Subject: Store Discount Cards
Tax: Sales & Use Tax
Statute: G.S. 105-164.3(16)
Issued By: Sales and Use Tax Division
Date: April 27, 1998
This directive addresses the application of State and local sales tax to products
purchased with a store discount card. The directive is effective immediately.
Store discount cards are issued by certain retailers and enable customers to
purchase products at a discounted price by presenting the card to the issuing
retailer. Customers without a discount card cannot purchase products for the
discounted price. The purpose of the discount card is to encourage customer
loyalty, increase certain product sales, and promote sales within specific market
areas. The price reductions resulting from the use of the discount card are
financed by the issuing retailer and product distributors, manufacturers, and
suppliers through programs such as purchase rebates and promotional and purchase
A price reduction on a product obtained by a customer through the use of a
discount card issued by a retailer constitutes a reduction in the sales price
of the product. Consequently, when a customer uses a discount card to purchase
a product, sales tax is to be computed on the price at which the product is
sold to that customer by the issuing retailer. That price is the amount after
the shelf price of the product has been reduced by the card discount.
This directive does not change the position of the Department with respect
to retailers' coupons and manufacturers' coupons. A retailer's coupon continues
to be considered a price reduction; consequently, sales tax is computed on the
price reduced by the discount represented by the coupon. In contrast, a manufacturer's
coupon is considered a partial payment of the item on which the retailer receives
reimbursement from the manufacturer. In the case of a manufacturer's coupon,
sales tax is computed on the price before the coupon is credited.
If you have questions about this directive, you may call the Office Services
Division, Taxpayer Assistance Section, of the North Carolina Department of Revenue
at (919) 733-3661. You may also write to the Division at P.O. Box 25000, Raleigh,
Last modified on:
10/31/07 03:37:40 PM.