How Do Sales Taxes Apply to a Groupon?

Tax official says they expect merchants to collect sales tax on face value of all Groupon purchases. News that should scare consumers and merchants alike.

From Forbes.com:

Have you used a Groupon or a Living Social coupon recently?

When you handed over your coupon, did the merchant collect tax from you? Did he calculate the tax based on the full face value of your purchase, or the discounted amount you paid for it? Did he force you to ante up any tax in cash, or did he allow you to apply your coupon towards the full bill, including tax?

These aren’t academic questions–the answers could affect the attractiveness of Internet-based social coupon programs to consumers, merchants, and state tax collectors. Ultimately, the question of how social coupons should be taxed is likely to end up in court, says Veranda Smith, interim executive director of the Federation of Tax Administrators, which represents state tax officials.

In case you’ve missed this latest craze, in a typical deal you might pay $50 with your credit card to Living Social or Groupon over the Internet, and get via email a link to a coupon worth $100 at a local shop. (The social part comes in because in some cases the deal only goes through if a certain number of folks buy it. Plus, there are often incentives for referring your friends.) Neither coupon site collects taxes when you make your purchase and they warn their vouchers can’t be used for sales taxes or tips—unless the merchant allows otherwise. Groupon states in its Merchant Self-Service Agreement that the merchant “shall be responsible for paying all sales and use taxes related to the goods and services described in the offer.”

But just what are those? Spokesmen for tax administrators in three of the nation’s five most populous states—California, Florida and Illinois– told Forbes they expect merchants to collect sales tax on the face value of what you buy. In other words, they want their cut on $100 even though you only paid $50 and the local merchant collected maybe $25. By contrast, if a store printed up its own half-off coupon and allowed you to buy an $100 item for $50, the tax men would only tax the $50 you forked over.

With the sales tax in Chicago and Los Angeles now a stiff 9.75% this distinction is a big deal.

Read more here...

10 Top Money-Saving Innovations of The Last Decade

Wallet Pop put together a list of the best money saving innovations from the last decade. I love how technology is driving us toward thriftier living. Hulu, Skype and Smart phones are incredible ways I’m economizing my life. Which ones are you using?

1. Skype

Telephone companies used to love long-distance relationships. Lovers separated by vast distances made them rich, after all. To access the industry's dedicated system of telephone lines and switchboards, one had to pay those dreaded long-distance fees; that is, until Skype (and its peers) arrived on the scene.

Skype replaced telephone lines with Internet connections. By routing calls over the Web, the cost was cut down to nothing, or close to it. Suddenly, Ben in Boston could talk to his heart's content with Brandi in Budapest.

Skype also drove down the prices that cell phone companies charged for long distance calls, and it also introduced many Americans to video conferencing. Now those lovers can gaze into one another's eyes, no matter how far apart.

2. Groupon

The power of group purchasing and the Internet gave birth to one of the hottest new money-saving strategies of the late 2000's: Groupon. The site solicits special deals from local companies in dozens of locations, offering products and services at a fraction of the price -- as long as people are willing to pay upfront and as long as a certain number of customers are willing to sign up.

Continue reading at Wallet Pop.com...