how does charging sale tax on store credit benefit a store?
my lgs made this small change in policy and it doesn't make sense to me.
If i buy something on credit and pay nothing to the store, how is this paying store credit to the store?
Items purchased on store credit alone don't bring in tax since all store credit is usually an amount of "I owe you" that the store bears.
My local store does this as well. They also do some other things with store credit that I find distasteful. For example, if you buy a box with cash, you pay about 110. If you buy a box with store credit, you pay the full msrp (~143.00). And if the store has discounts on cards, you cant take advantage of the discounts with store credit; you pay the non discounted price.
I dont accumulate store very much store credit, so these policies dont bother me much. Not sure if other stores around the country do these things as well.
Hmm, I might think that this depends on the state sales tax rules (and I'm not sure what state you are in). i.e., purchases of gift cards aren't taxable, but whatever you buy with the gift card funds would be taxable. Not sure if that is a direct analogue.
You might ask the store if they were audited recently. They may have found that they owed sales taxes on the value of merchandise redeemed with store credit.
I'm confused. What exactly are you saying is the case?
It's sounds like you're upset that you're getting charged tax when purchasing something with store credit, but that actually makes sense, so I'm confused.
Store credit isn't 'free', it's cash that has been, at one point, paid to the store. Even if the store credit is given out as part of a reward or something, it's still a cash value that's only redeemable at that store, and the value of that store credit was taken out of the store's funds. They have to charge tax when making purchases that way, it's the law in the US.
If someone gave you a gift card to target, for instance, you'd still need to pay tax when purchasing something with that gift card.
This is just anecdotal / sampling bias, but I remember my supervisors (at a video game store during my high school days) telling me not to charge tax when a customer would pay with store credit. We also didnt charge tax when people redeemed free pepsi products with winning bottle caps.
This is just anecdotal / sampling bias, but I remember my supervisors (at a video game store during my high school days) telling me not to charge tax when a customer would pay with store credit. We also didnt charge tax when people redeemed free pepsi products with winning bottle caps.
That would be equivalent to the supervisor giving the customer a discount. The store would still pay the tax on the sale to the government. With the Pepsi promotion it makes sense from a marketing perspective not to charge customers tax for "free" stuff and handling the sales tax further up the chain (ie when Pepsi reimburses the retailer)
Yeah, Azmod has it there. The sales tax is getting paid one way or another - the issue is whether its on the consumer or the store.
Personally, I much prefer it the way a lot of the world does it, in which the sales tax is included in the purchase price, and everything is a flat price.
So if I'm following this correctly. the store pays the sales tax that should be on the books of sales made, even if paid for by store credit...... thus they put sales tax on store credit to lessen what you can redeem with store credit as a means to compensate/off set what the store is suppose to pay in sales tax?
To me charging tax on "redeemed credit" or "I owe you" that store credit often is, does make much sense because your not taking in money that covers the amounts of sales tax that the sales tax laws say the store owes.
If stores charged a sales tax on trade or entry fees of tournaments which is cash that directly gets turned into store credit, that would make sense to me, because you taking in a specific amount of extra revenue that can be put toward the amount owed for sales tax specifically.
Charging sales tax on purchases paid for with store credit doesn't directly correlate covering the amount of sales tax owed by the store.
A tax accountant will probably correct me, but I think that there are three transactions, with tax implications -
Transaction 1 - pay entry fee. I would have thought that the entry fees were taxable revenue as well. If sales tax is 10% and the LGS charges $15, they get to keep $13.64 and pass on 1.36 to the state government.
Transaction 2 - win store credit. Technically, I suspect that anything you "win" is also taxable on federal/state income taxes (in the same way that if you find $5 on the street, you would theoretically declare that as income and pay taxes on it. No one does). Gambling winnings are certainly taxable. If this is revenue for you, then it is also probably a claimable expense for them when they prepare their income taxes.
