Revenue Administrative Bulletin 2026-12

Discounts, Coupons, Rebates, Vouchers, and Promotional Payments: Effect on the “Gross Proceeds” (“Sales Price”) Subject to Sales Tax

(Replaces Revenue Administrative Bulletin 1995-6)

Approved: November 10, 2026

Note: A taxpayer may rely on this Revenue Administrative Bulletin (“RAB”) until it is revoked by Treasury or until a law on which this RAB is based is altered by legislation or by binding judicial precedent. See MCL 205.6a and RAB 2016-20.

RAB 2026-12. This RAB replaces RAB 1995-6 and is retroactive to all tax periods open under the statute of limitations in Section 27a of the Revenue Act, MCL 205.27a, as of the approval date of this RAB.

Background

The General Sales Tax Act (“GSTA”) levies a 6% sales tax on the “gross proceeds” of taxable retail sales. The term “gross proceeds” is defined in Section 1(1) of the GSTA, MCL 205.51(1), to mean “sales price.” Importantly, the “sales price” is generally defined (in part) to mean “the total amount of consideration, including cash, credit, property, and services, for which tangible personal property or services are sold, leased, or rented, valued in money, whether received in money or otherwise, and applies to the measure subject to sales tax.” MCL 205.51(1).

With limited exceptions, such as for employee discounts that are reimbursed by a third-party on sales of motor vehicles, the sales price also includes certain consideration received by the seller from third parties, if all of the conditions under MCL 205.51(1)(d)(vii) and R 205.22(2) are met. Those conditions, often satisfied when applying a manufacturer’s coupon, are as follows:

(1) The seller receives consideration from a person other than the purchaser, and the consideration is directly related to the price reduction or discount.

(2) The seller is obligated to pass the price reduction or discount through to the purchaser.

(3) The amount of the consideration attributable to the sale is fixed and determinable by the seller at the time of the sale of the item to the purchaser.

(4) One of the following criteria is met:

a) The purchaser presents documentation to the seller to claim a price reduction or discount granted by a third-party with the understanding that the third-party will reimburse any seller to whom the documentation is presented.

b) The purchaser identifies himself or herself as a member of a group or organization entitled to a reduction or discount. Preferred customer cards that are available to any patron do not constitute membership in a group or organization.

c) The price reduction or discount is identified as a third-party reduction or discount on the invoice received by the purchaser or on other documentation presented by the purchaser.

This RAB generally describes how discounts, coupons, rebates, vouchers and certain promotional payments may affect the “gross proceeds” (“sales price”) for a taxable retail sale or are otherwise treated for sales tax purposes. References in this RAB to a “purchaser” or “customer” refers to a retail consumer.

This RAB replaces RAB 1995-6 and updates Treasury’s guidance to reflect the changes to the definition of “sales price” under the GSTA made by 2004 PA 173, which became effective September 1, 2004, and 2008 PA 438, which became effective January 9, 2009, and to provide additional examples. This RAB also reflects revisions to Rule 22, R 205.22, and Rule 4, R 205.54, that became effective August 11, 2023.

This RAB does not address “trade-in” deductions or topics covered by RAB 2022-17, “core charges” discussed in RAB 2025-18, or exemptions and deductions discussed in other RABs.

Note: Examples in this RAB assume that the retailer is choosing to reimburse itself by collecting the sales tax from the Michigan customer under Section 23(1) of the GSTA, MCL 205.73(1), as reflected in the “total due from customer.” Additional examples that are relevant to the matters discussed in this RAB can be found in Michigan Admin Code, R 205.22 and the SSUTA (as defined below).

General Definitions of Key Terms Used in this RAB

• Discount: A reduction of an item’s price from the full or standard amount.
• Coupon: A physical or digital certificate, ticket, document, or similar offer that the consumer presents to the retailer at the time of sale to reduce the price of a particular item.
• Promotional payment: A payment or reimbursement that a manufacturer provides to a retailer (rather than directly to the consumer), that does not require the retailer to pass on a price reduction or discount through to the consumer as a condition of (or in the amount of) the payment or reimbursement.
• Rebate: Return or reimbursement of an item’s sales price (in whole or in part) by the retailer or a third-party which is made to the consumer after the completion of the purchase of the product (e.g., a “mail in” rebate) or concurrent with the purchase (e.g., “instant rebate”).
• SSUTA: The multistate agreement known as the Streamlined Sales and Use Tax Agreement and which is available at: www.streamlinedsalestax.org/.
• Voucher: Instrument described as a “voucher” in Disclosed Practice Number 1 of the SSUTA. In general, a voucher is a certificate or similar instrument (available in electronic or physical form) that is purchased from a third-party for an amount that is less than the face value of the voucher and that is redeemable for tangible personal property or services in a single visit only at the retailer’s business. The voucher may be redeemable either for a specific product or for a certain dollar amount towards the price of any product sold by the retailer in accordance with the specific terms agreed to by the retailer and the third-party that issued, marketed, or distributed the voucher. A voucher typically identifies both the face value and amount paid by the purchaser on the voucher. A voucher is not a gift card or gift receipt.

