10

I have a coupon which gives me 25% discount in a restaurant. Does the restaurant pay tax (and therefore should they charge me tax) on the full amount, pre-discount, or the amount after the discount?

If it makes any difference the coupon came in a book of coupons which I paid a nominal sum for.

  • Do provincial laws come into effect, or just national? (American asking here) – MrChrister Dec 18 '13 at 16:29
  • Not sure. Ontario is the province. – DJClayworth Dec 18 '13 at 17:23
5

In almost any jurisdiction, the restaurant will pay tax on the amount after the discount.

Discounting is just a selective way to reduce prices for particular clients and thus achieve some degree of price discrimination. It's no different in principle to cutting prices for everyone or having a sale or similar.

It would be very strange for a tax jurisdiction to work any other way, because businesses would end up being taxed on money they never actually got. While tax systems often have that kind of anomaly in rare cases at the edge of the system, discounting via vouchers is extremely common. For example, here are the rules in the UK.

  • Do you have any kind of reference on that? – DJClayworth Jan 2 '14 at 15:15
  • I added one for the UK, but really this is an argument based on logic and experience. – Ganesh Sittampalam Jan 2 '14 at 16:18
4

I owned a restaurant for over 5 years.

Sales tax was only collected on POST discount price, though every state that collects sales tax may have different laws regarding collection.

For example, when a customer used a gift certificate, that did NOT reduce the amount that tax was collected on. Why? Because the restaurant at some point or another collected the full amount of the bill.

  • 1
    This matches what I know about sales tax law. If the business is compensated in some way for a coupon (such as a manufacturers coupon) they must still pay sales tax. If not they do not have to collect it as it is essentially the same as reducing the price. Welcome to Money.Stackexchange.com, please take a look at the About when you have a chance. – C. Ross Jan 2 '14 at 19:09

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