I'm sure other stores do it from time to time, but I can't recall any specific examples now. Yesterday I bought some 2-packs of LED BR30 bulbs at Costco: $14.99 less a $12.00 "Instant Rebate" courtesy of Consumers Energy -- and the 6% MI Sales Tax is charged on $14.99 rather than on the $2.99 Net Price.
Does every state charge ST that way, and why do stores price items that way?
Perce
That's how it works here in NJ. Good question why they do it that way, instead of just passing along lower pricing where you wouldn't have to pay sales tax on the full, pre-discount price.
I never paid any attention to this in the past. I will in the future though. I'm just guessing, but if that "instant" rebate would have been a "mail in" rebate the buyer would still pay the sales tax on the full price. Having said that, I'm thinking the government is getting more revenue than it deserves. That doesn't surprise me though.
I've been in Md. 32 years but I can't remember if it's Md. or NYS that I noticed did what you say. I didn't notice that either didn't do it.
That is the law. Using a cupon to reduce price by a fixed amount, tax must be pain on the "marked price" of the product. The cupon (x$ off) is considered as "money"
Any product marked down must be sold at the lowest marked price, even after the promotion is over. Not kosher to re-tag the items with a higher price. And even if, for instance, the cupon "instant rebate" or special price" is for a maximum of 10 per purchacer, the marked price is the maximum that can be charged. That's why you see signs like "Regular Price $15.99 Today only $9.99. Discount will be applied at checkout" - with the sticker on the item marked at $15.99.
A "X% off" offer is considered the same - and the marked price is the "before discount price". Tax is paid on the "discounted price" - the price actually paid..
This migh not be true everywhere - but it is here in Ontario - and many other places accross North America.
We were shopping for kid's shoes years ago - and the shoe store had a big display of shoes and a sign "all shoes on this table half price" I found 2 pair the kids liked - nice shoes, regularly priced at something like $28 but with $14.00 price tags on them. At the checkout they were run through at $14 each. I said "hold it!!!!" These shoes are on sale, half off. The teller said "The marked price IS half off. they are regularly $28.00" I told them they better change the sign to read "marked price is half off siggested retail", but in the mean time I was paying only $7 per pair - and if anyone in the line behind me was buying dhoes from that display, they were getting the same price - untill the sign was removed, or I was reporting them to consumer affairs.
I got the price. The sign came down...
It is all about "fairness in advertizing" and tax laws.
The "cupon" came from Consumer's Energy - not from Costco. Costco sold the lights for $14.99. You paid $12.00, and Consumer's Energy paid the other $2.99 on your behalf.. Costco has to remit tax on the entire $14.99, because that WAS the selling price.
The cupon likely had limitations on it too - a small retailler could not come in and buy 10 cases of bulbs from Costco for $12.00 each to resell for the regular price of $14.99 ( and $12.00 was very possibly less than what Costco paid from the distributor, even at their high sales/purchasing volumes)
I may be a skeptic but I wouldn't be shocked to find out Costco actually only paid the state based on the final sale price and put the difference in their pocket. It would really depend on how the state law was written on collecting sales tax.
The light bulbs with the Consumers Energy "instant rebate" were only one example. But at the same time I bought some chairs that had a $5 "Instant Rebate" (no indication that it was from the manufacturer or any other entity), but on those too the ST was charged on the pre-Rebate price.
I think some US states (not MI) prohibit the limiting of quantities.
Perce
There is a difference. If the eller puts an item on sale, he is doing one of two things.
In the case of an instant rebate, it is just that. He buys the bulbs at normal price. He sells them at regular price, pays sales tax at the rate of the regular price. But with one difference. Behind the counter is a guy from the power company kicking in 12 bucks. The seller makes the same profit, the state gets the same sales tax, but the power company pays some of the cost for you. My description is simplified, but that is what makes instant rebate differ from a sale price.
I wouldn't put it past them either. It's incredible how low businesses (and people) can go. But doesn't the computer total every penny attributed to sales tax on their receipts. It's not like someone adds it all up each month with an adding machine. It would require a really good explanation not to pay what the total shows, and not to then correct the computer so it matched what they were actually paying. Unless of course they just had a little program, assembled and linked in, with no source code to be found, that modified the totals. That's what VW would do.
I was just looking at TVs online at Costco and they have instant rebates on TVs too. That rebate isn't coming from some third party either, it's apparently from the manufacturer.
I guess the situation may be this. Let's say I'm the manufacturer and I have TVs that have a MSRP of $400, I sell them to Costco for $200. The channel is full of TVs, they've been sold at those prices for a while. I want to boost sales. So, I offer a $40 instant rebate to the consumer for each TV sold from 11/22 to 12/22. Why to the consumer? Because it's simple and for sure the savings is going to the consumer, to lower the price, and not into Costco's pocket, or half into Costco's pocket, etc. It also makes the consumer feel good about the manufacturer cutting them a break.
In NJ it definitely works as described, the sales tax is on the full price, before the rebate. I would seriously doubt a major chain like Costco is going to cheat the state sales tax folks. Some small shyster somewhere could be doing it.
In the case of a third party chipping in, it's a lot clearer and rational than the far more typical case, where the instant rebate is coming from the manufacturer of the product.
One thing about computers is they do exactly what you program them to do.
And forensic accountants can decipher what has been done. Under the Canadian/Ontario HST system you might get away with it for a short time, but they WOULD catch you - and getting caughrt definitely is not worth it!!!!. Do you want a monthly tax audit, or a tax audit spotcheck numerous times, with no warning, over the next 5 years??? I doubt it.
Would it have something to do with the psychology of it? Something like buy X and get a "free gift" to go with it?
snipped-for-privacy@aol.com posted for all of us...
I believe Costco or any reseller does not pay sales tax because of the structure. It is only collected at the retail or usage level.
What is being discussed is Costco or any other merchant, collecting sales tax on products or services they sell to their customers and then forwarding it on to the state.
This is done with coupons, too - the sales tax is charged on the original price, not on the cost after the coupon is applied.
Up here in Canada they symplified things a bit with the HST - Harmonized sales tax. It is a combination of the provincial saltes tax and the federal Goods and Services Tax..
Used to be a reseller or business paid the GST at purchace, and charged it on sale - paying the government the tax on the increase in price from purchase to resale, as well as on any labour charge.
They bought PST exempt, charged the PST, and remitted it to the provincial government less a very small collection fee.
Now with the HST, there are no exceptions for resellers - I pay the full HST on everything I buy. I collect the HST on everything I sell, including my time. I remit the difference to the government. I don't get a collection fee, but now everything I use as part of doing business is a credit - I don't pay the tax on business expenses.
Works out pretty good.
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