Calculating Sales Tax with Coupons

When you use coupons, it’s important to understand how sales tax works with manufacture and store coupons.

Consider the following points:

1. A store is reimbursed by the manufacture for the value of a coupon used. Thus, the store still generates revenue from the couponed item. Therefore, sales tax IS applied to the amount of the coupon.
2. When you use a store coupon, OR when a store doubles the value of a manufacture’s coupon, the store is NOT reimbursed for that amount. Therefore, the amount for which the store doubles a coupon or the amount of a store coupon is NOT subject to sales tax.

Make sense?  Here are a few examples, to make it crystal clear:

Calculating Sales Tax with Coupons

Let’s set up a scenario, with easy round numbers.

• Let’s say you are able to take advantage of a 10 for $10 sale at Publix, and you indeed purchase 10 items. Each item is thus priced at $1.00.
• Let’s further say you are lucky enough to have matching manufacture coupons worth 50¢ for each item. That’s $5.00 in manufacture coupons.
• If your Publix DOUBLES those coupons, then you’re essentially getting $5.00 in store coupons. (Look at your receipt — it’s always broken up as a separate coupon.)  This scenario would work the exact same way if you had ten Publix coupons for 50¢ off said item.
• So, your pre-tax total is ZERO. But, because the store will still generate revenue off the $5.00 in manufacture coupons, you’ll be taxed for that amount.
• Tax around here is 7%; so for me, I would pay $0.35 out of pocket for $10.00 worth of items.

Make sense now?  Want another example?

• Let’s go to Kroger, where they also have a 10 for $10 sale.  But remember, Kroger doesn’t double coupons anymore.
• Let’s say you buy 10 items for $1 each.
• And again, you have 10 manufacture coupons for 50¢ each.  Therefore, you have $5 in manufacture’s coupons.
• So for $10 worth of items, you pay $5 plus tax.
• Since you don’t tax the amount of a manufacture coupon, you pay $5 plus 35¢ in tax (assuming tax is 7%).
• For $10 worth of items, you ‘ll pay $5.35 after coupons and taxes.

Ok, one more example:

• Take those handy-dandy Bed Bath and Beyond coupons.  There are generally two kinds: 20% off or $5 off.
• In either scenario, since it is a store coupon, you are taxed AFTER the couponed amount.
• So, if you buy an item at BBB for $100, and use a 20% off coupon (please, oh, please don’t ever buy something from there without a 20% off coupon!!), you are taxed the post-coupon amount of $80.
• In the most of the metro Atlanta area, that means you’ll pay 7% tax, or $5.60.

Disclaimer: this is most certainly the case in the state of Georgia. I cannot speak for any state elsewhere. However, I would imagine the same principles would apply. There are some areas where sales tax is lowered or not applicable to food and medicine.  Any out of staters who can verify or deny this, I’d love to hear from you! 🙂