The Commonwealth Court of Pennsylvania reversed the Board of Finance and Revenue’s (Board) order, in part, and determined that when a retailer’s receipt separately states the coupon presented and sufficiently identifies the item to which the coupon applies, a taxpayer is only liable for sales tax based on the price as reduced by the coupon and not the full price.
Two individual taxpayers requested refunds of sales tax a retailer collected on taxable items paid for, in part, using coupons. For each purchase, taxpayers presented coupons at the point of sale and the receipt from the sale separately reflected the value of the coupon and the reduced sales price after applying the coupon. However, the retailer collected sales tax based on the full purchase price, without a reduction of the price after application of the coupons.
Pennsylvania regulation provides that the use of coupons at the point of sale will establish a reduced purchase price if “both the [taxable] item and the coupon are described on the invoice or cash register tape.” 61 Pa. Code § 33.2(b)(2). Relying on this regulation, the Board denied taxpayers’ requests for refunds because the receipts provided by the retailer did not adequately describe the coupons and did not indicate to which item the coupon relates.
After agreeing that the regulation is consistent with the applicable statute, the court held that the Board erred in finding that the regulation requires the receipt to specify to which taxable item the coupon relates. Further, the court held that the regulation did not require the receipt to identify the nature of the coupon, whether a rebate or a store or manufacturer’s coupon. Instead, the court held that the receipt must simply present a description allowing one to discern that the coupon was accepted and applied toward the purchase of a taxable item.
Thus, the court found in favor of the taxpayer, and determined that sales tax is imposed on the reduced price, where the applicable receipt separately stated the value of the coupon and the receipt only included taxable items. In contrast, the court upheld the Board’s decision to deny taxpayer’s refund where the receipt consisted of both taxable and nontaxable items. The court found that where it could not be discerned from the receipt whether the coupon applied to a taxable or non-taxable item, the sales tax should be collected on the full purchase price. The retailer intervened in the case and argued on the side of the state.