Coupons, Discounts and Rebates (Publication 113)
Reference Table

  Required reduction in selling price Payment to retailer is certain Payment is for like amount on a transaction-by-transaction basis Taxable Not taxable
Multiple threshold agreement-increase in rebate for each threshold exceeded Yes No Yes Not taxable
Manufacturer (MFG) coupon—retailer receives amount listed on coupon Yes Yes Yes Taxable
Store discount club card N/A (Not by third party) N/A (No payment, only reduction in price given to customer) N/A Not taxable
Store discount club card with third-party reimbursement Yes Yes Yes Taxable
Display in store indicates a reduction in selling price. Retailer agrees to reduce price and receives reimbursement from the distributor Yes Yes Yes Taxable
Retailer purchases directly from MFG. They enter into a buy-down program. Retailer is required to reduce price and will be reimbursed for the amount from MFG Yes Yes Yes Taxable
Retailer offers a "double discount" for certain MFG coupons. If MFG coupon states $1, the retailer discounts selling price by $2 Yes Yes Yes Only the $1 reimbursement from the MFG Amount reduced by retailer is considered an adjustment to the retail selling price
MFG has written agreement with retailer to advertise and give preferential shelf space. Retailer will receive compensation at the end of the promotional period. Retailers can document that agreements were not based on selling price reduction No Yes Yes Not taxable—the agreements were not based on a selling price reduction

Note: Sellers of cigarettes and tobacco products at retail must have a separate California Cigarette and Tobacco Products Retailer's License for each retail location. This is true even if you have a seller's permit or other permits or licenses issued by the CDTFA. For more information, see publication 78, Sales of Cigarettes and Tobacco Products in California.

Revision September 2018