Note: In practice, a discount, price reduction, rebate, etc. may take different forms or be realized in a different method. Therefore, the defined terms above are not intended to be strictly applied, but are intended to be used, generally, to illustrate or differentiate the ways that a discount, price reduction, rebate, etc. are treated for sales tax purposes depending on the circumstances.

Excluded and Deductible from the “Sales Price”

A discount, coupon, voucher, or rebate that reduces the selling price of an item generally reduces (i.e., are deductible from) the “gross proceeds” received by the retailer that are subject to sales tax.

The following examples illustrate the principle described above, illustrate the tax treatment of certain promotional payments, and assume that none of the conditions in MCL 205.51(1)(d)(vii) or R 205.22(2) apply including, but not limited to, reimbursement from a third-party to the retailer in the amount of the discount.

Discounts

In the following examples, the discount reduces the retailer’s sales price (gross proceeds) from the sale.

Example 1.

Retailer offers a 20% discount on all merchandise sold. The customer does not need to present anything to the Retailer or take any particular action to receive this discount. A customer purchases an item with an original price of $100. The sales tax due is computed as follows:

Example 2.

Customer (non-employee) purchases a motor vehicle with a sticker price of $30,000 from a dealer. The customer and dealer (retailer) negotiate a $2,000 discount off the selling price which is reflected on the sales invoice. The sales tax due is computed as follows:

Note: Authorized discounts on vehicles are deductible only when given to the purchaser by the dealer at the time of sale and shown on the invoice, sales order, the statement of sales tax paid as provided by the Michigan Secretary of State, and on the records of the dealer. R 205.54(4).

Example 3.

Retailer sells individual widgets for $2 each but offers a volume discount of $0.10 off each widget for purchases of 3 or more widgets. Customer purchases 5 widgets from Retailer for a total selling price of $9.50. The gross proceeds (sales price) subject to sales tax is $9.50 ($10.00 minus $0.50 volume discount). Sales tax due is $0.57 ($9.50 multiplied by 6%). Total due from the customer equals $10.07 ($9.50 plus $0.57).

Example 4.

Retailer implements a buy one, get one (BOGO) offer on a select line of camping gear normally priced at $20 each. No coupon is required as the retailer automatically applies the discount (no charge for the second item) at the point of sale. The gross proceeds (sales price) subject to sales tax on the sale of two items of such camping gear is $20. Sales tax due is $1.20 ($20 multiplied by 6%). Total due from the customer equals $21.20 ($20 plus $1.20).

Example 5.

Customer purchases a motor vehicle manufactured by ABC Motors that has a sticker price of $30,000. As a current employee of ABC Motors, Customer is entitled to a 10% discount when purchasing a motor vehicle from dealer (retailer). ABC Motors reimburses the dealer for the discount amount of $3,000 ($30,000 multiplied by 10%). The sales tax due is computed as follows:

Note: Under MCL 205.51(1)(d)(x) and R 205.22(3), employee discounts that are reimbursed by a third-party on sales of motor vehicles are excluded from the sales price. This exclusion of the discount from gross proceeds subject to tax only applies to current employees. Retired employees (and relatives of an employee) do not qualify.

Note: Under R 205.22(4), an automobile dealer may reduce the taxable sales price, calculate a credit, or seek a refund for consideration received from an automobile manufacturer to reimburse the dealer for a discount or price reduction given on the sale of a motor vehicle, to a member of a group designated by the manufacturer as entitled to a price identified on the manufacturer’s invoice to the automobile dealer that the manufacturer requires the dealer to charge the purchaser of that vehicle, if all of the following conditions are met:

(a) Purchaser is not employed by the manufacturer when discount or price reduction is given.

