Weekly Round-Up: The Tax Treatment of Online Vouchers


The popularity of online vouchers, such as Groupon and LivingSocial, has caused tax departments in New York and Massachusetts to take note.

New York, this past week, released a technical memorandum on the application of sales tax to these vouchers. In New York, the sale of certain vouchers by Web-based companies on behalf of businesses is not subject to sales or use tax at the time that the voucher is sold, the department states in the memo.

However, sales or use tax is due at the time the voucher is redeemed with a vendor if the voucher is redeemed for taxable products or a service, the memo explains. The amount subject to sales tax depends on whether the voucher is a specific product or service voucher or a stated face value, the memo provides.

Similarly, Massachusetts also released a working draft directive this past week addressing this issue.

In Massachusetts, as in New York, the sale of a third party certificate that may be redeemed for taxable property or meals at face value is not subject to tax, according to the draft directive. However, tax does apply when the retail customer uses the voucher.

In other developments, JiaQi Bao, at The Tax Foundation, takes a look at the new tax bracket for earnings over $350,000 in the District of Columbia.

Christian M. McBurney, at Nixon Peabody, highlights two more surprises coming out of the District of Columbia.

Russell K. Little , of Dow Lohnes Price, addresses how tax firms can utilize social media.

A new study by the Tax Foundation looks at the tax burden imposed by local sales taxes.

Kathryn Thurber, of PwC, reports on Apple’s loss in California over its method of ordering controlled foreign corporation dividends.

Amy Pitter is appointed as the new commissioner for the Massachusetts Department of Revenue.

By Priya D. Nair

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