California has joined the growing ranks of states that are weighing in on the taxability of deal-of-the-day coupons (DDIs). The Board of Equalization has just issued a Special Notice explaining the application of the State Sales Tax to the purchase and redemption of Groupons and other similar instruments. According to the State the sale of the DDI is not regarded as a sale of tangible personal property or a service and is therefore not a taxable transaction. However, the redemption of the DDI is a sale that MAY be subject to tax depending on what is being purchased. If the item or service being purchased is taxable the taxable amount will be the purchase price of the DDI along with any additional consideration paid to the retailer excluding sales tax.
The Special Notice includes examples of taxable and exempt sales.