Sales and Use Tax Issues Relating to Loyalty and Rewards Programs

According to a recent article, "Retailers with customer loyalty and rewards programs, including coupons or discounts and points, rewards, or bonus dollars, should be aware that they may be required to collect sales tax on the non-discounted price in some circumstances."

It is noted in the article that as the loyalty rewards program develops, so do the tax ramifications. "While one type of reward may be subject to tax, another may be exempt. Understanding the business arrangements on a current basis will help a tax department stay abreast of potential changes needed in its tax reporting."

Retails and ecommerce businesses need to care about this risk of noncompliance because it runs the risk of an audit, penalties, and lawsuits by consumers where the state has over-collected.

Vertex Cloud runs on the most advanced calculation and returns software platform in the industry, used by thousands of the largest corporations in the world. Positioned to support all of your sales and use tax needs as your business grows, Vertex Cloud is now right-sized for your organization in a way that reduces the time, effort, and risk of managing sales and use tax compliance.