Do you live in a “pre-coupon tax” state, or a “post-coupon tax” state? Do you even know, and would you notice if your store charged you tax on things it shouldn’t?
One Pennsylvania man knows, and he isn’t happy about what he found on his Walmart receipt. So he’s suing the multi-billion dollar company, for overcharging him by 21 cents.
21 cents? Kind of makes that woman suing Kohl’s over $14 look like a gold digger in comparison.
In a lawsuit that was originally filed in a local county court, but was transferred to federal court today, Brian Farneth of Verona, Pennsylvania says Walmart improperly charged sales tax on his pre-coupon total. Last month, he says, he used a “buy one get one free” coupon for Gillette Fusion shave gel at a Pittsburgh Walmart store. His pre-coupon total was $5.94, and after deducting the value of his coupon, his total was $2.97. But Walmart charged him 7% sales tax on the full $5.94.
That, with some exceptions, is a no-no in Pennsylvania. Connecticut, Massachusetts, Missouri, Pennsylvania and Texas are all “post-coupon tax” states. By law, sales tax must be applied on the final purchase price of an item or items, not on the selling price. In the 45 other “pre-coupon tax” states, sales tax is applied on items’ selling price – so even if you use coupons to get your balance down to zero, you’ll still owe some tax.
Farneth’s attorneys are seeking class action status for the lawsuit, alleging that Walmart has similarly overcharged other Pennsylvania couponers by a total of “several million dollars”.
In a statement to Coupons in the News, Walmart offered a defense. “Walmart’s current systems, with respect to the collection and remittance of sales tax, are in compliance with Pennsylvania’s tax laws,” it asserted. “We have previously sought an opinion from the state which confirmed this.”
In fact, Walmart has been down this road before – and, thanks to a giant loophole in the law, it’s been found to be in the clear.
In 2010, another Pennsylvania Walmart couponer filed suit against the retailer, with exactly the same complaint. On multiple occasions, alleged Mary Bach of Murraysville, Pennsylvania, she was charged sales tax on the pre-coupon price of products purchased at Walmart.
Walmart’s defense relied on a convoluted interpretation of the state law. The law says tax must be applied on the post-coupon total, if “the cash register receipt makes a clear reference to the item and the coupon related to it.” Walmart argued that its receipts do not show which coupons apply to which items. Coupons deducted from the purchase price are merely labelled “Coupon”, and there’s no way to tell what item it applies to. Therefore, since the receipts do not make a “clear reference” to the items on which coupons are used, Walmart said it’s following the letter of the law in charging tax on the pre-coupon amount.
And a judge bought it. Bach lost her lawsuit.
Similar lawsuits have been unsuccessful for other reasons. In 2011, a Connecticut woman’s lawsuit against Rite Aid was dismissed, after a judge ruled that instead of suing Rite Aid, she should have applied to the state for a refund of the 24 cents in pre-coupon tax that she said Rite Aid improperly charged her. And in 2002, a judge in Ohio (which is a pre-coupon tax state anyway) dismissed a couponer’s lawsuit against Giant Eagle, saying she should have sued the state tax commissioner instead.
So, even if you live in a post-coupon tax state, it appears that retailers can charge you tax anyway and you have little recourse. And even if you win, you may not win much.
In a related case, though one that didn’t involve coupons per se, everyone sued each other in a dispute over the way Food Lion charged tax on some items. A consumer group in Tennessee sued the grocery chain, for charging tax on the shelf price of items, and not on the discounted price offered to loyalty card holders. Food Lion then sued the state for a refund of the excess sales taxes it had collected. In the end, Food Lion settled with the consumer group in 2002. While denying any wrongdoing, it agreed to offer a coupon in its weekly sales circular that was worth a whopping 28 cents.
That’s a lot of lawsuits, over a little pocket change. But, as any good couponer knows – every penny counts.
Ok Wait.
I ACTUALLY researched this years ago when I lived in Florida.
It was my understanding (at that time) people were arguing if coupons and rebates were INCOME. And the argument went that it was not income and that meant that any sales tax paid to the state was an overpayment, and as such you could APPLY for a refund of the sales tax from the STATE. (The retailer’s hands were tied because in this ‘capacity’ the retailer is an ‘agent’ of the State. Hence any argument was between the customer and the State.)
So! I agree w/ your analysis-
But, as usual, I want to go 1 step further….this is a lawyer hoping to strike it rich (or famous) by abusing the legal system. Abusing the American taxpayer.
The legal system was not established to serve as a taxpayer funded lottery for ambitious and manipulative graduates of law school. This lawyer should be fined and suspended from practice.
Post-coupon total, not pre-coupon total. He was charged tax based on the pre-coupon total in his post-coupon total.
This story isn’t entirely true for states such as mine, California. Yes, you will be charged the tax based on the shelf/sale price even if you used a manufacturer coupon. But, if you use a retailer coupon in California, the tax must also be deducted from that coupon value.