Archive for Sunday, February 27, 2011

Kansas Department of Revenue monitoring sales tax collections by retailers using Groupon

February 27, 2011


It’s not just thrifty social media lovers who have been keeping a sharp eye on the Lawrence deals popping up on Groupon or LivingSocial.

Since the Internet trend arrived in Lawrence in January, the daily deals have gotten the attention of local and state officials who want to make sure that retailers are paying the proper sales taxes.

Each day, Groupon offers one deal in each of its markets. That deal is typically a 50 to 90 percent discount off the price of the product or service, and the offer might be good only if enough people agree to buy it. Customers buy the coupons online and redeem them at the local shops. Groupon and the retailer split the cost of the proceeds.

Another website, LivingSocial, operates on a similar concept.

These social coupons are something the Kansas Department of Revenue is reviewing, spokeswoman Jeannine Koranda said.

“It’s on our radar,” Koranda said. “It’s an area where a lot of states are finding that technology is outpacing their laws.”

Since January, Groupons have been offered in Lawrence on everything from coffee to laser hair removal.

Many of the products, such as massages, a ride on a party bike and prescription eye glasses, are exempt from paying sales tax.

But the Groupons products sold in restaurants, coffee shops and pizza parlors do have to pay sales tax. In Groupon’s agreement with merchants, it states that retailers are responsible for covering the sales and use taxes on the goods and services.

In Lawrence, businesses such as 3 Spoons Yogurt, Wheat State Pizza and Mirth Cafe treat Groupons just as they do other coupons. Customers only have to pay sales tax on the amount not covered by the Groupon.

But according to the department of revenue, that might not be enough.

The state agency agrees that retailers need to pay the difference on what is covered in the coupon and what a customer buys. So for example, if someone buys $30 worth of pizza and has a $20 Groupon, they must pay sales tax on the $10 of pizza not covered in the Groupon.

But, the Department of Revenue also thinks tax should apply to the amount of money Groupon returns to the retailer for every item purchased.

So in the pizza example, if customers pay $10 for a $20 Groupon and $5 dollars goes back to the retailer from that sale, the retailer would have to pay taxes on that $5.

The revenue department doesn’t know whether retailers are doing that.

“I don’t even know if we would even be aware if they weren’t at this point,” Koranda said.

Lawrence City Manager David Corliss doesn’t think there is anything wrong with using Groupons, but he is still keeping an eye on the company.

“You always want to watch your tax base. It may be something to monitor,” he said.


Richard Heckler 7 years, 2 months ago

Which retailers are charging an extra sales tax BUT are NOT telling consumers?

Where is the legal opinion on that back door venture?

Consumers would like to see this as they walk in the door?

Perhaps this data should be made quite obvious at all entryways!!!

Consumers would appreciate transparency in business!!

ralphralph 7 years, 2 months ago

You don't mean TAX-Burger, do you?

I'd like to see 'WARNING' signs for the double-secret-sales-tax-that's-not-really-a-sales-tax-at-all-but-actually-a-kickback-to-the-developer ... but I'd prefer a repeal of the law allowing it in the first place.

just_another_bozo_on_this_bus 7 years, 2 months ago

At the very least, the state and localities should get a cut for handling expenses. (In addition to requiring large signs informing customers that it's being charged.)

just_another_bozo_on_this_bus 7 years, 2 months ago

Why can't they require every retailer in such a district to include an entry on the receipt showing exactly how much extra tax was charged on each purchase?

Stuart Evans 7 years, 2 months ago

in other words, do not try and create an economy that is separate from the existing government scam. under thumb and always will be; got it.

kawman_sense 7 years, 2 months ago

"But according to the department of revenue, that M I G H T not be enough."
"But, the Department of Revenue also T H I N K S tax should apply to the amount of money Groupon returns to the retailer for every item purchased."

So, reading this article, I come to the conclusion that the Department of Revenue does not know how this should be handled. Let us know when they do.

sherbert 7 years, 2 months ago

Do retailers always have to pay tax on the difference of actual price paid and coupon discount? That doesn't make sense. If it's normally $2.00, but you have a coupon to get it for $1.50, then the retailer is getting $1.50 and that's what tax should be paid on. Now, maybe I'm misunderstanding it, I do think they should pay tax when they buy the Groupon Coupon, because it's a purchase as well.

just_another_bozo_on_this_bus 7 years, 2 months ago

Sales tax should be collected on whatever Groupon gets paid to issue the coupon. Not the "list" price.

obamasocks 7 years, 2 months ago

Thats could they charge sales tax on more than they are selling? Eg, this week taco bell has crunchwraps for 88 cents. Its normally 2.50. Should taco bell be taking sales tax on 2.50, or on .88 cents? This is just the state freaking out because they are in the budget crisis, and wanting to squeeze every last penny out of sales tax.

Brock Masters 7 years, 2 months ago

I agree with you. A store offers 50% off on a sweater, but they must collect tax on the full price? BS.

The Governor wants to create an environment that encourages economic growth but then his agency steps in and tries to stymie it. Unbelievable.

kshiker 7 years, 2 months ago

I could not agree more. There is no difference between a coupon or discount obtained through the internet and one clipped out of the morning newspaper. If the retailer is receiving $10 for a product that normally goes for $20, then the sales tax is required on the price of the product, which is $10. I would love to see the statutory or regulatory justification for their interpretation.

ghamon 7 years, 2 months ago

Another little unknown fact about our sales tax which I would guess few people realize: If you buy a new car, and the dealer offers a $3,000 rebate on the vehicle, you pay sales tax on the #3,000 rebate amount. In other words you pay sales tax on money that you do not spend. If the same logic is applied to this situation, not only should sales tax be collected on the sale of the Coupon book itself, but if you buy a $20 pizza for $10 you would pay sales tax on the actual price of the pizza before the discount was applied. I am sure the Department of Revenue is looking into that.

rse1979 7 years, 2 months ago

Actually, it's similar logic the state is applying here. In the car rebate example, generally the rebate gets paid by the manufacturer to the dealer. Let's say you pay $17,000 for a car, after $3,000 rebate. The dealer 'sold' the car for $20k (17k from you, 3k from the manufacturer), so that's the taxable amount.

In the Groupon/pizza example above, the pizza place gets $10 from the consumer (amount spent above and beyond the $20 coupon), plus another $5 back from Groupon. So the pizza place 'sold' the pizza for $15.

ghamon 7 years, 2 months ago

So the difference between a discount and a rebate is??? The deal between the dealer and the manufacturer has nothing to do with me , so why would I be responsible for the sales tax?

CHKNLTL 7 years, 2 months ago

This reminds me of those television converter box coupons from the government. It took $40 off my cost, which brought it down to $19.99, but the sales tax was calculated against the whole total before the rebate -$59.99. I hadn't even taken enough money to buy it after that tax trick they pulled on me. I was forced to swipe my debit card over 37 cents I didn't bring! The Department of Revenue clearly can't keep track of businesses owing sales tax....until they seize the business(Papa Keno's, Jefferson's, Wheat State). Look out Java Break -you're next.

jaycat 7 years, 2 months ago

The difference is between manufacturers and retailers coupons. On manufacturers you pay sales tax on the entire amount before the coupon, this is because the manufacture reimburses the retailer. With the retailer you take off the amount for the coupon, and then charge tax on what is left. The retailer does not get reimbursed for the amount they took off the price of the product. So revenue has to ask itself if the groupon is a manufacturer’s coupon or a retailer’s coupon.

7 years, 2 months ago

I still think the Groupon TV commercials are insulting to real people dealing with real problems. I "get" the joke, but really?

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