My wife recently started using Groupon to get some good deals at restaurants and for some other services. I started to explore this site a bit more and saw some very interesting and attractive deals. As a sales tax consultant, I tend to look at these situations with a curious eye on what type of sales tax consequence could be involved.
As I understand Groupon, they are an electronic marketing co-op that offers discount coupons and discounted prices for good and services. Groupon charges the merchant a commission or placement fee and then sends the retailer the difference. For example, a local restaurant recently was selling $20.00 coupons for $10.00. This was a great deal since we go there all the time. For sales tax purposes, this coupon was treated as some type of gift card. When we used the card our bill was $35.00 plus 6% sales tax for a total of $37.10. We used the $20.00 Groupon and paid the cashier $17.10. In this case, the retailer handled all the sales tax on the transaction.
In other Groupon situations, the services offered are not coupons but are the direct purchase of the item. For example, we recently bought a carpet cleaning service for $50.00. That’s all we pay. This is not a coupon but is just a discounted purchase of a product. There are also haircuts for discounted price, moving services, inflatable toy rentals, bed & breakfast rentals, and hotel stays. These are not just coupons, but are the payment for the service. My question is how sales tax is or should be handled?
We have yet to purchase a taxable service on Groupon. In the list above, hotel rentals are clearly taxable in Georgia. As I looked at the site, I didn’t see any mention of sales tax. Because this is not a coupon, I think a strong argument could be made that Groupon is acting as a retailer of hotel rooms and should be collecting sales tax and lodging tax on these transactions. I know nothing about Groupon’s nexus footprint, so it’s impossible for me to say that they have the obligation. However, I’m curious how the hotel is handling these situations. Are they paying sales tax only on what Groupon sends them as their portion of the sale or are they remitting tax on the full sales price of the transaction? Hard to tell.
I’d love your comments on this topic. I can see that this model is going to be building quickly. As such, the sales tax folks can’t be far behind.
Groupon Sales Tax