INDIANAPOLIS (WISH) — When you buy something on sale, you expect to save money, but I-Team 8 found that savings can sometimes be complicated by something as simple as a coupon.
It’s all due to sales tax.
Indiana law requires stores to charge a 7 percent sales tax on all coupons issued by manufacturers. The state treats the coupon the same as cash.
But, products discounted or marked “on sale” by a store itself are treated differently. When you check out, sales tax isn’t supposed to be calculated until after the discounts are applied.
I-Team 8 found that policy can sometimes cause confusion for customers, retailers and even the state.
THE SEARCH FOR SAVINGS
Millions of Hoosiers will be on the hunt for deals in the coming weeks as the holiday shopping season kicks off. For shoppers like Karen Green, the search for savings is already well underway. It’s something Green doesn’t take lightly.
“I’m on limited income, so every penny counts to me,” said Green, who lives on Indianapolis’ far east side. “When you get your income from social security disability and you only have $3 to $4 left to last you the whole rest of the month,10 cents makes a big impact on your life.”
For the last six years, Green has been confined to a wheelchair after she was diagnosed with a hereditary blood clotting disorder. She also works part time to help pay off medical expenses.
“I consider myself very blessed to be here,” she said. “But, I’d be lying if I said if wasn’t really hard sometimes just to make ends meet.”
It’s one reason why she was so excited to find what she considered a great deal recently on bulk laundry detergent at a Sam’s Club in Cumberland.
“It was $3 off with instant savings,” she said, smiling. “You don’t even need a coupon.”
But, when Green looked closer at her receipt, she saw something she didn’t think added up.
“I noticed that they charged the sales tax on the full regular price, not the discounted price,” she said. “So, I went up to the customer service desk to get a refund, and they said they would have the manager look into it.”
That was in September.
Green says she’s returned to the store at least four times since then to shop similar “instant savings” deals on other products. Each time she hasn’t used a coupon. Each time, her receipts appear to show the same thing: sales tax charged on the full price of the items, rather than the discounted price. And, each time she has sought and received a refund of the difference in sales tax from the store’s manager, her receipts show.
“This is the fifth time, I think, that I’ve brought it to their attention in the last three months,” she told I-Team 8.
I-Team 8 went back to the Sam’s Club store with Green and purchased another laundry detergent instant savings deal, this time for $7 off the total price. If the deal was offered by the store, with no coupon used, the sales tax should have added up to $1.85.
“And, I didn’t present any sort of coupon,” Green said.
But, her receipt instead showed she was charged $2.34 in sales tax.
“That doesn’t make any sense to me,” Green said, shaking her head.
I-Team 8 took the receipts to the Indiana Department of Revenue for an explanation. At first glance, spokesman Bob Dittmer said it appeared Green was right.
“Their point of sale calculation has worked incorrectly here,” Dittmer said, looking at the receipts. “They didn’t do the math right. If that were a coupon, that calculation would be correct. In this case, since that’s not a coupon, the calculation is not appropriate.”
Except, Sam’s Club says it was a coupon — just not the kind you’re used to.
“We have a program called instant savings which provides our Sam’s Club Plus members special savings without the clipping of coupons. Instant savings are electronically loaded to membership cards and automatically redeemed at checkout,” said Sam’s Club spokeswoman Dianna Gee.
Some of the “instant savings” are offered by Sam’s Club as retailer discounts, Gee added. But, not all of them.
“The instant savings listed on the receipts you provided were all funded by the manufacturer and therefore would be treated as manufacturer coupons,” she told I-Team 8. “We use an internal process to code each instant saving product to reflect whether it’s a manufacturer-funded or retailer-funded discount, and the tax code is applied appropriately.”
But, without knowing that internal code, there’s no way for a customer to know the difference — or to check if the sales tax was correctly applied, Dittmer said.
“That’s the reason we do audits to find those things,” Dittmer said. “And, there are cases where a retailer doesn’t know or has charged the tax incorrectly.”
After researching Green’s purchases further, the Department of Revenue now believes the store’s original calculations were correct. But, if the retailer did nothing wrong, why was Green’s tax money refunded five separate times?
“The customer refund was offered for member satisfaction,” Gee, the Sam’s Club spokeswoman, said.
Sam’s Club’s gesture for the customer doesn’t short the state tax.