Transaction 3 - buy stuff with store credit. As covered above, I believe the LGS needs to pay sales taxes on this. They can either charge you ($4 store credit for a pack, plus $0.40 sales tax), or net down their revenue (i.e., keep $3.64 and pass on $0.36 as sales tax).
I suspect many LGSes net this down - i.e., they collected $15/player and record expenses (including prize support) of 4 packs/player.
I charge sales tax on any purchase made at my store. I have to. The method of payment (cash, credit card, gift certificate, store credit) doesn't matter to the state.
All LGSs I've ever been to had to charge tax, due to the law. Never thought once about it. I would be nice if LGSs would sticker their cards it include the tax amount, but doing so leads to some weird looking prices. I know of one LGS that did so, and they stopped as people saw the prices and thought they were being overcharged of the cards without taking the tax amount into account. Oh well.
my lgs made this small change in policy and it doesn't make sense to me.
If i buy something on credit and pay nothing to the store, how is this paying store credit to the store?
Items purchased on store credit alone don't bring in tax since all store credit is usually an amount of "I owe you" that the store bears.
I dont accumulate store very much store credit, so these policies dont bother me much. Not sure if other stores around the country do these things as well.
You might ask the store if they were audited recently. They may have found that they owed sales taxes on the value of merchandise redeemed with store credit.
It's sounds like you're upset that you're getting charged tax when purchasing something with store credit, but that actually makes sense, so I'm confused.
Store credit isn't 'free', it's cash that has been, at one point, paid to the store. Even if the store credit is given out as part of a reward or something, it's still a cash value that's only redeemable at that store, and the value of that store credit was taken out of the store's funds. They have to charge tax when making purchases that way, it's the law in the US.
If someone gave you a gift card to target, for instance, you'd still need to pay tax when purchasing something with that gift card.
TerribleBad at Magic since 1998.A Vorthos Guide to Magic Story | Twitter | Tumblr
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That would be equivalent to the supervisor giving the customer a discount. The store would still pay the tax on the sale to the government. With the Pepsi promotion it makes sense from a marketing perspective not to charge customers tax for "free" stuff and handling the sales tax further up the chain (ie when Pepsi reimburses the retailer)
Personally, I much prefer it the way a lot of the world does it, in which the sales tax is included in the purchase price, and everything is a flat price.
TerribleBad at Magic since 1998.A Vorthos Guide to Magic Story | Twitter | Tumblr
[Primer] Krenko | Azor | Kess | Zacama | Kumena | Sram | The Ur-Dragon | Edgar Markov | Daretti | Marath
To me charging tax on "redeemed credit" or "I owe you" that store credit often is, does make much sense because your not taking in money that covers the amounts of sales tax that the sales tax laws say the store owes.
If stores charged a sales tax on trade or entry fees of tournaments which is cash that directly gets turned into store credit, that would make sense to me, because you taking in a specific amount of extra revenue that can be put toward the amount owed for sales tax specifically.
Charging sales tax on purchases paid for with store credit doesn't directly correlate covering the amount of sales tax owed by the store.
Transaction 1 - pay entry fee. I would have thought that the entry fees were taxable revenue as well. If sales tax is 10% and the LGS charges $15, they get to keep $13.64 and pass on 1.36 to the state government.
Transaction 2 - win store credit. Technically, I suspect that anything you "win" is also taxable on federal/state income taxes (in the same way that if you find $5 on the street, you would theoretically declare that as income and pay taxes on it. No one does). Gambling winnings are certainly taxable. If this is revenue for you, then it is also probably a claimable expense for them when they prepare their income taxes.
Transaction 3 - buy stuff with store credit. As covered above, I believe the LGS needs to pay sales taxes on this. They can either charge you ($4 store credit for a pack, plus $0.40 sales tax), or net down their revenue (i.e., keep $3.64 and pass on $0.36 as sales tax).
I suspect many LGSes net this down - i.e., they collected $15/player and record expenses (including prize support) of 4 packs/player.
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