Some stores still shortchanging customers with coupons

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Hometown grocer Giant Eagle has been taking some hits lately in advertisements by Wal-Mart that compare register tapes showing how much money shoppers can save by filling their grocery carts at the nation's biggest retailer.

But when it comes to facing customers who take the time to clip coupons, Wal-Mart is the one that has reason to wince.

In Pennsylvania, the state tax code allows retailers to subtract coupons from the price of taxable goods before calculating sales tax. Consumers pay less tax that way than if the store figured the tax on the full price of the item.

At Giant Eagle, registers now calculate sales tax on the after-coupon price, saving customers money.

Not so at Wal-Mart, which charges tax on the full amount.

PG graphic: Sales tax comparison
(Click image for larger version)

That means a shopper in Allegheny County buying a $10 jug of detergent with a $2 coupon at Wal-Mart would pay 70 cents tax (6 percent to the state, 1 percent to the county). But at Giant Eagle, that same item would ring up 56 cents tax, or 14 cents less.

The amount at stake for consumers is relatively small when looking at a single shopping trip, especially considering most food, medicine and clothing are not taxable in Pennsylvania. But the tab adds up when taking into account multiple trips by thousands of coupon clippers.

Some major categories of goods subject to sales tax include soft drinks, cosmetics, jewelry, paper goods (toilet paper is exempt), detergents, soaps, shampoo, pet foods and prepared foods served at restaurants and deli counters.

Wal-Mart's coupon policy comes at a time when struggling households are increasingly relying on coupons to help them get by. Coupon use has undergone a resurgence over the last three years, with 81 percent of shoppers reporting they used coupons regularly in 2011, up 17 points from pre-recession levels, according to the most recent study by coupon tracker Valassis.

Until recently, Giant Eagle, the region's largest grocer, treated coupons the same way as Wal-Mart.

In early 2005, the Post-Gazette did a spot check of some major retailers in the area that handled lots of coupons, finding that Target extended the tax discount to customers, but Wal-Mart, Giant Eagle and rival grocer Shop 'n Save did not.

Back then, Shop 'n Save quickly made good on a promise to adjust its registers to calculate sales tax on the discounted, after-coupon price. Giant Eagle and Wal-Mart said they believed fixes were coming.

But when the newspaper checked back nearly five years later, at the end of 2009, nothing had changed.

"Thank you for bringing this to our attention," Wal-Mart spokeswoman Ashley Hardie said at the time.

More recently, Giant Eagle undertook "significant work with its sales systems software providers" over the last 18 months to be able to offer the tax break on 95 percent of coupons redeemed at its 105 Western Pennsylvania stores, spokesman Dick Roberts said last week.

The O'Hara-based chain is in the process of installing more software upgrades that it expects to be completed in the next two weeks that will cover the remaining 5 percent of coupons, mainly specialty coupons on multiple items, Mr. Roberts said.

The Pennsylvania Department of Revenue requires retailers to provide detailed records that match coupons to particular products so the state can be certain that coupons for nontaxable items are not being used to reduce the price of taxable goods.

Stores that do not provide proper documentation must remit sales tax based on the full, pre-coupon price.

"The [tax] regulation gives retailers the means to charge sales tax on the lower price," revenue department spokeswoman Maia Warren said last week. However, she said, the state "cannot legally require retailers to do it."

Back in 2009, a source told the newspaper that Wal-Mart was reluctant to invest in the computer upgrades necessary to make the switch.

Last week, Wal-Mart's Ms. Hardie declined to say whether the discount chain was planning any changes.

"Wal-Mart's current systems, with respect to the collection and remittance of sales tax, are in compliance with Pennsylvania's sales tax laws," she said in an email.

Ms. Warren said the revenue department does not know which or what percentage of retailers statewide offer the sales tax break to their coupon-clipping customers.

"There's no way for us to track that information," she said.

For a list of taxable items in Pennsylvania (Retailers' Information Guide REV-717) visit www.revenue.state.pa.us, or go directly to http://www.revenue.state.pa.us/portal/server.pt/community/sales%2C_use___hotel_occupancy_tax/14487

businessnews - yourbiz

Patricia Sabatini: psabatini@post-gazette.com or 412-263-3066. First Published July 1, 2012 12:00 AM


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