Rev. 12/17
About New Jersey Taxes
Coupons, Discounts & New Jersey Sales Tax
Publication ANJ-9
Introduction
This bulletin explains the correct procedures for charging New Jersey Sales Tax whenever coupons or
other discounts result in a taxable item or service being sold at a reduced price. New Jersey reduced
the Sales and Use Tax rate in two phases between 2017 and 2018 (N.J.S.A. 54:32B-3). Effective January
1, 2018, the New Jersey Sales and Use Tax rate decreases from 6.875% to 6.625%. The tax rate was
reduced from 7% to 6.875% in 2017. Additional information about the Sales and Use Tax rate is
available
online. The examples in this publication use the 2018 Sales Tax rate.
Coupons
There are two distinct types of coupons commonly used by consumers —
manufacturer coupons
and
seller coupons
. Sales Tax is calculated differently depending on which kind of coupon is used.
Manufacturer coupons are treated like cash because the seller that accepts them is
reimbursed
by a
third party. When these coupons are used, Sales Tax is charged on the
full regular price
because that is
the amount which the seller ultimately receives — in part from the customer, the balance from the
manufacturer.
Example: A store issues a coupon labeled “mfr.” entitling the holder to purchase an item for $10
less than the regular price.
Example: A manufacturer issues a coupon entitling the holder to purchase two items for the price
of one.
NOTE: If a coupon involves a reimbursement and that fact is not disclosed on the coupon or in the
advertisement, the seller that accepts the coupon will collect Sales Tax from the purchaser only on the
reduced price but must remit Sales Tax to the State based on the full regular selling price of the item.
Regular price
6.625% Sales Tax
Total before discount
Manufacturer’s coupon
Customer pays
$ 99.95
+ 6.62
$ 106.57
- 10.00
$ 96.57
Regular price
6.625% Sales Tax
Total
Coupon for free item
Customer pays
$ 5.98
+ 0.40
$ 6.38
- 2.99
$ 3.39
Publication ANJ–9 About New Jersey Taxes:
Coupons & Discounts
Rev. 12/17
Seller coupons are issued by the seller, rather than by the manufacturer. Whenever a transaction includes
the use of a seller coupon, tax is charged
only on the discounted price
of the item being purchased, since
the seller is not reimbursed for the value of the coupon.
Example: A store issues a coupon entitling the holder to purchase a product for 50 cents less than
the regular price.
Regular price
Store Coupon
Taxable receipt
6.625% Sales Tax
Customer pays
$ 2.37
- 0.50
$ 1.87
+ 0.12
$ 1.99
Example: A store issues a coupon entitling the holder to purchase two items for the price of one.
Regular price for two items
Store Coupon for free item
Taxable receipt
6.625% Sales Tax
Customer pays
$ 1.58
- 0.79
$ 0.79
+ 0.05
$ 0.84
Discounts
Whenever a taxable item is purchased “on sale” and
no coupon is required
for the discount, Sales Tax
is due only on the discounted price. If a coupon
is
required, see
Seller Coupons
and
Manufacturer
Coupons
above.
Example: Ann purchases a new television for $350. The regular ticket price of the item is $450. No
coupon is required for the $100 discount. The total cost to Ann is $373.19 ($350 for the TV plus
$23.19 Sales Tax).
Free Offers
When a store or manufacturer offers a taxable item free with
no coupon required
, Sales Tax should
not be charged on the free item. If a coupon
is
required, see
Seller Coupons
and
Manufacturer
Coupons
above.
Publication ANJ–9 About New Jersey Taxes:
Coupons & Discounts
Rev. 12/17
Supermarket Club Cards
Often, supermarkets issue customers a store card that can be used to receive discounts on certain
items. Discounts obtained through such cards are treated the same as discounts with store coupons.
Thus, Sales Tax is due on the discounted amount.
Buy One Get One
If no coupon is required to obtain two taxable items for the price of one (or three for the price of two,
etc.), Sales Tax should be charged only on the amount that the customer actually pays. If a coupon
is
required, see
Seller Coupons
and
Manufacturer Coupons
above.
Example: Rick buys two paperback books, each book costing $4.95, on a “buy one, get one free”
offer. No coupon is required for the discount. The cost to Rick is $4.95 plus 33 cents Sales Tax
(6.625% of $4.95).
Early Payment (Term) Discounts
Sellers often offer their customers a discount for early payment. For example, the term “2/10, net/30”
means that the purchaser may take a 2% discount off the selling price if payment is made within 10
days, but no discount is allowed thereafter and the full invoice amount is due within 30 days. Sales Tax
is charged on the discounted price if the customer chooses to take advantage of the discount.
Trade-Ins
A trade-in is a discount that occurs when a customer gives the retailer a used item that the retailer will
hold for sale in exchange for credit against the purchase of a new product of the same kind. In
transactions that include a trade-in, Sales Tax is charged on the net purchase price, which is the price
to the customer
after
the
amount of the trade-in allowance has been deducted from the regular selling
price.
Example: An automobile dealer allows a customer an $800 trade-in allowance against the purchase
price of a used car. The sales invoice would look something like this:
Sales Tax is not charged on the full price in this case because the seller will collect the balance of tax
later, when the traded-in item is resold. NOTE: The law permits this discount only when the item taken
in trade is of the same kind as the one being purchased and the retailer intends to resell it. The dealer
Trade-in allowance
Taxable receipt
6.625% Sales Tax
$ 8,900.00
- 800.00
$ 8,100.00
+ 536.63
$ 8,636.63
Publication ANJ–9 About New Jersey Taxes:
Coupons & Discounts
Rev. 12/17
must separately state the Sales Tax on all invoices, including when the customer initially agrees
to a transaction price and when the customer actually takes delivery,
Rebates
A popular sales promotion is for the manufacturer to issue a rebate on the retail price of an item. When
a manufacturer’s rebate is involved, Sales Tax is calculated on the full retail price before the rebate. For
Sales Tax purposes, a rebate is treated the same as a manufacturer’s coupon, since in both situations,
the seller is receiving the full retail price, in part from the customer, in part from the manufacturer.
Example:
An automobile manufacturer offers a $2,000 rebate on the cost of this year’s latest model. The
billing would look similar to this:
A manufacturer’s rebate may be sent to the customer after the sale is concluded, or directly to the
seller as part of the customer’s payment. The rebate will not affect the retail taxable receipt since the
retailer receives the full price either way.
Promotional Gift Cards
Gift cards given away by sellers as promotional items (e.g., customers who spend $50 on a single visit
to a store receive a $10 gift card to be used on their next purchase at that store) are treated in the
same manner as seller coupons. When a promotional gift card is redeemed, tax is charged on the price
after the amount of the gift card is deducted as long as the seller receives no compensation for the
card.
For More Information
Contact the Division’s Customer Service Center at 609-292-6400 or email us. Many State tax forms and
publications are available on our website.
Sticker price
6.625% Sales Tax
Total before rebate
Manufacturer’s rebate
Customer pays
$ 18,000.00
+ 1,192.50
$ 19,192.50
- 2,000.00
$ 17,192.50