Questions and Answers

Identifying Information:Questions and answers on rebates and incentives issued directly to retailers.
Tax Type:Kansas Retailers' Sales Tax
Brief Description:Questions and answers on rebates and incentives issued directly to retailers.
Approval Date:09/09/2010


Rebates issued directly to customers.—Manufacturers sometimes offer product rebates directly to a retailer's customers after the customer purchases the manufacturer's products. To receive the product rebate, customers are generally required to submit a rebate application form along with any required documentation (e.g., sales receipt) to the manufacturer or manufacturer's representative directly or through the retailer. Once the rebate form and required documents are processed and accepted, the manufacturer will issue the customer a rebate check. Rebates checks issued by manufacturers directly to the retailer's customers are not part of the retailer's gross receipts. In such a situation, the customer pays the retailer the full selling price and receives a subsequent rebate directly from the manufacturer. K.S.A. 2009 Supp. 79-3603(ll); K.A.R. 92-19-16a; See also 18 Cal. Code of Regs. 1671.1(c)(2).

Rebates and incentives issued directly to retailers.—Retailers engage in rebate and incentive programs with manufacturers or other third parties. These programs result in additional revenue for the retailer when certain conditions are met. These transactions involve buy-down programs, markdowns, discounts, coupons, rebates, and other price reductions. These rebate and incentive programs are also known as "buy-down rebates," "voluntary price reductions," "promotions," "flex (flex extensions)," "coupon redemptions," "scanbacks," "instant rebates," and other similar names. When a retailer enters into an oral or written contract with a manufacturer or other third party that requires, on a transaction-by-transaction basis, a specific reduction in the retailer's selling price of specified products in exchange for a certain payment of a like amount from the contracting party (e.g., a payment that is not contingent upon selling a particular amount of the specified products), such payments received by the retailer are part of the taxable gross receipts or sales price of the sales. When a retailer contracts with its customer for the addition of sales tax reimbursement to the gross receipts of tangible personal property sold at retail, or when a retailer is obligated to collect use tax measured by the sales price, the retailer is required to disclose to the customer the amount upon which sales tax reimbursement or use tax is collected, including the amount of any taxable discounts, rebates, or incentives offered or paid to the retailer by third parties.
K.S.A. 2009 Supp. 79-3603(ll)(3)(E), which allowed certain rebates issued by motor vehicle manufacturers to reduce the tax base for a vehicle sale, expired on June 30, 2009 and has not been renewed. As a result, manufacturer rebates that a buyer assigns to a motor vehicle dealer at the time of sale no longer reduce the tax base of the vehicle sale. Sales tax should be charged on the agreed-upon purchase price of the vehicle and not on the agreed-upon purchase price less the manufacturer's rebate assigned to the dealer. As used here, the agreed-upon purchase price include the reduction allowed for a trade-in. K.S.A. 2009 Supp. 79-3603(ll); K.A.R. 92-19-16a; See also 18 Cal. Code of Regs. 1671.1(c)(3).

Reference: K.S.A. 2009 Supp. 79-3603(ll); K.A.R. 92-19-16a.

Date Composed: 09/13/2010 Date Modified: 09/13/2010