What Is a Taxable Rebate in California?

A rebate might sound like a discount, but under California sales tax law, not all rebates reduce your taxable purchase price.

Whether or not you pay tax on a rebate depends on a single key question: Is the retailer reimbursed by a third party for the rebate?

What Counts as a Rebate?

The California Department of Tax and Fee Administration (CDTFA) defines rebates as post-sale reductions in the amount the customer ultimately pays. They can take several forms:

Instant rebates applied at the register
Mail-in rebates
Cashback after purchase
Gift card rebates (“Buy this, get a $50 gift card”)

When Rebates Are Taxable

If the retailer is reimbursed by a manufacturer or third party, the rebate does not reduce the taxable amount. You are taxed on the full pre-rebate price.

Example:
You buy a $1,000 laptop with a $100 instant rebate funded by the manufacturer. You pay $900—but the store gets that $100 back from the manufacturer.
Sales tax applies to the full $1,000.

When Rebates Are Not Taxable

If the retailer funds the rebate on their own and is not reimbursed, then the rebate is treated like a discount. You are taxed only on the reduced price.

Example:
You buy a $1,000 mattress, and the store knocks off $100 as a special rebate—but they’re not getting that money back from anyone.
Sales tax applies to $900.

Special Case: Gift Card Rebates

Some promotions give you a gift card as a rebate instead of cash.

If you pay full price and get a store gift card later, you are taxed on the full amount paid.
If the gift card is deducted from the price at checkout, whether or not it reduces tax depends on who funds it.

Quick Reference Table

Rebate Type	Retailer Reimbursed?	Tax Applied To
Manufacturer Rebate	Yes	Full Price
Store-Funded Rebate	No	Discounted Price
Mail-In Rebate	Yes (usually)	Full Price
Gift Card Rebate (post-sale)	Yes (usually)	Full Price

FAQs

Q: Why is a rebate taxed differently than a coupon?
Because rebates are often issued after the sale and the retailer still gets paid the full price, the state considers the full amount as part of the taxable sale.

Q: What if I never submit my mail-in rebate?
Even if you don’t claim the rebate, sales tax is still calculated as if you did—because the terms were available at the time of sale.