Monday, January 17, 2011

Sales Tax on Coupon Amounts

I don't remember how he phrased this, but hubby said something as we were leaving Publix tonight about how you only pay taxes on the amount after all the coupons.  I was quick to correct him that it doesn't quite work that way.  Unfortunately, we do live in a state where we have to pay sales tax on food purchases to begin with.  As if that's not bad enough, we get stuck paying sales tax on the amount of our purchases pre-coupon.

This is a common question and a common misconception about coupon use.

Coupons are considered currency as far as the stores are concerned.  The stores are reimbursed on the manufacturer coupons that are used, by the manufacturer, however they (the store) still have to pay sales tax on the full sale. Since it is their regular practice to pass sales tax on to the consumer (which is who is really responsible for paying it anyway) they pass on the full amount.

Since store coupons are really nothing more than extended sale, we don't pay sales tax on that amount.  This is why if you have a coupon for a "FREE" item or a coupon that makes an item free when combined with a particular sale, you'll still end up paying something out of pocket.

 To get a better image of how this works, take a look at my CVS trip from Sunday.  You'll find that the total of all of my items (before coupons) was $21.95.  I used $18.25 in manufacturer coupons (which is what ECBs are considered as well) and a $4 store coupon.  My total tax liability was $1.44 (which is 8% of $17.95; or the amount after the $4/20 coupon is subtracted).  

If you get lucky and you have several coupons that create an overage and all of your items are free after coupons you may reduce your tax liability.  This happened for me last week at CVS when my total after coupons was <.13>, and I actually paid less than the tax total out of pocket.

CVS Trip 1/16

It seems that my hubby has been making all my shopping trips with me this week; not by design, just for convenience.  He's learning a lot in the process about how all of this works (see my earlier post on rainchecks and stay tuned for my post on paying sales tax with coupons).

So yesterday he was with me when I went to CVS.  This trip didn't go quite like I had planned, because I did my math wrong (and did it based on coupons I didn't actually have).

So here's what I got:

  • 2 bottles Listerine (500ml)
  • 2 tubes Colgate Total (6oz)
  • 1 Blink Tears (5oz)
I used the following coupons

  • $1.50/2 Listerine
  • .75/1 Colgate
  • $1/1 Colgate
  • $4/1 Blink Tears (peelie coupon on package)
  • $4/20 CVS purchase coupon
  • $10 ECB earned from last week's purchases
(If you read my "Plan of Attack" earlier in the week, then you know I based my plan on using (2) $1/1 Colgate coupons and (2) $1/1 Listerine coupons.  The problem with my plan was that I didn't have (2) 4$1/1 Colgate coupons (although I would have if I'd gotten Sunday's paper before making this purchase) and I didn't have (2) $1/1 Listerine coupons (well, I did but they weren't valid for this size). The lesson here is double check your coupons (and the Sunday Coupon Preview) before you head out to shop.

That said, I still came out ok, paying only .70+tax OOP (or $2.14) and I earned $8 in ECBs to use later.

Saving Money with 50% Off Deal Sites

This weekend, we've used 3 different restaurant deals we got at Groupon or Living Social, for a total savings of $43 on 3 meals.

While there are many more deals we think about purchasing, we find that we save the most by only buying deals for places that we already go regularly and only buying one deal at a time.  Although, there are some deals we've considered buying multiples of and kind of wish we had done so (especially when we like the place enough to use the deal the very next day).  But, I know why businesses like sites like Groupon and Living Social, and it's simply because they make money off the deal. 

Here's how it works:
  1. They are guaranteeing sales.  By having you purchase your meal upfront, they know they have the sale whether you redeem your certificate or not.
  2. You've paid but if you don't claim your deal, you can lose it. Most 50% off deals expire in 6 months.  These aren't gift certificates with no expiration date.  If you don't use it in time you will lose it.
  3. Chances are you will spend more than your certificate amount.  Keep in mind your certificate does not include gratuities and often there are particular exclusions to the certificate (whether it be certain days or certain items).  So be sure to read the fine print before you purchase.  I recently read on another blog a complaint from a young woman about a 50% off deal she purchased for a hair salon.  The certificate was $25 for a $50 hair service, the problem is that her hair was long and therefore didn't fall into the $50 hair service price range.  If you are looking at a deal for a service, make sure you look at it just like you would a restaurant, the certificate covers the amount stated, which may or may not be enough to cover the full service.
  4. Recidivity Rate - the #1 reason that businesses would sign up for a deal site like this is that they know that a certain (and typically pretty high) percentage of users won't use their certificate at all.  The highest percentage of users will use their certificate on the first day it's available to them.  However, by making it not available to you until the day after you purchase it they actually decrease this percentage a good bit.  After that first day the % of people who won't use the certificate at all goes up exponentially.
So if you are going to purchase deals on Groupon or other similar sites, make sure it's for something you will use very soon after you purchase it, and don't purchase deals so often that you end up with a backstock of deals that you have to use before they expire. 

What's a Raincheck For Anyway?

So I had hubby with me when I went back to Publix to grab a few things today.  While they had most of the items that they were out of when I went last week, they were still out of the Jolly Time popcorn (that would be free after coupons).  On the way out I stopped at the Customer Service desk to grab a raincheck.

When we got to the car, hubby asked "So what does that raincheck thing do anyway?"  So I explained.

A raincheck is the stores written commitment to you to sell you the item they are currently out of when they get it back in stock, at the sale price.  The raincheck guarantees you the sale price when you return after the sale is over. 

Rainchecks can be a great way to save a little extra or to delay spending a little.  If you don't have a coupon for an item when it's on sale, it gives you a little extra time to get some together.  That said, while the customer service person isn't likely to go run to the back or send a bagger to check to see if they are really out of stock on something, you shouldn't ask for a raincheck for an item that is actually in stock.  But, if you do have to ask for a raincheck, ask for a raincheck for the maximum amount allowed, and then do what you can to get more coupons together, before you purchase the item.

Since my local stores have been out of the Jolly Time popcorn all week, and the stuff is free after coupons, I'll be doing my best to track down more coupons before I purchase it with the raincheck.  I now have an extra month to do so.

Free Samples

A few interesting free samples today....