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No Tax Strings to Customer Rebates

Suppose your company offers store customers a rebate if a local team wins the championship. What are the tax ramifications? A new private letter ruling is a good indication.
In the new ruling, a retail outfit offered rebates on merchandise purchased within a set timeframe if a specific event occurred (which it did). The retailer made good on its promise.
Result: The IRS determined that the promotion was meant to encourage customers to purchase merchandise. So the rebates represent nontaxable discounts to the customers. Furthermore, the store did not have to report the discounts as taxable income to the IRS.

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