What's the Deal with the proposed Connecticut "Coupon Tax"

A proposal by the Governor of Connecticut, Dannel P. Malloy recently created headlines about Taxing Coupons. What is this "Coupon Tax" and what does it mean? 

Well in many states, state sales tax is calculated on the final price (after all discounts and coupons). So for example if the sales tax is 10%, on a $100 item the sales tax would be $10. If you had a $10 coupon, then the final price is $90 and the sales tax would be $9. This is currently how it works in Connecticut, here's the official explanation by the Connecticut Department of Revenue Services.

However in some states, such as New Jersey, taxes are applied before any manufactures coupons. So in the above case, if you had a $10 manufacturer coupon, you would still pay the full $10 in sales tax. Check out the New Jersey Division of Taxation tax note. However if you had a store coupon (i.e. $10 off at The Gap), then the sales tax would be applied on the final discounted price. From here it gets more confusing as different states have all kinds of different rules (i.e some may tax BOGO coupons others may not, some may only tax certain items, etc..). In fact in some cases, the rules can vary even down to the local level when an additional local sales tax is applied.

However as far as I can tell, no state bases it's sales tax on the MSRP or regular price. So for example if a coat was normally $199 but was on sale (no coupon required) for $99, then the tax would be on the $99.

So what's the story in Connecticut. Well it was widely reported that the sales tax would be extended to include "all discounts and coupons" off the full price. Editorials were quickly written that the tax is unworkable. How would the state determine the regular price? Would it be MSRP? The store's regular price? Unfortunately no one seems to know what the Governor is actually proposing? It would be nice to see an actual transcript of the remarks. It's interesting that there has not been any follow up.

My thoughts are that the Governor proposal is to ultimately change the rules regarding coupons to be more like New Jersey where taxes are applied before any manufactures coupons. I'm betting he is not an avid coupon user and his remarks were intended to lump in all discounts provided by the consumer not the retailer.