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.

 

 

September 4, 1996

 

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