(b) Dealer did not reimburse itself for tax on the portion of the sales price received from the manufacturer.

(c) Amount of the credit or refund does not exceed the actual amount of sales tax paid on the portion of the sales price received from the manufacturer.

Retailer Coupons and Doubling of Manufacturer Coupons

Certain coupons reduce the gross proceeds subject to sales tax. The examples below illustrate how these coupons reduce the gross proceeds of the transaction and, therefore, reduce the taxable “sales price.” The sales tax due is computed as follows:

Example 6.

Customer purchases laundry detergent that has a store price of $8 from Retailer. Customer presents Retailer’s “store coupon” redeemable for $0.50 off the store price of the detergent. The sales tax due is computed as follows:

In addition to retailer-issued coupons, retailers may offer to double (match) the discount offered by a “manufacturer’s coupon.” A retailer that offers such “double coupons” may reduce gross proceeds and the sales tax base by the amount the retailer added to the value of the manufacturer’s coupon. However, as illustrated by Example 6 of this RAB, the face value of the manufacturer coupon remains subject to tax.

Example 7.

Customer purchases a box of laundry soap for $10. Customer presents a “manufacturer’s coupon” redeemable for $1 off the sales price. Assume that the manufacturer’s coupon satisfies the conditions in MCL 205.51(1)(d)(vii) or R 205.22(2) as set forth in the Background section at the beginning of this RAB. Retailer offers to double the value of the manufacturer’s coupon. The sales tax due is computed as follows:

Note: In addition to paying the retailer the coupon’s face value, a manufacturer may reimburse the retailer a certain amount for accepting its coupons. This reimbursement represents a nontaxable promotional payment to the retailer for providing this service to the manufacturer and is not included as part of the gross proceeds of the sale, so the retailer does not add the reimbursement to the sales tax base. Nontaxable promotional payments are illustrated in Examples 10-11below.  Taxable promotional payments are illustrated in Examples 17-18 of this RAB.

Rebate Issued by Retailer

Rather than requiring the customer to present a coupon to obtain the price reduction, a retailer may offer a price reduction at the time of sale in the form of an “instant rebate.” Such rebates reduce the gross proceeds from the sale, and therefore, the taxable “sales price.”

Example 8.

A customer purchases a box of markers priced at $4 from Retailer. Retailer offers an “instant rebate” for one free box of markers. The sales tax due is computed as follows:

Voucher (No Third-Party Reimbursement)

If the retailer seller is not reimbursed by a third-party for some or all of the difference between the value of the voucher allowed by the retailer and the amount paid by the customer for the voucher, then the amount of that difference is treated as a discount from the sales price (i.e., same treatment as a retailer’s in-store coupon) and not included in taxable gross proceeds.

Example 9.

A voucher is issued for $10 by a third-party under an agreement with the retailer that entitles the consumer to $20 towards the purchase of any product sold by the retailer. The agreement provides that the third-party will retain $3 of the amount paid by the purchaser for advertising and marketing the voucher. The voucher displays the $10 paid by the consumer, the $20 face value of the voucher, and the expiration date for the period that the discount is available. The consumer buys a $40 product from retailer prior to the expiration of the voucher and tenders the voucher plus the $20 cash. The gross proceeds subject to tax equals $30 which is calculated as follows: consideration received by third-party from the issuance of the voucher ($10) plus the cash by the consumer directly to the retailer ($20). Sales tax due equals $1.80 ($30 multiplied by 6%). Total due from the customer equals $31.80 ($30 plus $1.80).

Note: For additional examples, see Disclosed Practices 1.1 of the SSUTA.

Nontaxable Promotional Payment

Example 10.

Under the terms of a contract between a manufacturer and a retailer, for a promotional program offered by the manufacturer, the manufacturer is required to provide the retailer with a $2 promotional payment for each sale of the manufacturer’s product if the retailer performs certain obligations. The contract does not require the retailer to discount its selling price or in any way limit or restrict the retailer’s ability to determine the retail price for which the product may be sold. The $2 promotional payment does not satisfy the conditions under MCL 205.51(1)(d)(vii) and R 205.22(2) as set forth in the Background section at the beginning of this RAB, so it is not included in the gross proceeds on which the retailer is required to pay sales tax. For example, there is no requirement that any discount be passed on to the consumer and the payment is not directly related to a price reduction or discount.

Example 11.

