When is "$400 off" not really $400 off - from a Consumer's net perspective?

I received an email from Republic yesterday afternoon advertising, “Get yourself an all new Google Pixel 4 XL for $400 off the original price of $899…

Now, I jumped on that deal because I had been looking at the Google Pixel 3a for a while at $399 to replace my 3-yr old Moto Z Play whose non-user replaceable battery was not holding much of a charge anymore. So, for $100 more, I figured I was getting a pretty good replacement upgrade - especially since no one else was discounting the 4 XL at such a steep discount yet (although there are rumors of the 5 and/or a 4a coming out “soon”).

Anyway, I order the phone online following the Republic email link, and when I go to check out, I can’t figure out why it the bottom line total is much higher than what I expected. Then backing into the numbers, I figured out that I’m being charged tax on the Original $899 price.

Now, why is that? Is there some law that requires retailers to charge tax on an item’s original price before applying the discount sales price?? Common sense would dictate that if an item is on sale, that’s the selling price, and then the state and local tax is on that price, and not the original price.

Makes no sense to me…

As indicated on the page, the $400 off is an instant rebate. In the case of an instant rebate the law does indeed require that the taxes be charged on the original price as that’s what you’re paying and then essentially receiving a $400 credit afterwards. This is true if you buy from Republic, Best Buy or anywhere else.

How is it not $400 off? As an example, let’s say I buy the phone in South Florida where I currently live and the sales tax is 6%… The tax amounts to $53.94. At the regular price, $899 + $53.94 = $952.94. On sale after instant rebate the calculation would be $499 + $53.94 = 552.94.

$952.94 - $552.94 is $400, so the sale price would indeed be $400 off. What it is not is more than $400 off.

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Thanks for the explanation, louisdi - okay, so I understand that the catch is in the terminology of the sale here. It is an “instant rebate,” so by definition a “rebate” is something given after a purchase. Okay, I get it on the definitional terms.

But here’s my follow-up question now - so why does it matter to Republic (or any other retailer) that they offer an “instant rebate” instead of “instant sales discount”? Why not just mark the actual selling price upfront down $400 from $899 and let the customer duly pay tax on that net final $499 discounted price?

Either way, Republic (or any retailer) is still getting $499 net from me the customer - it’s just the taxing authorities that get less tax revenue from me. Which equates to less total cash out of my pocket.

There must be an accounting / goods inventory reason to use the “instant rebate” methodology rather than the “instant sales discount;” however, I can tell you that although I like the final lower-than-original price, it still left me with a slight bait-and-switch bad taste in my mouth. Yes, maybe legal and completely “accurate” in definitional terms, but a slight negative in the Goodwill dept.

Since Republic prides itself on good communications and transparency, I think it would have been more in their nature of not being like the typical nameless, faceless corporation to have added a one-liner disclosure that sales tax will be on the full original amount because of blah-blah reason. Simple, clear, no surprises.

Either that, or just make the selling price $499 and be done with it. Why cause unneeded “Gotcha!” reactions from loyal customers?

We don’t know the financial arrangements of this sale. Instant rebates usually involve 3rd parties such as the manufacturer or distributor of a product providing some or all of the amount of the discount. This requires different accounting.

I promise you, this isn’t a gotcha. Republic regularly runs “regular” sales. This isn’t that. Do you call it a gotcha when Best Buy or Amazon offers things with rebates?

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Thanks for your explanation, too, rolandh but see my follow-up response to louisdi below.

Basically, if you were offered a $50,000 car for $27,753, would you be expecting you would be responsible for paying the sales tax at the $50,000 amount level?

That’s all I’m saying - wouldn’t you rather want a true “sale” price versus the “instant rebate” price?

Hi @paulf.lrkq4k,

Of course, I would prefer sales tax to be calculated on the lower sale price after instant rebate. In fact, I would prefer sales tax did not exist at all. Before moving to Florida, I lived in New Hampshire where there is no sales tax. It was great walking into a store and paying precisely the advertised price and nothing more.

Candidly, I think your argument is with your state’s taxing authorities rather than Republic. Republic has no reason to want to remit more to your state’s taxing authorities than necessary. There’s certainly nothing in it for Republic.

At the end of the day, there’s got to be a business reason this particular sale is structured as an instant rebate. No business Republic included can, in my opinion, be reasonably expected to explain the rationale for every business decision. Perhaps, it would be better if Republic just stuck to the term “after instant rebate” omitting the word sale? I do feel, however, the title of your post is imprecise.

I already said I understand now that it hinges all on the “Instant Rebate” terminology. Still, I think for most consumers (at least those who bother to check their bills to see if the taxes seem “reasonable”), it still feels like a “Gotcha.” Oh yes, it’s all legally and technically correct - the lawyers and marketers have double-checked the language. I’m just giving you my net reaction.

And BTW, yes I understand that all other retailers must do this too, but the amount is usually rather inconsequential - on a nominal $899 purchase, it’s not like a 50 cents or a dollar.

There must be a tax write-off or some other incentive for retailers to go this “instant rebate” way - that way they can book the sale at full price for better quarterly results and/or write off the value of their carrying inventory. I would really like to hear an accountant or business owner explain it.

This just isn’t correct. The way this was done in the old days was you paid the full amount to the retailer. You paid tax on the full amount. You then sent the receipt, a UPC code and a form to the manufacturer or distributor and at some point in the future got a check, or a debit card with your rebate. Some carriers like AT&T and Verizon still do this. You buy the phone and three months later get a gift card.

