A. A retailer sells discount cards to its customers. Customers purchasing such discount cards from the retailer receive certain benefits on future purchases from the retailer. Typical benefits include cash discounts on purchases and cash back amounts usually in the form of rebates or credits.
The sales and use taxes apply to the reduced sales price (the sales price after the discount is deducted).
For further information see Policy Statement 2007(5), Sales Tax Treatment of Coupons, Scan Cards, Cash Equivalents, Promotional Items, and Rebates.
This answer is intended to provide general information concerning a frequently asked question about a current position, policy, or practice associated with the taxes administered by the Connecticut Department of Revenue Services. It may include an informal interpretation of Connecticut tax law by the Department of Revenue Services (DRS). However, it is not intended to serve as a legal ruling.