Call Kurtis: Taxed Too Much

If you have bought an optional extended warranty, you may want to check your receipt. A Call Kurtis investigation found one store taxing at least one customer when they shouldn't have. We found out about this after a smart viewer from Orangevale scanned her receipts from Beck's furniture.

After buying a love seat and recliner Judy Hodnett thinks customers need to check their Beck's furniture receipts. She loves the furniture but is miffed about what she found on the invoices.

"We noticed that they charged sales tax on the warranty that we had taken out," says Judy.

After spending $69.95 for each of the extended warranties, she realized she was taxed a total of $12.24.

"I said, 'Well, you're not allowed to by law.' He said, 'Well, we've being doing it for 40 years.' And I said, 'Well it doesn't make it right.'"

So Judy filed a complaint with the agency that collects sales tax, The California State Board of Equalization, which says in its rules optional warranties like Judy bought are not taxable. Extended mileage warranties or service plans are also not taxable. Although state law allows you to be taxed on mandatory warranties, like a manufacturers warranty that is automatically included in the price.

"It's like buying the blender at Walmart. You would actually have to pay tax because it's included in the total gross receipts, or the sales price to the customer. When it is an optional warranty it is not subject to sales and use tax," says Susanne Buehler of the State Board of Equalization.

After complaining Judy says the BOE said she deserves a refund, and Beck's sent her a check for $12.24.

We reached out to Beck's wanting to know if this was a one time thing, or if this had really been going on for decades as Judy says she was told. They emailed us this response:

We have been through many successful audits with the state board of equalization. Our practices have always complied with state requirements.

Recent changes to our warranty program now allow us to sell "optional warranties" that would not be taxable. We have changed our process to accommodate this recent development and going forward the "optional warranty items" will not be taxed.

We are an agent of the state of California and as such any and all taxes collected are turned over to the state.

If a customer feels they were charged incorrectly they may contact us at any of our locations and we will be happy to research their orders and refund them accordingly.

Tod Paxton
Executive Vice President
Beck's Furniture

But Judy still wonders, "How many other people have they done that to?"

The BOE says if it finds a pattern of overcharges they can fine a business, although we would never know. The state says all audits are confidential. We asked Beck's if they were fined but they didn't answer the question.