Charged Me 40 Percent Sales Tax

Reader M bought four books online from Borders for $17.82 and was charged $7.07 in sales tax. Unless the books were cigarettes, there was probably an error on Borders’ end. But M says the bookseller refuses to acknowledge a mistake.

M, who says the order included free shipping, writes:

I made a mistake of ordering 4 book worth $17.82 with two $50 gift cards that came with $5 bonus gift card. For delivery to a Michigan address, I was charged $7.07 tax.

I emailed them first to make sure I was only taxed on the books and not on the gift cards. I was told that the $7.07 tax was calculated on the $17.82 books. Even though this would make it a almost a 40% tax rate.

I emailed them several times and even called them. Their Customer Service cannot even conceive that their computer program could have made a mistake. One lady even told me that the tax was $1.77 per book, even on one book worth $3.14.

It is more likely that I was charged $1.07 for the books (6 percent of $17.82) and was overcharged $6 tax (6 percent of $100 Gift Card with Bonus bundle).

Their Customer Service cannot seem to admit and fix this problem.

Have you ever paid such a high online sales tax rate?


Edit Your Comment

  1. jesirose says:

    Verizon math! :-P

  2. pinkbunnyslippers says:

    Sure that didn’t include the shipping as well?

  3. oldwiz65 says:

    And Borders wonders why people don’t shop there.

  4. pecan 3.14159265 says:

    $117.82 x .06 (6% is Michigan’s sales tax) and you get $7.07. It’s obivous that M was charged tax for the gift cards as well.

    • speedwell (propagandist and secular snarkist) says:

      Absolutely, and it’s the law some places that you be charged sales tax on the actual sale price of the items. In other words, the gift cards would be applied to the total price plus tax, not the total price before tax.

      Phil, Lord Ishulda-Guest, Master of the Obvious, strikes again! ;)

      • dolemite says:

        I’m not sure how that is obvious. Gift cards are basically cash. Why would you pay sales tax on those? When you go to use them to buy books, won’t sales tax be added to that order as well? Meaning you were double taxed?

        • speedwell (propagandist and secular snarkist) says:

          If gift cards spend like cash, then the sales tax is applied before you use the cards. In other words, the real total was for the actual retail price of the books plus cash. Then the hundred dollars in gift cards was applied, leaving the amount the gift cards did not cover, plus the sales tax. Gift cards are not “cents off” coupons (for which some areas require the full retail sales tax paid anyway). I mean, think about it. If something is a quarter, and I ring it up and it’s 27 cents, and you have a gift card for a quarter, how much is left? Jesus, how can this not be obvious?

          • drizzt380 says:

            He worded it oddly, but I think he he purchased a book and two $50 gift cards(I know he said with). Why would he use two $50 gift cards to buy a $17 book?

            He’s saying he was charged tax on the money loaded onto the gift cards. Which will then be taxed when he uses them to buy other items.

          • K-Bo says:

            M bought gift cards, M did not pay with gift cards.

          • SabreDC says:

            I think you’re mistaken. This customer bought gift cards, not used them. If the order was $117 and she used $100 in gift cards, you’re absolutely correct. M would be taxed on the $117. But M actually bought $17 in books and $100 in gift cards. There should be no tax on buying gift cards.

          • pecan 3.14159265 says:

            How did you agree with me and say “absolutely” when it’s clear you thought the OP used gift cards to pay for his order? Clearly, you did not agree because my calculations were based on the OP buying gift cards.

          • Megalomania says:

            He PURCHASED the gift cards, you smug jackass.

          • Qntmcat says:

            You seem to have missed something from TFA: OP *purchased* gift cards. He did not USE gift cards to make the purchase.

            If you are charged tax on a gift card, and then the recipient of your gift card is charged tax on their purchase where they pay with your gifted card, then tax is charged twice on the same purchase.

            Has this clarified the “obvious”?

          • rambo76098 says:

            You’re dumb. Sales tax is not paid on gift card purchases. It is paid at the time the gift card is used as a method of payment. Durrr.

          • paul says:

            When you “buy” a gift card, you’re not making a purchase. The store is basically holding on to your money until you decide to spend it, but it’s still your money. There is no sales tax when you buy the gift card or gift certificate because there is no sale happening.

            The laws dealing with gift cards/gift certificates/store credit differ from state to state. In Missouri, for example, I believe the store is required to turn over any unspent gift certificate after 5 years to the state. The state puts it into their unclaimed funds dept. As the holder of an old/expired gift certificate you can turn it in to the state and get the cash equivalent back (after 5 years). The store of course was able to collect interest on your unspent money for 5 years before turning over the original amount.

