REQUEST LETTER

01-021

Response August 14, 2001

NAME

ADDRESS

On DATE, I set up a new business, COMPANY, tax ######. May I please take some of your time to explain my situation?

The business consists of selling Coupons on Demand voucher books. I have enclosed one for your scrutiny. I understood from my ‘mentor’, and the people involved with COMPANY, (PHONE; ADDRESS, that the vouchers are an intangible, and, as a service (searching, clipping and mailing coupons to consumer) are not subject to sales taxes.

I sell the Coupons on Demand voucher book for $$$$$$. The purchaser then chooses the coupons he/she wants, lists them on the back of the voucher, and mails the voucher to the distribution center in CITY, STATE. The distribution center returns the requested coupons to the purchaser through the mail. The sales tax is then paid at the time the items are purchased (with their coupons) by the purchaser.

I am new at this, and went to the Sales and Use Tax Workshop that you provide for business owners. When we questioned the instructors to the taxation on these books, they were unsure and advised us to write to receive a decision. Our question, therefore is whether or not these voucher books are taxable. I appreciate your time in reviewing this situation and your reply.

NAME

Owner

RESPONSE LETTER

NAME

ADDRESS

RE: Advisory Opinion

Dear NAME,

We have received your request for an advisory opinion concerning the application of sales tax on the coupon voucher books you sell. These books contain vouchers that can be completed to receive discount coupons that apply to various products. For purposes of this opinion, we assume that you only sell the coupon voucher books and are not a vendor for the products to which the discount coupons apply.

In this situation, the Tax Commission does not consider your sale of the coupon voucher books to be the sale of tangible personal property. Individuals purchasing the books do not seek the books or the vouchers themselves as the object of the transaction. Instead, they seek the intangible right to obtain the product discount coupons that may be ordered on the vouchers provided in the book. For these reasons, you may sell the coupon voucher books under these circumstances tax-free.

Although you may sell these coupon voucher books tax-free, sales tax is nevertheless due on the materials that comprise the books, such as paper and ink, which are tangible personal property. Therefore, you must pay sales tax on either your cost to purchase the coupon books, if you contract with a printer to print them, or your cost of the materials that comprise the books, if you print them yourself.

Should you have any other questions, please contact us.

For the Commission,

Marc B. Johnson

Commissioner

MBJ/KC

01-021