By Kurtis Ming

A Dixon man bought a big screen TV on sale but later found out he was charged tax on the full price. When he couldn’t learn why, he called Kurtis to get answers.

He bought the TV from Costco. It came with a big manufacturers discount.

So why was he charged tax before the sale price?

Ed Larue likes his big screen TV.

“Discovery channel, lots of sports, with the grandkids, cartoons, SpongeBob, you know, pineapple lives in the sea,” said Ed.

Last month, Ed found an even bigger and better one at Costco.

“A 60 inch Samsung football TV,” said Ed.

And the price was right… $800 off, thanks to a manufacturer’s discount.

But after Ed paid, he realized he was charged sales tax on the pre-discounted price, which was around $60 more.

“As a consumer, I was a little steamed,” said Ed.

When he asked Costco why, Ed says they told him, that’s the way it is.

“I thought to myself, why? Why is it done that way?” asked Ed.

We went inside Costco and the sale sign does state “sales tax on the pre-rebate price.”

“The question really is what is the price paid for the TV?” said Betty Williams, tax attorney/managing shareholder, The Law Office of Williams and Associates.

Williams says it’s not how much pay you for an item but how much the retailer receives.

In this case, Costco received $1049.99 from Ed and $800 from the manufacturer, making the total taxable amount $1849.99.

When we reached out to Costco, they referred us to state law, which states: “amounts paid by a manufacturer to a retailer to reimburse the retailer for the value of the manufacturer coupon are included in the retailer’s gross receipts.”

“It definitely feels wrong but it is allowed under the law,” said Williams.

Despite what state law says, Ed feels it’s still unfair.

“Let Costco pay the tax on the $800. Why should the consumer pay because they’re getting the money back? I’m not getting it, they’re getting it,” said Ed.

If the discount is a store sale, you would pay sales tax on the sale price because the retailer isn’t getting any additional money from a third party.

  1. The fact is that Costco isn’t getting reimbursed by their manufacturers/vendors, so it is overcharging sales tax. I checked with many of Costco’s suppliers, and I’ve never found one that’s reimbursing Costco for their discounts. However, Costco is paying the BOE all the sales tax that it collects. And the BOE refuses to explain why they’re still letting Costco get away with that. When Target and Toys”R”US did the same thing that had to stop.

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