Republic (and some others) have short-circuited this, for the benefit of the customer. Instead of asking you to do this, they work directly with the organization offering the rebate. The “pre-pay” it to you and then you essentially assign your right to the rebate to them.

Personally, I’d rather pay the extra taxes than pay the full amount up front and wait 4-6 weeks to get my rebate back.

rolandh -

Try 8.25% where I live in Texas. I’m sure NYC customers would have even more ire.

It’s not an issue with the concept of paying sales tax - that’s something we’re stuck with. It’s more about the “perception.”

Hi @paulf.lrkq4k,

The issue I take with perception generally is one’s perception is not always reality. May I ask without meaning to be argumentative, what is the reason you believe Republic would want to remit to the state of Texas more sales tax than necessary? It’s not like Republic is pocketing the difference.

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Yes, I’m old enough to have done rebates that way in the “old days.”
And yes, I’d rather get a rebate “instantly” than wait 4-6 weeks for it, but that’s not the issue here - it’s not a question of speedier rebate processes but one of “instant rebate” vs. “upfront sales price” and how that impacts the customer’s sales tax liability.

My point is that there must still be some other reason a retailer goes the “instant rebate” way.
Look at the example you used, louisdi:
Old days: I buy the phone for $899 and pay taxes on that amount, fill out the paperwork, and the manufacturer would send me the check for $400. The seller books a $899 sale.
Yesterday: I buy the phone for what I thought was $499, but if I read it much more closely I actually did buy it for $899 and paid taxes on that amount, then get $400 taken off at the end. As you surmise, the manufacturer pays $400 to the seller (who actually booked a nominal $899 sale).

So what are the differences in those two scenarios?

  • Well, it looks like the seller got to book a $899 sale in both cases, so that’s the same
  • And then the manufacturer paid a $400 rebate/kickback/sales credit/inventory-reduction charge or whatever you want to call it for the product, so that’s the same
  • The only thing that changed is that I, the consumer, paid more sales tax in one scenario than the other

That’s why I’ve got to figure there’s some other incentive for Republic and all other sellers to go the “instant rebate” route over a discounted-upfront sales price. Why, in this case, couldn’t Republic and Google just negotiate that $400 transfer between them for every Pixel 4 XL that Republic sells in their remaining inventory between yesterday and August 15th? With that in writing, Republic could just launch a “$400 off” sale and be done with it.

So, there must be something else going on - perhaps the need to continue to book high selling prices for the current flagship model while treating the essentially $400 discounts as some “marketing costs” or some other accounting sleight-of-hand.

Perhaps. But that’s likely covered by confidentiality agreements between the parties etc. I’m 100% confident, with absolution no evidence, that if Republic had the choice to structure this in away that was more favorable to their customers, they would.

The Sale Price is not $499 as per the item headline and on RW Phones page. This is not how RW has behaved in the past and likely would be legally considered false advertising since “rebate” is not mentioned before special terms. Reputable retailers are less opaque in Sale/Rebate advertising.

At end item page…

*** Promotional price of $499 for the Google Pixel 4 XL on republicwireless.com is valid through 8/15/20 at 11:59 p.m. ET, or while supplies last. Price after instant rebate. Taxes not included. Sales tax is calculated based on the full price before rebate.

Last sentence above explains the taxation better.

:flight_departure:

That’s not my position at all on this - I never said that I think Republic has something to gain in setting up the sale so the customer pays more sales tax. I don’t believe there is any reason for them to do so for “sales tax reasons.”

My point - my question actually - is what business reason is there for them to structure this marketing promotion as an “instant rebate” vs. “upfront sales price”? Because from this whole discussion thread today, I think we can all agree that I paid net $499 to Republic for the phone.

If the promotion was structured as “$899 phone on sale for $499” instead, Republic would have still gotten $499 from me, but I would have paid only the sales tax for a $499 phone.

So if there is indeed an accounting or business advantage reason for Republic to have chosen the “instant rebate” sales marketing route, I’m just curious what it was because it just cost me the additional sales tax on $400.

Being such a customer-centric focused company, there must be a good enough reason for Republic to have gone this route. Otherwise, if indeed there was nothing to be gained for them, I would have expected that Republic would have done the sale in the way that would have been best for their customers with no discernible impact to them - they still got $499 from me either way.

What it says on the phones page is:

What it shows on the page for the phone itself:

Ha ha, PlaneTherapist - you are exactly right! I just went back and re-read the whole email and now see that I did not go and read all of the fine print. (Actually, it mentions up top too that the taxes are assessed on the original $899 before the rebate is applied.)

So thanks for pointing that out - I retract any dispersions I’ve written that the marketing email wasn’t clear enough. I just did not read it as thoroughly as I normally would because I was in a hurry to buy the phone at the “$499 after rebate” price because I googled and saw that it was no one else was offering such a deal on the open market.

But so I do apologize to Republic (and the other loyal commenters here) that there was no “misleading” marketing ad - it was all clearly stated. However, my basic question still remains - about the seller/business advantage of structuring an “instant rebate” sale vs, an “Instant upfront discounted sales price.”

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There’s no benefit to us. The benefit is to the buyers who are getting a great price on a spectacular phone.

The instant rebate comes from the manufacturer. We’re able to apply that rebate instantly, at checkout, to save you from having to jump through rebate-completing hoops and wait for the $400. However since it is a rebate, we’re required to collect tax on the full amount.

It’s not some strange game where we’ll call things a discount one week to collect taxes on the discounted price, then call it an instant rebate the next week to collect taxes on the full amount. There’s an actual manufacturer’s rebate being applied to each purchase for this particular offer, and we’re simply following tax law.

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