# Groupons - Iowa Sales Tax

## What are Groupons?

Groupons, or other similar discount certificates purchased on the Internet, are a group-based online buying service. Individuals sign up and are emailed a daily deal. Each deal requires a certain number of people to buy-in before it is actually available. Once that number has been reached, customers pay the online service for the deal. The online service then pays the retailer for the number of deals purchased, minus its fee. Customers then print out their "Groupon" and take it to the retailer in exchange for the deal.

### Example

An online buying service offers a certificate for a restaurant meal worth \$100 for a purchase price of \$50. The purchaser pays the online service \$50 for the certificate and then presents it to the restaurant in exchange for a meal worth \$100. The online service collects \$50 from the purchaser, subtracts its fee, and sends the remainder to the restaurant.

## On What Amount is Iowa Sales Tax Charged?

In most situations, sales tax will be charged on the full price of the item purchased.

### Example

Using the above restaurant example, assume the online buying service's fee is 45% of the \$50 purchase price for the certificate.

Value of meal purchased = \$100
Price paid by purchaser = \$50
Online buying service fee = \$22.50
Amount received by restaurant = \$27.50

Sales tax will be collected by the restaurant when the purchaser redeems the certificate. In this example, the restaurant collects Iowa sales tax on \$100, the full price of the meal.

## Is Iowa Sales Tax ever Charged on a Different Amount?

If the certificate states on its face the price paid by the purchaser to the online buying service, tax is collected on that amount, rather than the full price of the item purchased.

### Example

Again using the same restaurant example, assume the discount certificate has the \$50 purchase price printed on it.

In this case, sales tax will be collected by the restaurant on \$50.