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Not paying tax on free products?

smilesarepriceless

Advanced Member
Gold Member
Jun 11, 2007
551
0
When a host earns free product, i read on here that they do No pay tax on free products?

Is this accuracte?

If so, I'm just curious, why is this?
 

heat123

Legend Member
Silver Member
Sep 7, 2005
6,977
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I don't know why but our hosts are lucky because other DS companies do charge tax on FREE product!
 

JAE

Legacy Member
Jun 3, 2007
4,760
1
This is accurate, and I have no idea why.
 

ivykeep

Advanced Member
Gold Member
Mar 14, 2007
629
1
Tax in most states is calculated as a percentage... you pay tax on what you pay, not what it's worth (think about how much tax you pay when you buy something on sale at a store -- you pay the percentage on the SALE price, not the original price).

Free product is free, therefore the host IS paying tax on it -- they are just paying your local tax percentage on $0. I would be extremely surprised if PC is remiting sales tax on the host items -- my expectation as a bookkeeper would be that they are writing the value of the free products to an expense account as part of the cost of doing business (which actually is REDUCING their corporate taxes, so they pay LESS tax than they would otherwise). If other DS companies are charging tax on Free product, I would wonder if they are remitting it or simply adding it to the profit line.

I've worked in retail, wholesale and been a finance manager for several companies in Maryland, DC and Virginia. In NONE of those states did we ever charge or remit sales tax on items that were free.
 

smspamperedchef

Veteran Member
Silver Member
Jan 24, 2007
1,235
1
Tara1021 said:
Premier Jewelry makes you pay tax on your free stuff....UGH!
THEY SURE DO! That's why I WILL NOT do a show again for them. I did a show for an acquaintance. Her very FIRST show but I explained I wasn't able to spend anything really. I had a decent party and earned lots of "FREE" stuff. That is until I realized I had to pay almost $30 for tax and I believe shipping too! I was so mad!
 

chefjenibel

Member
Mar 30, 2006
295
0
I think the reason some DS companies charge tax on the "free" and discounted products is because of the whole inventory issue. The consultant probably already paid tax on the retail price when she purchased it as "inventory" (Or will have to pay it when she places the order), therefore the tax is passed on to you, the consumer.
 

dannyzmom

Legend Member
Gold Member
Apr 11, 2005
9,321
17
Tara1021 said:
Premier Jewelry makes you pay tax on your free stuff....UGH!

Whan I did a Partylite show last year they charged tax and shipping on my free stuff as well...man that just fried my cookies!
 

momoftwins

Veteran Member
Nov 9, 2005
1,107
0
I just did a Discovery Toys party this past Tuesday and I had to pay shipping on my free stuff!!!!!! I actually only paid about $10.50 out of my own pocket for the products but ended up paying $10 for shipping! I was livid!!!!!!!!!!!!!
 

Christ Follower

Legacy Member
Gold Member
Jun 8, 2007
4,991
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PartyLite and Princess House charges tax and shipping on the free products! They don't have inventory either! I had $205 in free credit at my Partylite party and with that + my 1/2 off item + another $40 item she let me but for $9, I still paid $75 when I thought it would be around $40 or $50! It was more than $25 in tax!

Grrrrr!
 

chefann

Legend Member
Gold Member
Nov 4, 2005
22,111
6
I think part of it is also how the FPV is addressed on the host order. If it's applied like a coupon, then sales tax would be computed first, then subtract the FPV from the total, resulting in the host paying the sales tax.

Please note that (at least in MI), it is actually against the law to charge sales tax on the FPV. I just found that out in May when my SD mentioned it at a meeting. Apparently, she has a relative who was part of a class action lawsuit against a department store that charged sales tax on free items. I don't know all the details, but the store had to refund a LOT of money to people included in the suit. Of course, that still doesn't stop DS companies from charging it...
 

BethCooks4U

Legend Member
Gold Member
Jan 21, 2005
13,006
42
lacychef said:
I love that we don't charge it, and always point it out to my hosts!
...especially those that are consultants or junkies of other ds companies. They are all over that!
 

pamperedgirl3

Senior Member
Jun 7, 2006
2,084
0
I hosted an Arbonne show & was charged tax on my free stuff--around $30! And shipping. I didn't know ahead of time that I would have to (figured everyone was as wonderful as PC!) & if I had known, I definitely would not have spent as much on additional products as I did.

Now I make it a point to tell people that they don't have to pay tax on the free stuff.
 

Chef Endora

Advanced Member
Gold Member
Nov 18, 2006
807
2
I didn't realize any of this!:eek:

Thanks for the great question Miss Curious;) and the great answers everyone!:)

I continue to learn so much here. :D
I will make a point out of this at my shows.

Does anyone know about TS?
 

cathyskitchen

Senior Member
Gold Member
Jul 1, 2007
2,707
2
I love this part of our host benefits, too. I recently hosted a Silpada jewelry party and earned $400 in free product, only to be charged tax and shipping on that free product!! I had no idea until I had picked out all of my free stuff! Needless to say, I didn't order anything above/beyond the free (esp. since they offer no additional discount - although my consultant offers a 10% discount to all of her past hosts as a "thank you"). I have hosted several DS parties and our host benefits are by far the best of all of them!! :)
 

jrstephens

Legend Member
Feb 18, 2006
7,133
0
I had to pay Shipping on my FREE Tupperware a few months ago. I am not sure about taxes. I LOVE that out PC Host do not hae to pay either - I had comments on how great it is from Hosts too.
 

apamperedone

Member
Jan 15, 2006
64
0
Tastefully Simple is a no inventory company too. Most people think you have to carry stock, but the company prefers you to not, just have the orders shipped directly to the customer from the warehouse.
 

heat123

Legend Member
Silver Member
Sep 7, 2005
6,977
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I forgot to mention I did a CTMH show and had to pay shipping and tax on free stuff! PC rocks!
 
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