“That’s the retailer’s call, as long as they still pay the state,” Dittmer said. “That’s still recorded as a full sale. So, it’s a short for the retailer, not us.”
Still, Dittmer admits the state doesn’t have the resources to investigate every case as thoroughly as Green’s. Records show the agency audits fewer than 1 percent of all retailers statewide in a given year.
That can leave customers open to being taken advantage of.
“That’s why the first line of defense is knowledge,” Dittmer said. “The law is simple: sales tax is calculated based on whatever the customer is paying right now, regardless of the actual value of the product.”
Manufacturer coupons are treated differently, Dittmer explained, because retailers don’t lose money on them.
“If you have a $1 coupon that you’re applying to a $10 product sale — the sale, for tax purposes, is $10. Because the retailer is going to take that $1 coupon, submit it to the manufacturer and get that $1 back. So, the coupon is actually worth money,” he said.
It may sound confusing, but Dittmer says there’s no reason for retailers to get it wrong — particularly large retailers.
“Those that have extensive point of sale equipment and sophisticated software ought to be able to program their stuff to handle this accurately,” he said.
A NEW TAX TEST
Last year, I-Team 8 set up a tax test, visiting 20 Indianapolis area grocery and convenience stores to see if retailers were following recently updated law changes regarding sales tax. That law, known as Information Bulletin #29, makes most non-prepared foods, like groceries, tax free.
But, it also allows for a myriad of confusing exemptions, and I-Team 8 found those exceptions have left many retailers confused. More than half of the stores involved in I-Team 8’s test last year were applying the tax incorrectly.
Would the same hold true for coupon usage?
To find out if other stores were facing similar cases of coupon confusion, I-Team 8 went shopping, visiting both large chain stores and local merchants. At each store, we purchased taxable products using both manufacturer-issued coupons and products placed on sale by the store.
All but one was correctly calculated at the checkout: Wal-Mart, the parent company of Sam’s Club.
While I-Team 8 shopped around for its coupon test, we came across a discrepancy.
On two separate shopping trips to two separate Wal-Mart stores in Indianapolis, I-Team 8 found discount prices labeled as “rollbacks” on store shelves were not applied.
At one store, we purchased a lip balm product advertised for $2.47, discounted from its original price of $2.82. Receipts show we were charged the higher $2.82 price at checkout.
At another store, discount signs appeared to offer a $0.20 sale on facial cleansing wipes. But, upon closer inspection, the sales price was actually for another product four shelves below. I-Team 8 purchased both products and receipts show neither included the discount.
I-Team 8 also found several instances where the advertised “rollback” sales price was actually higher than the originally marked price.
Consumer law attorney Steve Hofer says that could be a problem.
“If it’s intentional, then that’s a deceptive consumer sales practice. False advertising is a subset of deceptive consumer sales. It’s intentionally trying to pull one over on the consumer. And, the more it repeats, the more likely it is that it’s not accidental,” Hofer said.
Intent, however, can be hard to prove, Hofer said. That’s why very few consumer overcharging cases ever end up in court.
“You generally have to have some evidence that a large number of people were affected. And, as a practical matter, you’ve really got to build it into a class basis to address it. But, most of the time, it truly doesn’t matter whether it’s intentional or not. If you go (to a store manager) and ask to have it addressed, they will address it. You should expect to get a refund. And, if you don’t, you’ve got every right to complain everywhere you want to complain.”
I-Team 8 reached out to Wal-Mart four separate times asking for an explanation on those pricing discrepancies and had not received a response as of Thursday afternoon.
“It’s important for shoppers to be a part of this process,” Dittmer, the Revenue Department spokesman said. “Because, as this investigation shows, it’s not always easy to tell how sales tax should be calculated.”
The first step, Dittmer said, is to check receipts: every purchase, every time.
“That’s really the first line of defense for a consumer, is to look at their receipt. That will often clear things up,” he said.
If it doesn’t, Dittmer suggests looking at the shelf.
“While these kinds of manufacturer’s discounts are not always listed on the sales receipt, often retailers post discount messages next to the products on the shelves announcing a manufacturer’s discount to be applied at check out,” he said.
If that fails, Dittmer said it’s always worth a customer’s time to speak with a manager.
“Take it up immediately with the retailer,” he said. “More often than not, they’ll work with their customers. And, if all else fails, file for a refund with the (state). That’s what we’re here for.”
If you believe you’ve been overcharged on sales tax, fill out this form.