Tax 11.28(3)(a) (a) Coupons for free property, items, or goods issued and redeemable by a manufacturer or other third party. When a manufacturer’s or other third party’s coupons are distributed to consumers and subsequently are redeemed by a retailer for tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., without charge, the transfer of the property, items, or goods by the retailer to the coupon holder is a sale, not a gift. The consideration for the sale upon which the measure of tax is based, if taxable tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., is transferred, is the amount the manufacturer or other third party reimburses the retailer for the coupon, less any coupon handling fees, if the following conditions are met:

Tax 11.28(3)(a)1. 1. The retailer receives consideration from a third party other than the purchaser and the consideration is directly related to a price reduction or discount on the sale.

Tax 11.28(3)(a)2. 2. The retailer is obligated to pass the price reduction or discount on to the purchaser.

Tax 11.28(3)(a)3. 3. The amount of the consideration attributable to the sale is a fixed amount and the retailer is able to determine the amount at the time of the sale.

Tax 11.28(3)(a)4. 4. One of the following also applies:

Tax 11.28(3)(a)4.a. a. The purchaser presents a coupon, certificate, or other documentation to the retailer to claim the price reduction or discount, if the coupon, certificate, or other documentation is authorized, distributed, or granted by a third party with the understanding that the third party will reimburse the retailer for the amount of the price reduction or discount.

Tax 11.28(3)(a)4.b. b. The purchaser identifies himself or herself to the retailer as a member of a group or organization that may claim the price reduction or discount.

Tax 11.28(3)(a)4.c. c. The retailer provides an invoice to the purchaser, or the purchaser presents a coupon, certificate, or other documentation to the retailer that identifies the price reduction or discount as a third party price reduction or discount.

Tax 11.28(3)(b) (b) Cents-off coupons reimbursed by manufacturers and other third parties. A common arrangement between manufacturers or other third parties and retailers involves the use of cents-off coupons. The coupons are issued by manufacturers or other third parties and used by consumers toward the purchase of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats. The retailer then is reimbursed by the manufacturer or other third party. In this situation, the retailer’s taxable sales price includes the amount the retailer receives from the customer. The retailer’s taxable sales price also includes the amount the retailer receives from the manufacturer, less any coupon handling fees paid by the manufacturer to the retailer, if the conditions in par. (a) 1. to 4. are met.

Tax 11.28(3)(c) (c) Coupons issued and redeemable by retailers.

Tax 11.28(3)(c)1. 1. When a retailer distributes coupons which its customer may use to obtain free tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., or taxable services, the following shall apply:

Tax 11.28(3)(c)1.a. a. When purchasing taxable products, including services, which will be given away to customers who make a required purchase consisting of only nontaxable products, a retailer may not purchase the free products without tax for resale. The retailer is deemed the consumer of the free products as provided in s. 77.52 (21) (a), Stats. If the free products were acquired without tax for resale, the retailer shall report the tax on its purchase price of those products.

Tax 11.28 Note Example: A retailer purchases key chains that it will give to customers who purchase eight gallons of gasoline. The gasoline is exempt from sales tax. The retailer is required to pay Wisconsin sales or use tax on its purchase of the key chains.

Tax 11.28 Note Note: See s. Tax 11.985 for additional information concerning bundled transactions.

Tax 11.28(3)(c)1.ag. ag. When purchasing taxable products, including services, which will be given away to customers who make a required purchase consisting of only taxable property, items, or goods, a retailer may purchase the free products without tax for resale. The retailer is deemed to be selling both the required property, item, or good and the product being provided free, as provided in s. 77.52 (21) (b), Stats.

Tax 11.28 Note Example: A retailer purchases bicycles that it will give to customers who purchase a sofa. The retailer may purchase the bicycles without tax for resale because the customer must purchase the sofa in order to receive the bicycle.

