The Illinois Department of Revenue (Department) issued General Information Letter (GIL) ST 12-0009-GIL (Feb. 28, 2012), which states that retailers that sell “deal-of-the-day” vouchers must collect and remit sales tax on the amount a customer pays for the voucher if the retailer can identify such amount. Otherwise, the retailer must collect and remit the full value of the “deal-of-the-day” item sold. The Department stated that it is in the process of preparing a bulletin to explain the tax treatment of deal-of-the-day websites, but it issued this GIL using guidance provided at a practitioners’ meeting on February 2, 2012.

The taxpayer in ST 12-0009-GIL requested information regarding the taxability of a prospective business venture similar to GroupOn, a popular website that sells vouchers redeemable for items sold by retailers at a discount. The Department provided several examples of how a typical GroupOn-type transaction should be treated for Illinois sales tax purposes when a customer purchases a $25 voucher redeemable for $50 of food at a retailer.

• In the first example, the customer redeemed the voucher for $50 of food. The Department stated that the retailer must collect $2 of sales tax (applying Illinois’s 8% sales tax rate to a $25 purchase) if the retailer knew the customer paid $25 for the voucher.
• In the second example, the customer also redeemed the voucher for $50 of food, but the retailer did not know the amount the customer paid for the voucher. The Department stated that the retailer must collect $4 of sales tax ($50 taxed at the 8% rate) because it did not know the amount paid for the voucher.
• The third and fourth examples were the same as the first two examples, except that the customer redeemed the voucher for $60 of food. The Department stated that both transactions are treated in the same manner as the first two examples, except that the retailer must collect sales tax on the additional amount sold—an additional $0.80 ($10 taxed at 8%).

The Department further stated that the taxpayer is not required to collect sales tax on the sale of the voucher because the taxpayer sold intangible property, which is not subject to Illinois sales tax.

Only a limited number of states have provided guidance on the taxability of deal-of-the-day transactions. Illinois’s suggested treatment is similar to a handful of other states’ guidance on this issue, including Iowa, Kentucky, and Maine. The Streamlined Sales and Use Tax Project (SSTP) is also working to provide uniform guidance on the voucher business model to its member states. The SSTP is in its preliminary analysis phase, but recently distributed the results of a survey issued to all member states attempting to determine how states treat the voucher transactions. While states are slowly issuing guidance on the issue, Illinois’s deal is “on” for vouchers.