96-117
Response September 4, 1996
Request
This letter is in response
to a telephone conversation in which XXXXX of XXXXX District presented the
following scenario:
The
school sells discount cards to students.
The students, in turn, use the discount to make discounted purchases
from outside vendors. The outside
vendor charges sales tax on the purchase.
XXXXX describes the cards as operating like XXXXX. Our publication for public schools states
that sales of XXXXX are not taxable.
XXXXX
Re: Sale of
discount cards to students
Dear XXXXX
We have
received your request for an opinion as to the taxability of discount cards
sold by a school. The discount cards
entitle the students to make purchases from an outside vendor at a discount.
Sales
of discount cards are only taxable if they are sold by the vendor or retailer
who deals in the goods or services to which the discount applies. However, when the school sells discount
cards which are honored by a number of vendors, the sale of the card to its
students are not taxable. When a
student uses the discount card to make a purchase from a participating vendor,
that vendor must collect sales tax on the amount charged.
We
appreciate the effort that you have put into adopting the accounting changes
suggested by our recent publication on sales by schools. Please continue to call on us as other
questions arise.
For
the Commission,
Alice
Shearer,
Commissioner