Tax 11.28(3)(c)1.ar. ar. When purchasing taxable products, including services, which will be given away to customers who make a required minimum purchase that may consist of both taxable and nontaxable property, items, and goods, the retailer may owe tax on its purchase of the free products. If the sales price of all of the taxable products sold equals or exceeds the required minimum purchase, the retailer may purchase the free products without tax for resale. If the sales price of all of the taxable products sold does not equal or exceed the required minimum purchase, the retailer owes tax on its purchase price of the free products to the extent that nontaxable products are included in the required minimum purchases. The retailer may make a reasonable allocation to compute the tax due on its purchase price of the free products. If the retailer does not want to make this allocation, the retailer shall pay tax on its purchase price of the products provided free of charge.

Tax 11.28 Note Examples: 1) A retailer provides a free soft drink to each customer that purchases at least $20 worth of property. A customer purchases $15 of taxable property and $5 of nontaxable property and receives the free soft drink. The retailer purchased the soft drink from its supplier for $1. Since 75% of the selling price of the minimum required purchase is from taxable property ($15/$20 minimum purchase requirement = 75%), the retailer is only required to pay tax on the remaining 25% of its $1 purchase price of the soft drink it gave away to this customer.

Tax 11.28 Note 2) Same as Example 1, except that the customer purchases $5 of taxable property and $15 of nontaxable property and receives the free soft drink. Since 25% of the selling price of the minimum required purchases is from taxable property ($5/$20 minimum purchase requirement = 25%), the retailer is only required to pay tax on the remaining 75% of its $1 purchase price of the soft drink it gave away to this customer.

Tax 11.28 Note 3) Same as Example 1, except that the customer purchased $15 of taxable property and $30 of nontaxable property and receives the free soft drink. Since 75% of the minimum required purchases is from taxable property ($15/$20 minimum purchase requirement = 75%), the retailer is only required to pay tax on the remaining 25% of its $1 purchase price of the soft drink it gave away to this customer.

Tax 11.28 Note 4) Same as Example 1, except that the customer purchases $25 of taxable property and $30 of nontaxable property and receives the free soft drink. Since at least 100% of the $20 minimum required purchase is from taxable property, the retailer does not owe any sales or use tax on its purchase of the soft drink that it gave away to this customer.

Tax 11.28 Note Note: Additional examples can be obtained in Wisconsin Tax Bulletin 174 (January 2012) available on the Department’s web site at www.revenue.wi.gov.

Tax 11.28(3)(c)1.b. b. A retailer may not use an exemption certificate when purchasing taxable products which the retailer knows, or should know, are to be given away to customers without a required purchase. If the product that is given away was acquired without tax for resale, the retailer shall report the tax on its purchase price of the product.

Tax 11.28 Note Example: A retailer purchases key chains that are subsequently given away to customers, regardless of whether the customer makes a purchase. If the retailer purchased the key chains without Wisconsin sales or use tax by giving its supplier an exemption certificate claiming resale, the retailer is liable for tax on its purchase price of the key chains given away.

Tax 11.28(3)(c)2. 2. The taxable sales price of retailers, who issue cents-off coupons which reduce the price of merchandise they sell, and who receive no reimbursement from a manufacturer or other third party, is the reduced amount charged the customer.

Tax 11.28(4) (4) Coupon books, including dinner club memberships.

Tax 11.28(4)(a) (a) A sales promotional agency may sell coupon books or voucher books to purchasers who use the coupons or vouchers in obtaining reduced prices from participating retailers. The coupon books may contain coupons redeemable by several retailers or may contain coupons redeemable by only one retailer. The sales promotional agency may have agreed to retain all receipts from the sales of coupon books, or to remit some portion of the receipts to the participating retailers.

Tax 11.28 Note Example: Coupon books may contain coupons entitling the purchaser to a free meal with the purchase of another meal, free dry cleaning or free bowling games.

Tax 11.28(4)(b) (b) A sales promotional agency’s receipts from sales of coupon or voucher books are not taxable, because the agency is selling intangible rights. These intangible rights entitle the purchaser of the coupon or voucher book to receive tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., or taxable services at a reduced price or for no charge. However, any receipts received by participating retailers from the sales promotional agency are subject to the sales tax, if taxable property, items, goods, or services are furnished to the person using the coupon or voucher. Any additional receipts received by the retailer from the person using the coupons or vouchers also are taxable.