Monday, August 25, 2008

Digital Converter Boxes*

We here at SalesTaxGuy are always looking out for you folks. We just wanted you to know that. So when these stories started popping up, we knew you’d be concerned.
Y’know all of those announcements on TV about the upcoming shift to digital, and how you can get a coupon for the converter box? And you’ve all been worrying about the sales tax impact of that coupon, haven’t you? Yep, I knew it. So, here’s the information you’ve been desperately seeking.
So far, of the states that have made an announcement about this, they seem to be roughly split in half.
The good guys are considering the coupon to be a reduction in the basis of the tax calculation. Therefore, if you paid $50 for a box, and the coupon reduces the price to $10, the sales tax will be calculated on the $10 - NOT the $50. In some cases, the state law already supports this method, in other cases they consider the coupon to be a sale to the US government. Either way, these states are the good guys, as of this writing: WI, PA, FL, CT, KY, CA, IL, TX
Then there are the states wearing the black hats (the bad guys)…you’ll have to pay sales tax on the full amount of the sale with no deduction for the coupon in: NY, TN, UT, OH, NE, SC, NM
If you’re saying, “Huh?” then you probably don’t know about this little coupon situation:
When it comes to coupons, most of the states say that a coupon, issued by someone other than the retailer, will NOT reduce the basis of the tax calculation. If you buy some soap and use the dollar off coupon on the $3 bottle, then the tax is still calculated based on $3. The assumption is that the selling price hasn’t really changed. It was just paid for with $2 of your money and $1 of the manufacturer’s money.
But in the case of the converter box coupon, the theory, in some states, is that, since the US government is providing the coupon, $40 of the sale is actually to the US government and that sale can’t be taxed. And some of the states rightly think that making people pay the sales tax on that full $50 is not the politically wise thing to do.
So, I hope that’s a load off all of your minds.
By the way, in my research, I came across the link to get the aforementioned coupon…
Happy viewing.
Sales Tax Guy
*The picture is not mine. Thanks to DixiePistols. Here is a link to the picture

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