Tax on Coupons and Tips On Tax
 

Nothing annoys me more, yet falls just short of risking an argument with the waitstaff.

I will use a Restaurant.com certificate, or an Entertainment book coupon, and they will calculate tax on the pre-discount amount. Then, they will add tax and mandatory tip on the pre-discounted amount plus tax!

Difference is about $5. Now I know that tax doesn't apply to coupon's, except when they are being reimbursed by a manufacturer. We know that Restaurant.com and Entertainment arnt' reimbursing restaurants for the coupons/certificates.

Has anyone ever challenged a restaurant on this shady practice?

Costco does the same - calculating the tax on the price before the coupon. But, this is stated on the coupon. It must be depending on the state regulations.

The tip, however, SHOULD be calculated on the price before the coupon.

I always have a problem tipping on the tax - but usually round up anyway.


DD

A tip should be paid on the menu price of food & beverage - before any discounts or special pricing.

I don't understand tipping the Governor - so I don't do it.

Sales tax has to be collected according to state law - some states are very draconian :( .

What do you mean, "tipping the Governor?" The waitperson gets the money, no matter whether you tip on the pre-tax or post-tax amount.

Exactly:
Should tip on the precoupon anount: and as far as tax, where I live CVS, Walgreen's all do it just like this Cosco.

"Tipping the Governor" refers to paying a tip on the state tax. The poster is saying that s/he calculates the tip on the pre-tax amount.

I'm in retail, not food service, but here in Wisconsin I remember around five or six years ago my accountant forwarded me a letter he received from the state that specifically mentioned taxing the pre-discounted amount in relationship to coupons.

I don't know if that was a new law or it was just highlighting an existing law that was never fully followed, but we have been doing it ever since.

Each state, and some cases even each county/city, sets their own regulations. And even change depending on what type of coupon it is. Some treat it like cash (so the tax is on the pre-tax amount), some don't and reduce the taxes. So if you are traveling, it is difficult to argue as you don't know the local rules.

I tip on the pre-discount amount - same as I do if I've received free food, etc... if I've sent back a meal IF the service and service recovery was otherwise good.

I'll usually tip on the pre-tax, pre-coupon amount. I do make an exception, though, for a few places (chains, mostly) which ALWAYS have certain discounts or which run them very regularly and where I don't go in without the discount. For those, I'll generally tip lower - if 20% of the pre-tax, after coupon amount is still an OK (10-15%) tip based on the pre-coupon amount, I'll usually leave that.

Example:
Local chain, pretty much always has "your second entree for $3.99" coupons
Two entrees, normall $13, $12 (and overpriced without hte coupon) and two drinks $2 each.
subtotal: $29, tip - 20% tip - $5.80
Subtotal with coupon: $21.01 - 20% tip - $4.20 - or 14.4%. Good enough for me.

On a flat out BOGO deal, that might end up being too low. Just sort of something to be aware of rather than hard and fast rules.

I dont usually tip on tax.

While tipping on tax is a minor point, the real outrage seams to be taxing on a coupon.

How is a coupon different from any other discount? Should stores always tax on the full "retail price" when the item is on sale? Of course not. They should tax on the money received, that's it.

My concern is that restaurants are paying taxes based on sales, and pocketing the difference.

Different states have different laws regarding which cost basis is to be used as its sales or use tax.

MisterNice

Costco has me flummoxed as well. The have these "instant rebate" sales in the store, but you have to pay sales tax on the pre-rebate amount. ...?

When something is on sale at Target, you don't have to pay sales tax on the "full retail" amount, so what gives?

Does this involve some technicality involving a "rebate" that is different from the item simply being on sale?

I have actually asked at Costco, but did not get an answer that made much sense.

The "instant rebate" thing is not unique to CostCo, but it's certainly annoying!

Instead of "instant rebate" think of what happens in the case of a more traditional rebate. For the traditional rebate, you pay the full price; pay tax on the full price; go home and follow all 13 steps required to get the rebate (cutting out barcode, copying receipt, printing name/address/info on proper form); mail documentation in #10 Envelope; wait 12-18 weeks for rebate to be sent to you only to find out that you missed one of the 13 steps required and are not eligible for the rebate.

Now with an "instant rebate" you pay the full price as you would otherwise have done and then magically all 13 steps are properly completed for you and at the very end of your transaction you receive your rebate by having said amount deducted from your total.

This differs from a sale in that you pay the sale price and not the regular price, followed by getting a rebate. Sure it's mainly semantics but that's most likely what's happening in the case of an "instant rebate".

And no, I am not an attorney :D