Taxes

I have a question on taxes. Do you deduct the difference between a Groupon type promo and regular price?

Thank you!

Replies to This Discussion

Permalink Reply by M Elaine Gustafson on March 30, 2016 at 5:55am

Are you talking about filing your business taxes for IRS purposes? If so, it depends on how you file. I file on a "Cash" basis so I only count what I take in and what I pay out in a given calendar year. You may want to consult a tax service. If you are talking about sales tax, it would depend on your state law. In some states you must collect tax on the full amount and others the post-discount price. Hope that helps.

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Permalink Reply by Donna Battermann on March 30, 2016 at 1:30pm

Thank you so much!

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Permalink Reply by Teresa Escoffery on March 30, 2016 at 10:48am

Groupons are a multi-step accounting issue

When you receive a payment from Groupon, you are essentially selling a gift certificate.

So that lump sum increases your CASH in the bank and also increases your Liability for GCs outstanding. These are BALANCE SHEET entry, not a SALE or goods or services (which is a Profit & Loss entry).

When a groupon is redeemed, you enter the list price of the service as a sale, then enter the difference between the List Price and the Selling price of the Groupon as a DISCOUNT. Discounts are NOT deductible items since what they do is reduce your top line revenue. YOu are just taking in less money.

You then enter the difference between the selling price of the Groupon and the amount Groupon pays you for each voucher as a MARKETING EXPENSE. This is a deductible item as it is money you are paying someone to do something for you.

You then reduce the amount of your liability by the amount Groupon pays you for the voucher since you now have 1 fewer voucher in circulation with a promise to redeem.