These days almost every business has some type of loyalty or reward program. At the heart of these programs, a business is trying to reward or incentivize its customers for certain consumer behavior. Not surprisingly, the structure of these programs varies considerably, as does the sales tax treatment that may apply in the states in which the rewards are offered and redeemed. We addressed this issue in a recent article published in the Journal of Taxation. Specifically, we discussed the question of whether the value of the reward is considered part of the “sales price” such that it would be subject to the tax when the rewards are exchanged for free or discounted tangible personal property or taxable services.

Minnesota Department of Revenue Addresses Rewards Programs -

In June 2015, Minnesota, a state that was discussed in our article, issued Sales Tax Fact Sheet 167, “Coupons, Discounts, Rewards, Rebates, and Other Forms of Payment.” The fact sheet explains the sales taxation of eight different types of payments—coupons, discounts, rewards, rebates, trade-ins, gift cards and certificates, scrip and barter. The fact sheet provides a level of clarification around loyalty programs that was previously lacking.