The Bargain Tax

Check this out:

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Translation:

Today I returned a lifetime supply of Roundup to Costco, because I couldn’t open the damn consumer-proof container and because on reflection I decided I didn’t want to open it.

I paid a penny less than $40 for it and expected to get that much back. When the guy said “That’ll be $33 back on your credit card,” I said “Huh?” He said, “You got a $9.00 coupon.”

Ohhhhkaayyyy….

But…look at the amount of tax they refunded, shown on the green receipt: $3.63

That tax is not on the reduced amount I paid. It’s on the full freight of the pre-”coupon” price.

See? I paid $29.99 for the stuff, and they charged me tax on a $38.99 purchase.

In Arizona our sales tax is almost 10%. So that amounts to an 84-cent difference.

Peanuts, you say? Well. Consider how much merchandise a single Costco store moves, to say nothing of Costco’s thirteen stores in the Greater Phoenix Metropolitan Area.

At this time of year, Roundup is a hot item in Phoenix. Every one of those 87 berjillion fake “desert-landscape” yards sprouts a bumper crop of wazoo-high weeds after the winter rains. Basically what it means is that just about everyone who lives in a house craves to buy Round-up. Last I heard, the Phoenix GMA was home to about two-thirds of Arizona’s population, to the tune of something over 1.5 million households.

Think of that. Let’s say a half-million of them live in apartments. That would give us a potential market, for the wee overcharge, of $.84 x 1 million, or $840,000. Not a bad profit, on a bit of bookkeeping sleight of hand.

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MD April 17, 2013 at 6:03 pm

It’s not uncommon for states to disregard manufacturers’ coupons when determining the sales price for sales tax purposes.

funny April 17, 2013 at 6:26 pm

Well! That would explain Costco’s behavior.

It, however, then would bring up the question of the unfairness of exaggerating the negative effect of an already regressive tax.

frugalscholar April 17, 2013 at 9:22 pm

I think you pay sales tax on pre-coupon price here also. So a free after coupon item at Walgreens, say, actually costs 10% of the item.

funny April 17, 2013 at 9:31 pm

What a rip!

Money Beagle April 18, 2013 at 4:36 am

I think it’s fairly common that the discounts come off after tax is applied. I don’t think this is Costco doing anything wrong, nor is the state of Arizona doing anything out of the ordinary.

When we buy a Groupon deal and it’s on a taxable item, every business I’ve ever been to charges you the sales tax you would have paid on the full amount. This has never bothered me.

funny April 18, 2013 at 5:11 am

It may be business as usual, but it’s still unfair. If you’re taxed on the cost of an item, you should be taxed on what you pay for the item, not on a theoretical cost. These “automatic coupon discounts at the register” are a come-on: the real cost of the item is what you pay at the register, and the sticker price is an inflated price the merchant has no intention of charging anyone.

jestjack April 18, 2013 at 5:05 am

YIKES!!! NINE …POINT…. THREE….PERCENT plus another 2% tax of some sort to boot. Rip in deed. I have fought this battle you desribe many times. The explanation I recieved and I guess carries some weight is that the tax needs to be collected and as the coupon does not provide for the payment of applicable tax…the consumer is on the hook. Not a fan of Round up…I worry about the long term effects of these chemicals getting into drinking water. I don’t care what the companies say….these products and the chemicals in them are anything but benign.I do my weeds the old fashioned way…I pull them. As for the sales tax…recently in this neck of the woods they raised the sales tax from 5 to 6%. AND the taxpayers immediately started making their purchases in neighboring Delaware (no sales tax) and Pa. ( no sales tax on clothing). 10% sales tax…there would be riots…

funny April 18, 2013 at 5:44 am

LOL! Unless you live near a border, it’s not very practical to drive to another state to buy products. Many buy almost exclusively online (though you can’t buy a week’s worth of produce and meat on line!), and so the state revenue dept has passed a rule stating that they’re going to audit every return on which a taxpayer has not declared any use tax (the assumption being that everyone buys something online) and will slap a huge penalty on anyone who has bought from Amazon (or any other online retailer) without self-declaring and calculating the use tax on every single online purchase.

Hilariously, this is a state that is run by right-wing anti-tax extremists. Or so they would have us believe.

The 2% tax is a city tax on food. It was supposed to be “temporary” because the city was allegedly going broke. But of course now it’s permanent. My father used to say, “There’s no such thing as a ‘temporary’ tax.’” :-D

To be fair, compared to states in the Midwest and East, our property tax is relatively low, though it’s hard to compare because it’s a county, not a state tax. In 2012, I paid $1811 in property taxes on a house worth about $200,000 to $220,000. I have no idea how much that would be in Delaware, because I’m incapable of figuring out what $0.31 per $100 assessment would be or how assessed values compare to real values in Delaware. I assume that’s 31% of whatever the government thinks your house is worth. In Maricopa County, property tax is 10% of full cash value, but “full cash value” is a joke — my house is valued at $189,000, a fraction of what I could get for it even in the current depressed market. I also know that if I’d lived in, say, Minnesota at the time I was laid off, the property taxes would have made it impossible for me to stay in my paid-off home.

We also have a tax on personal property and an outrageous vehicle tax — one reason I haven’t bought a new car is that tax on a $25,000 vehicle is over $400 a year. It drops, but slowly. On a 13-year-old car it’s low enough that I can pay it out of pocket, but if I bought a newer vehicle, I’d have to raise my tax and insurance monthly self-escrow, which is already at $445 a month, another $33 a month.

At one point when Janet Napolitano was governor, she noted that with all the scattered little taxes and gouges coming from every direction, the average Arizonan pays about the highest total tax bill in the nation. Corporate taxes are low, but individual taxes are surprisingly high — a fact hidden by the sheer number of taxes on such a wide variety of goods, property, and services.

Mrs PoP @ Planting Our Pennies April 18, 2013 at 5:29 am

Wonder how this works in countries with a VAT?

funny April 18, 2013 at 6:23 am

VAT is a sales tax on steroids. I recall when we lived in England prices of EVERYTHING were through the roof. They don’t break out the tax, so the price is just the price. But what’s happened is the government has charged what amounts to a transaction tax on every step of manufacture, warehousing, distribution, delivery, and sale from raw material to purchased product. That includes food.

At the time we were in England — the mid-1970s, so things may have changed by now — middle-class people expected to own what we would think of as K-Mart products: low-end in design and quality. Only the very affluent could afford to shop in a department store that was roughly equivalent to a Dillard’s, and only the ridiculously wealthy and tourists could afford Harrod’s, roughly equivalent to, say, Lord & Taylor, Gump’s, or I. Magnin.

IMHO, a value-added tax in this country will be the coup de grace for the US middle class.

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