I wrote to the Site Administrators, and jenn replied:

"The coupon is set to work on sale and clearance items, provided the product page has the green coupon icon indicating that the vendor accepts coupons being used on their products. If the vendor does not allow coupons, whether the product is on sale or in clearance does not matter."

Here is my reply to Jenn:

"Thank you. That explains the problem I looked at all the clearance items in my wishlist and saw that all of them had yellow/orange flags, saying that the vendor does not participate in all coupons. I then went to the clearance section of the Marketplace and checked the first dozen items, and all of them also had yellow flags. This makes me wonder if there are any clearance items in existence with green flags. The default setting for a clearance item certainly seems to be yellow, and of course we have no way of knowing which coupons a vendor will accept, if any. I certainly miss the old system, where coupons would always apply to clearance items (except when they were on sale for $3.50 a few times). That encouraged me to try some clearance items with high discounts after applying a large coupon. But I also miss vendor sales in general, where coupons would also apply. Now all we get are items going on sale as Prime Flash or "Gift of Savings" (also Prime Classic) items, where no coupons apply. To me coupons have almost become worthless except for the occasional new product that interests me, and as a Poser user there are not very many of those anymore.