Iowa Sales Tax on Discounts, Rebates, and Coupons

Discounts

The word "discount" means "to buy at a reduction." Iowa sales tax applies to the reduced price paid by the customer.

Certain retailers bill their customers on a gross and net basis, with the difference considered to be a discount for payment purposes. When a customer does not resolve the bill within the net payment period, tax applies on the gross charge shown on the billing.

Rebates

A rebate is a return of part of an amount paid for a product. Manufacturers’ rebates are not discounts and cannot be used to reduce the gross receipts received from a sale or reduce the purchase price of a product. This rule applies even though the rebate is used by the seller to reduce the selling price or is used by the purchaser as a down payment. The rebate is considered a transaction between the manufacturer and the purchaser.

Iowa sales tax applies to the amount paid by the purchaser to the seller. That amount cannot be reduced by the amount of the rebate before sales tax is applied.

Coupons

Generally, two types of coupons are used.

Coupons issued by the producer of a product

These are not discounts and cannot be used to reduce the taxable amount of the product.

Coupons issued by the retailer

These are treated as a discount.

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.

On What Amount is Iowa Sales Tax Charged?

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

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.


Source URL: http://tax.iowa.gov/iowa-sales-tax-discounts-rebates-and-coupons