Same facts as Example 10, except that the only condition on the retailer to receive the $2 promotional payment is to place the manufacturer’s products on the shelf closest to the cash register. The promotional payment is not included in the gross proceeds on which the retailer is required to pay sales tax because it does not meet the conditions under MCL 205.51(1)(d)(vii) and R 205.22(2) as set forth in the Background section at the beginning of this RAB.

Included and Not Deductible from the “Sales Price”

Discount on Future Transaction

If a retailer provides the purchaser with a promotional discount to use on a future purchase, this discount does not reduce the sales price of the original transaction, so sales tax is due on the full sales price of that transaction. When the promotional discount is redeemed in a subsequent transaction to reduce the sales price, sales tax is due on the discounted price as illustrated in Part 3 of this RAB.

Manufacturer’s Coupon

Certain coupons do not reduce the gross proceeds subject to sales tax because they satisfy the conditions in MCL 205.51(1)(d)(vii) and R 205.22(2) as set forth in the Background section at the beginning of this RAB. A common example of such coupons are manufacturer’s coupons.

Example 12.

Customer purchases a box of laundry detergent with a selling price of $10. Customer presents a “manufacturer’s coupon” redeemable for $1 off the price. As is generally the case, assume that the manufacturer’s coupon satisfies the conditions in MCL 205.51(1)(d)(vii) and R 205.22(2) as set forth in the Background section at the beginning of this RAB. The sales tax due is computed as follows:

Voucher (Fully Reimbursed by Third-Party)

When the discount on a voucher is fully reimbursed to the retailer by a third-party and the conditions in MCL 205.51(1)(d)(vii) and R 205.22(2) are met, the gross proceeds are based on the face value of the voucher (i.e., same treatment as a manufacturer’s coupon) and not the price paid by the purchaser for the voucher.

Example 13.

A voucher with a face value of $50 is issued for $20 by a third-party under a contract with the retailer that entitles a consumer to $50 towards the purchase of any product by the retailer. The contract also provides that the third-party will retain $10, of the $20 amount paid by consumer, for advertising and marketing the voucher. The retailer also receives consideration from another party reimbursing the retailer for the $30 discount taken by the consumer. The consumer purchases a $100 item from the retailer using the  voucher (with the face value of $50) plus $50 cash. The gross proceeds subject to tax equals $100 which is calculated as follows: money received from the sale of the voucher ($20) plus the consideration received as a direct reimbursement of the discount from the face value of the voucher ($30), plus the cash paid by the consumer directly to the retailer ($50). Sales tax due equals $6 ($100 multiplied by 6%). The total gross proceeds due from the retailer, including tax, equals $106.

Note: For additional examples, see Disclosed Practices 1.2 of the SSUTA.

Costs and expenses of the retailer are not deductible from the retailer’s gross proceeds and are included in the sales price subject to tax. Further, reductions in the amount of consideration received by the retailer from the third party that issued, marketed, or distributed the voucher, such as advertising or marketing expenses, are costs or expenses of the seller subject to tax.

Example 14.

A voucher with a face value of $20 is issued by ABC, a third-party, to a consumer for $10. The voucher is redeemable only for goods sold by Retailer. By contract, from the $10 received by ABC from the sale of the voucher, ABC must remit $8 to Retailer but can retain $2 for its advertising and marketing costs associated with the voucher. The consumer purchases $20 worth of taxable items from Retailer and tenders the $20 voucher to pay for the items. The gross proceeds subject to sales tax equals $10, which includes the $2 retained by ABC. The $10 difference between the face value of the voucher ($20) and the amount the consumer paid to ABC for the voucher ($10) constitutes a discount that is excluded from the gross proceeds subject to tax. Sales tax due equals $0.60 ($10 multiplied by 6%). Total due from the customer equals $0.60.

Note: For additional examples, see Disclosed Practice 1.3. of the SSUTA.

Manufacturer Rebates

Example 15.

Customer purchases a trailer with a retail selling price of $10,000 for which the manufacturer offers a $1,000 rebate payable to the retail dealer. Under the terms of the rebate, the dealer must pass on at least 50% of the value of the rebate in the form of a price reduction to the customer and any remaining amount may be kept (held back) by the dealer as a promotional payment. The dealer applies 50% of the rebate (e.g., $500) to the sales price as a discount and keeps the remaining $500 as compensation for itself as a manufacturer promotional payment. Sales tax is computed as follows: