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Bulletin #42

Taxpayer Services Division
March 1, 1989
Cash Discounts

This Bulletin is revoked by PS 96(2)

Cash discounts allowed and taken on sales are excluded from the dollar amount subject to sales and use taxes pursuant to Sections 12-407(8) and (9) of the Connecticut General Statutes. The Commissioner has recently ruled that a customer must take the discount at the time of sale and not subsequent to the time of sale in order to exclude the cash discount from the taxable sales price.

For example, if the retailer offers a 2% discount from the sales price for payment made within 10 days, the customer must pay the invoice at the time of sale in order for the discount to be excluded from tax.

Sales price $ 100.00
2% discount (2.00)
Subtotal $ 98.00
Sales tax $ 7.35
Total $105.35

However, if the invoice is paid after the time of sale, the tax must be calculated on the total invoice before the deduction for the cash discount.

Sales price $ 100.00
Sales tax 7.50
Subtotal $ 107.50
2% discount $ (2.00)
Total $105.50

This ruling is effective for all sales made on or after April 1, 1989. Any prior ruling to the contrary shall not apply to sales made on or after April 1, 1989 and is hereby revoked.