Sales and Use Tax Implications of Loyalty Programs

There are many types of loyalty programs, and a ruling related to the taxation of one program may not necessarily be relevant to how the redemption of loyalty rewards pursuant to another program should be treated. What is entirely clear is that the states differ in their approaches. Thus, there is n...

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Bibliographic Details
Published inJournal of Taxation Vol. 123; no. 2; p. 80
Main Authors Benton, Mary T, Hedstrom, Matthew P, Barton, Gregg D
Format Trade Publication Article
LanguageEnglish
Published New York Thomson Reuters (Tax & Accounting) Inc 01.08.2015
Subjects
Loyalty programs
State taxes
Tax planning
Taxable income
United States > US
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Summary:There are many types of loyalty programs, and a ruling related to the taxation of one program may not necessarily be relevant to how the redemption of loyalty rewards pursuant to another program should be treated. What is entirely clear is that the states differ in their approaches. Thus, there is no one size fits all answer for taxpayers. Whether or not to include redeemed loyalty rewards in the tax base for purposes of collecting tax on the sales transaction is a l complicated question. Given the complexities and uncertainty in this area, a company's tax department should make every effort to understand the specifics of the company's loyalty program. It can then examine the states in which the company has the most loyalty reward redemptions and determine the best course of action in each state.
ISSN:0022-4863