Sales Tax State Activity Update - April 2005

Pennsylvania Discusses Discounts

The Pennsylvania Department of Revenue states that regulations specify that amounts representing

• On-the-spot cash discounts
• Employee discounts
• Volume discounts
• Store discounts
• Wholesalers or trade discounts
• Rebates
• Store or a manufacturer's coupon

shall establish a new purchase price , if both the item, and the coupon are described on the invoice or cash register tape.

A retailer is required to deduct the coupon amount from the taxable portion of the purchase price, if the cash register receipt describes both the item purchased, and the coupon that applies to it. The description requirement ensures that a coupon relating to a nontaxable item will not reduce the taxable purchase price. It also protects the retailer by showing why the taxable price was reduced.

The requirement of a description means that the cash register receipt makes a clear reference to the item, and the coupon related to it, or a clear reference that there is an amount deducted on any purchase or a percentage discount on all items listed whether taxable or not.

Regulations also state that an amount representing a discount for prompt payment of a bill, which is dependent on an event occurring after the completion of the sale, may not be deducted in computing the taxable measure.

View the ruling here.

(Pennsylvania Tax Update No. 113,February/March, 2005)

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