It seems everything is taxable — even coupons! I never questioned the small print on the coupons I use, at least not the part about the customer paying sales tax. (I don't understand why a manufacturer can say a coupon shouldn't be doubled when it's the retailer that makes a doubling offer, but that's not my point here.) I never questioned the sales tax, but I know others have.
Recently, when we were about to pay for new car tires, I overheard the customer in front of us questioning the sales tax on his bill: “Why should I pay sales tax on this $40-off coupon? You don't charge sales tax when the price is lower because of a store sale. Using a coupon is the same thing — I still pay $40 less.” He made a valid point: Why am I paying sales tax on money I'm not paying for goods or services?
If a manufacturer prices a car at $21,499 and I bargain with the dealer so that I'm paying only $17,399, I would certainly question the bill if I saw I was taxed on $21,499. Sometimes manufacturers suggest ridiculously inflated retail prices that I would never pay; the idea of being charged sales tax on those prices is absurd.
For lower priced items, the difference in tax seems minor, even if I would scoff at the manufacturer's inflated price. If I went to a toy store and paid a $15.00 sale price for a toy that's usually $20.00, I might not notice if I were charged thirty cents in tax on the extra $5.00. If I did notice, I would complain about it if I had the time and was in a quarrelsome mood. But until I overheard that tire customer, I never questioned the sales tax I paid on coupons. In fact, I have done the opposite — I once blurted out, “Don't I owe sales tax?” when coupons and sales brought my total bill to $0.00.
Once that tire customer planted the idea in my head, I had to find out why we do have to pay sales tax on coupons, but not advertised specials. The tire clerk had just responded, “The law says we have to.” That explanation wasn't enough to satisfy my curiosity, so I turned to Goodsearch and found a reasonable explanation from the state of New Jersey: “When these [manufacturers'] coupons are used, sales tax is charged on the full regular price because that is the amount which the vendor ultimately receives — in part from the customer, the balance from the manufacturer.” The same site explained that sales tax should not be charged for vendor coupons because the vendor never receives that extra money. That made sense to me, but assuming the laws are the same in my state (an answer I couldn't find online), the tire customer could have made another argument against paying sales tax: the coupon he used had been a vendor coupon.
Retailers seem to be as confused by the law as consumers are. Some retailers never charge sales tax on discounts, whether they are in-store sales or manufacturer's coupons. Some charge sales tax on all coupons, even those they have issued themselves. I have learned to expect to be charged sales tax on coupons and am pleasantly surprised when I am not — I consider it a gift from the retailer. Either way, I see coupons as a blessing, so I have decided not to complain that I’m really only getting 94% of their value after I pay Pennsylvania’s 6% sales tax.
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