Posted on Sun, Aug. 24, 2008

Watchdog: Are you paying too much sales tax?

Texans enjoyed the annual clothing sales tax holiday last weekend where clothing and other goods were sold tax-free, and now it’s back to normal.

Don’t assume it’s back to right. You could wind up paying too much sales tax, as Robyn Salaver found when she started closely examining her sales tax receipts.

"I’m kind of tired being overcharged," says Salaver, who adds that every penny counts in a tough economy. "I’m trying to get by like everybody else."

But don’t assume that the store is trying to pocket a little extra cash. Computer problems and the state’s hard to decipher sales tax rules could be to blame, and the overcharges go to the state, not the store.

The problem often comes when stores run specials like 2-for-1 sales or take coupons. Sometimes, stores charge tax on the regular price, not the final price paid by consumers.

"There’s not a deluge of it, but it does happen," said a spokesman for the Texas comptroller of public accounts, which is responsible for sales tax collection. "Software programming or something else could be incorrect. We do get questions about concerns from citizens."

Salaver is one of those who questioned. After she believed she was overcharged at a feed store and then at a supermarket, she contacted the comptroller for guidance, and also The Watchdog.

She purchased dog food at an area feed store. The dog food was on sale for $10 off.

"They charged me the sales tax on the full amount and then deducted the $10," she says. "So I ended up paying sales tax on that $10 discount."

When I contacted the store operations manager, he checked into it and verified that the mistake was made but said it was unintentional. A day later, he reported back that he had corrected cash registers so it won’t happen again. "We don’t keep the money," he said. "Everything that says sales tax goes to the government."

Salaver also noticed the same on receipts from cat litter she bought at a grocery store in Fort Worth. A $2.20 bag was on sale for $1.50. Because she is involved in a cat rescue operation, she took advantage of the sale and bought many bags. But the store charged her tax on $2.20 for each bag, not on the amount she actually paid, her receipts show.

She complained to the store manager and was referred to the store’s customer-care telephone line. When she didn’t get a call back, she called the state comptroller’s office where an employee helped her find the applicable part of law. The comptroller also sent a staffer to the store to explain the rules.

When The Watchdog called the store, a spokesman promised to take a close look. "If, in fact, there was an error on our part, we certainly want to communicate with her and make sure if it’s a couple of dollars that she is entitled to, that we take care of that."

The Watchdog made purchases at some of the chain’s other stores using a coupon, and the sales tax was rung up correctly each time.

The state law, as written, is not the easiest to understand, Salaver says. The Watchdog agrees, believing lawmakers could have written the law so that it is clearer for consumers and retailers.

Get this: "When coupons or certificates are accepted by retailers as part of the selling price of any taxable item, the value of the coupon or certificate is excluded from the tax as a cash discount, regardless of whether the retailer is reimbursed for the amount represented by the coupons or certificate."

Huh? I read it a half-dozen times, and called comptroller spokesman R.J. DeSilva several times to make sure I was reading it right. Wouldn’t it be easier to simply state that sales tax is only charged on the bottom-line total of a purchase after all the discounts are taken? (Note that mail-in rebates are not affected by this; customers must pay tax on the entire amount paid at the register.)

DeSilva said that when the office conducts sales tax audits or when it follows up on consumer complaints, it requires companies to reimburse customers if they overcharge on sales taxes.

One of better known cases in recent months involved an electronics chain that had overcharged sales tax to customers in Texas and other states who purchased digital TV converter boxes using $40 government-issued coupons. The retailer was charging tax on the entire purchase, when only the remainder after that $40 should have been taxed.

A spokesman for the company tells me that it is trying to reimburse customers who are owed a little more than $3 for the tax paid on each $40 discount. The retailer is using addresses to find customers who paid with credit cards and those who are members of its loyalty program.

Salaver says she wants everyone — stores and customers — to know the law: "I’m not going to give up on this. I am pretty determined. I’ll be the voice. I’ll keep stomping up and down and get my refund. But what about other people?"

She’s proud, she adds, that her co-workers who have heard her story are now looking more closely at their purchase receipts, too.