Texas sales tax, those purchases are still exempt from tax when paid for with food stamps.

The letter separately addresses manufacturer's coupons. The value of a manufacturer's coupon is not itself subject to sales tax when used to buy a taxable item — the coupon is treated like a cash discount on the sale, and tax is calculated on the purchase price minus the coupon's value.

Finally, the letter explains what happens when a WIC or food stamp payment and a manufacturer's coupon are combined on the same purchase: neither the value of the coupon nor the amount paid with WIC or food stamps should be taxed. The coupon's value should be applied to the transaction so that the food stamp isn't effectively used to cover tax on the item.

The letter closes by noting the opinion is based on the facts presented and may change if different or additional facts apply.

What This Means For You

Food stamp and WIC purchases are exempt, even for otherwise-taxable items. If a customer pays with food stamps or through the WIC program, the purchase is not taxable — and this exemption extends to candy, sodas, or other items that would normally be subject to Texas sales tax if bought with cash.

Manufacturer's coupons reduce the taxable purchase price. A manufacturer's coupon works like a cash discount: tax should be calculated on the purchase price after subtracting the coupon's value, not on the full pre-coupon price.

Combining a food stamp/WIC payment with a manufacturer's coupon on the same item. In that situation, retailers should make sure neither the coupon's value nor the WIC/food-stamp-paid amount is taxed, and should apply the coupon so that the food stamp isn't used to cover any tax on the item.

This is a facts-based opinion. The letter states its conclusion is based on the facts presented to the Comptroller, and that different or additional facts could change the outcome.

Q&A

Q: Is a purchase made with food stamps subject to Texas sales tax?
A: No. The letter states that purchases made through the WIC program or with food stamps are not taxable.

Q: What if food stamps are used to buy candy or soda, which are normally taxable?
A: The letter says that if food stamps are used to purchase candy, sodas, or other such items that are subject to sales tax in Texas, those purchases are exempt from tax.

Q: Is a manufacturer's coupon subject to sales tax?
A: No. The letter explains the value of a manufacturer's coupon is not subject to sales tax when used to purchase a taxable item; it's equivalent to a cash discount, and tax is calculated on the purchase price less the value of the coupon.

Q: What happens if a customer uses both a food stamp/WIC benefit and a manufacturer's coupon on the same item?
A: Neither the value of the coupon nor the amount paid under the WIC program or with food stamps should be taxed. The coupon's value should be applied so the food stamp isn't used to cover tax on the item.

Q: Does this opinion apply no matter what facts are involved?
A: No. The letter states the opinion is based upon the facts presented, and that different or additional facts could change the outcome.

Original ruling text

July 12, 1993

Dear ****:

I am responding to your inquiry into the proper application of tax to
food purchases made using The WIC program or food stamps in connection with
manufacturer's coupons.

As you stated, purchases made through the WIC program or with food stamps
are not taxable. Most of these purchases are purchases of food and food
products that are not subject to tax. However, if food stamps are used
to purchase candy, sodas, or other such qualifying purchases that are
subject to sales tax in Texas, these purchases are exempt from tax.

The value of a manufacturer's coupon is not subject to sales tax when
used to purchase a taxable item. The value of the coupon is equivalent to
a cash discount taken on the sale. The tax should be calculated on the
purchase price less the value of the coupon.

If a customer uses both a WIC or food stamp and a manufacturer's coupon
on the purchase of an item, neither the value of the coupon nor the amount
paid for under the WIC program or with food stamps should be taxed. The
value of the coupons should be applied to the transaction in such a
manner so that the food stamp is not used to cover tax on any item.

This opinion is based upon the facts presented. If there are different
or additional facts, this opinion may change. You may also write to Tax
Administration Division, Comptroller of Public Accounts.

Sincerely,

Tax Administration Division

NOTE: Previous Accession Number 9308042L.2 and/or 9308042L