Sales Tax On Free-Item Coupon? A Supermarket Dustup / coupon-clippers, sales and use tax is calculated on the sales price net after all coupon reductions

Kevin Hunt for CTNow.com writes:  Q: If a customer has a coupon for a "free item" package of cat food or kitty litter, is there sales tax on the free item? I was unfortunately behind a woman who was arguing with the cashier that her two "free items" were absolutely free and were not subject to the state sales tax. Please clarify who is right.

Chris Anastasio, Newington

A: We'll get to the tax in a minute. The customer, says reader Anastasio, had manufacturer's coupons for free full-size bags of cat food AND litter. What a deal!

But the customer left a Newington Stop & Shop —– according to Anastasio's observations —- without the cat food or litter after arguing with the store manager over the tax.

"This caused quite a delay while I was waiting," says Anastasio. "She finally said, 'Forget it,' and rudely took her coupons back and left the items behind, muttering 'I know the law but obviously you don't!'"

As if that matters to her cat.

But it matters to the rest of us. So what's the answer? TBL used his usual combination of knowledge, logic and guesswork to presume the state would want 6.35 percent of the store's regular price for the cat food and litter. The store manager considered the items taxable, too, according to Anastasio.

The official answer:

"The customer would not owe tax," says Sarah Kaufman, a spokeswoman for the state Department of Revenue Services.

State regulations say "sales tax on dollars-off or percentage-off coupons is calculated on the sales price net of the price reduction." The sales price net, after the deduction of the free-item coupons, was zero.

"Our [cash register] system is automatically programmed so that coupons, both store coupons and manufacturers coupons, reduce the taxable base before sales tax is calculated on taxable products," says Stop & Shop spokesman Suzi Robinson. "Therefore, a free taxable product with a coupon would not be charged any Connecticut sales tax."

Memo to the cat: Tell your owner she can return to the store and use the coupons to get the food and litter free without taxation.

"As the reader who submitted the inquiry was not directly involved in the issue," says Robinson, "we cannot speculate on the exact situation that may have happened in the store. If there was a misunderstanding in the store, we apologize for any inconvenience to that customer."

So, coupon-clippers, remember this: Connecticut sales and use tax is calculated on the sales price net after all coupon reductions. If a store doubles a coupon, that amount is also deducted from the taxable amount.

Rewards programs are also treated like coupons. If a retailer issues a certificate the consumer uses for a price reduction, only the final price is taxable. If a store's scan card offers a discount, tax is only charged on the reduced price.