Coupons, Discounts and Rebates (Publication 113)
Taxable Rebates and Incentives

Invoice listing the discount

You maintain an online sales website. You enter into buy-down programs with manufacturers in which the manufacturers require you to offer their products at a reduced price. The amount of the discount is subject to tax because all three conditions exist. When your customer purchases a discounted product, the customer's invoice lists the selling price less than the amount of the manufacturer's discount. Since you have itemized the buy–down rebate on the invoice, you may collect sales tax from the customer for the full taxable amount.

Buy-down program

You enter into a buy-down program with a manufacturer in which you are required to reduce the selling price of the manufacturer's products. In turn, the manufacturer agrees to compensate you for the amount of the price reduction. You purchase the manufacturer's products directly from the manufacturer. The rebate revenue is subject to tax.

Coupon on package

Coupons on dog food bags indicate $2 off at register. The coupon also indicates "payable by Big Bad Dog Food Co. (BBDF Co.)" or "All promotional costs paid by BBDF Co." The store clerk removes the coupon from the dog food bag and enters the amount of the discount into the register. The discount amount is included in your total taxable sales.

Rebate agreements

You enter into a rebate agreement with a soda distributor that allows you to receive payments from the distributor based on the number of 12-packs of soda you sell at a required discounted price during the month of September. The distributor determines the amount of the sales discount and you receive 50 cents for every 12-pack of soda that you sell in September at the required discounted price.

At the end of the promotional period, after verifying the number of 12–pack units sold, the distributor will issue a rebate check to you. The payment of 50 cents for every 12–pack of soda that you sell in September at the required discounted price is subject to tax.