For example, Groupon’s Terms of Sale claim that “The Merchant, not Groupon, is the seller of the Voucher and the goods and services and is solely responsible for redeeming any Voucher you purchase.” On this view, a voucher service avoids liability for merchants’ shortfalls.īut a voucher service is the merchant of record for the charge to the customer’s credit card. Voucher services typically seek to cast themselves as mere marketing vendors that are not responsible for the conduct of the corresponding merchants.
(But not to the server! So don’t use this as an excuse to tip less!) It's only $1.77, or 8.875% of $20, but that is essentially a hidden gift which goes directly to the restaurant. The restaurant is charging too much sales tax. So in this case that would be $20 plus $20 makes $40. Rather than charging tax on $60, the tax should be calculated on the post-coupon amount plus the amount that the customer paid for the coupon. So far so normal.īut in fact, once I hand over the Groupon, the sales tax should be recalculated - this according to unanimous advice from various state authorities. I hand over a Groupon and a credit card, and my card gets charged the difference, of $25.32 I then add a tip on the $60 amount.
I rack up a $60 bill, before tax and tip, and the check arrives, charging me $65.32 after adding 8.875% sales tax. Let’s say I spend $20 for a $40-face-value Groupon at a restaurant. And it’s also quite common for merchants to need to hand over to the state any money they got from expired coupons.Īnd then there’s the question of sales tax. Elsewhere, people redeeming coupons for less than the face value are required to get the difference back in cash. In others, coupons need to have a 5-year expiration, rather than the much shorter ones found on most Groupons it’s not enough just to offer the consumer’s money back for that long.
In many states, for instance, it’s illegal to offer discounts on alcohol, yet Groupon merchants do so anyway. Benjamin Edelman and Paul Kominers have a fantastic post up about the various legal pitfalls facing Groupon and other coupon sites: there are more of them than you might think.
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