SECTION 3.301. Promotional Plans, Coupons, Retailer Reimbursement

(a) Trading stamps.

(1) The sale of trading stamps to a retailer is a sale of intangible personal property and not taxable under the Limited Sales, Excise, and Use Tax Act. The sale to a retailer of catalogues, stamp books, advertising, or printed matter, or other tangible personal property used in connection with the conduct or promotion of his business is a sale of tangible personal property and subjects such retailer to liability for the sales or use tax, which tax must be collected and remitted in accordance with the terms of the Limited Sales, Excise, and Use Tax Act. When a retailer distributes trading stamps to customers along with the sale of merchandise, such stamps are considered to be given in addition to the merchandise, unless the terms of the sale reveal an intention that a part of the consideration is for the stamps.

(2) The redemption of trading stamps by exchanging merchandise for them is a sale at retail of merchandise for a consideration. Trading stamp companies selling tangible personal property or redeeming trading stamps by exchanging merchandise for them or both are retailers. Trading stamp companies or other retailers so redeeming trading stamps must collect and remit to the state sales tax based on the redemptive value of the stamps surrendered or on the reasonable retail price of the taxable merchandise utilized in the transaction, whichever is the larger.

(b) Games and concessions dispensing merchandise.

(1) The operators of games, grab-bag concessions, or other operations similar in nature, in which each customer receives some merchandise or prize are regarded as retailers and must collect and remit to the State of Texas the sales tax; sales to these operators are sales for resale. Tax on the sales of such merchandise or prizes is due on the gross receipts from such operations, and a reimbursement tax shall be collected from their customers. If an operator disposes of both taxable and nontaxable items, his tax to the State of Texas will be measured by the percentage of his taxable sales to his total sales, but not less than the reimbursement taxes collected from his customers. Such operators may give their suppliers resale certificates for taxable items purchased.

(2) The operators of games, or other concessions, in which each participant does not receive some merchandise or prize, become the consumers of merchandise so used by them and are liable to the State of Texas for tax based on the sales price or use of the taxable items purchased for use by them. Retailers selling taxable tangible personal property to such operators or concessionaires shall collect and remit to the state the tax due on the sales to them. The Texas use tax is due on out-of-state purchases of taxable tangible personal property based on the purchase price of the merchandise.

(c) Gifts, samples, prizes, premiums.

(1) Sales of taxable tangible personal property to persons who make gifts of the property or use the property for samples or advertising purposes are taxable. For an explanation of the taxability of an item purchased for use as a prize when the winning of the prizes depends upon chance or skill, see §3.298(f) (1) of this title (relating to Amusement Services).

(2) Sales of taxable items to persons who give the property as a premium with bona fide sales of other taxable items are not sales for resale where no additional charge is made for such premiums. However, when a taxable item is given as a premium with an additional charge being made therefor, the premium is purchased for resale and sales tax should be collected on such additional charge. This does not apply to transactions in which trading stamps are used.

(d) Cash discounts. The actual selling price of taxable tangible personal property is the measure of the tax due under the terms of the Limited Sales, Excise, and Use Tax Act. Bona fide cash discounts taken by the buyer at the time of the sale pose no problem, as they are never a part of the sales price and are never in the tax base. However, if cash discounts are taken after the amount of the sales have been used in the measure of the tax, such cash discounts may be deducted from the measure of tax liability for the reporting period in which such discounts are taken in which instance the retailer seeking an adjustment in his tax liability must show he has adjusted pro rata the reimbursement tax collected, if any, from his purchasers. Cash discounts so taken and becoming the basis of a tax adjustment between retailers, their purchasers, and/or the State of Texas, must be substantiated in the accounts, invoices, and records of such retailers to the satisfaction of the comptroller's office.

(e) Coupons. When coupons or certificates are accepted by retailers as a part of the selling price of any taxable item, the value of the coupon or certificate is excludable from the tax as a cash discount, regardless of whether the retailer is reimbursed for the amount represented by the coupons or certificate.

Source Note: The provisions of this 3.301 adopted to be effective January 1, 1976; amended to be effective October 1, 1988, 13 TexReg 3991.