            Some stores have fees that are deducted from your gift card balance on a monthly or annual basis. They do this to try to get around the escheatment laws, so that by the time the deadline comes around there’s no money left on your balance. These fees are illegal in some states.

            The laws differ between gift certificates and gift cards, in some places like New York, gift cards are treated equally under the law, in other places gift cards are ignored by the law. Sometimes the gift cards are actually run by a third party in another state which confuses things even further. So YMMV.

            Just give cash.

      • pecan 3.14159265 says:

        I didn’t post that to mean that Phil’s post was in the wrong, somehow. There’s still the matter that M needs to convince Borders was wrong. He should call Borders customer service again and explain that he was charged sales tax on his gift cards. He should be firm about it, and not budge until they fix the error.

  5. Kitten Mittens says:

    Um, report them to your state’s tax commissioner… Nothing like a little investigation for tax fraud from the AG to get them to correct this.

    • speedwell (propagandist and secular snarkist) says:

      If it was fraud, that is. Even if the tax charged is wrong, which is unclear, you’d have a hard time proving intent to defraud.

    • GuyGuidoEyesSteveDaveâ„¢ says:

      I think they are more concerned with NOT getting money vs. getting money. I mean, if a store undercharged you, would you fight as hard as if they over charged you?

      • RandomHookup says:

        Then a different department in the AG’s office handles consumer overcharges.

      • Taddare says:

        Actually the AG may be interested. A company totals the tax it should have to pay and then pays that amount, they keep any difference (or have to pay it out). What they are actually doing is charging the 1.07 tax and keeping the rest while saying to you it was all tax, and that kind of annoys the state.

        I had a similar issue from a shipping company working with Verizon. I ended up getting a refund from Verizon for the whole total of a modem including shipping. Verizon’s total was 5 dollars different than mine. When I took them the receipt I had the CS rep and I noticed that the shipping company told Verizon they added the tax then the shipping charge, while on my bill they put the shipping charge and then added tax to the total. Must have been a good racket before they got sent off to the AG for tax fraud.

  6. qwickone says:

    Charge-back the portion that was incorrect? Can you do a partial charge-back?

    • wrjohnston91283 says:

      Yes – I did a partial chargeback when a merchant (Southwest Airlines Vacation, which is NOT run or owned by Southwest Airlines) would only give me a partial refund. The credit card company had no problem doing it.

  7. GuyGuidoEyesSteveDaveâ„¢ says:

    Shipping? Many states now allow retailers to charge shipping, and since many sites charge you shipping, then give you a coupon off for the exact amount of it, perhaps they are charging you for the taxable total, before discounts. I know in NJ you have to pay taxes on the price of something, even if it has a coupon.

    The other thing I wonder is if it’s possible to be charged tax from both the selling state and the buying state.

    • stevied says:

      Incorrect. The collection of sales tax on shipping and handling is nothing new. 37 States specifically collect sales taxes on shipping & handling fees. The laws of these 37 States have been that way since I started in business in the late 70’s.

  8. djseebs says:

    I just tried replicating the OP’s situation myself: 2 X $50 GiftCards, 4 Books X ~$4.50 each. Shipping to Michigan.
    Subtotal: $115.96.
    Tax: $0.96.
    Hmmm… something is definitely fishy here.

  9. stevied says:

    Excess sales tax collected is obligated to be paid to the State unless the tax is refunded to the customer prior to the date the sales tax is due to the State.

    Borders has done no wrong, conditional upon the excess sales tax being paid to the State OR the refunded to the customer.

    Considering how business books are kept (sales tax collected is sales tax owed) Borders will be paying the State unless the customer is able to recieve a prompt refund.

    No need to involve Law enforcement because no laws were broken.

    • pecan 3.14159265 says:

      Did you use weird legalese to say that Borders isn’t in the wrong if it refunds the excess tax to the customer? Cause there’s still the whole bit about Borders erroneously charging sales tax on gift cards.

      And it is definitely an error because I just went to the Borders website, initiated an order for a gift card, and was not given the cost of tax at any point (up to the point right before one would click “purchase”).

      • stevied says:

        Correct. Excess Sales Tax collected, if refunded, is legal and allowable.

        You are also correct in that sales tax should not be collected on Gift Cards (there are exclusions but lets not go there) as the sales tax will be collected when the goods are sold.

        The no sales tax on Gift Cards is to prevent double taxation, not because Gift Cards are specifically excluded from sales tax collection. Of course there are some goofy arse exclusions in which Gift Cards must be taxed, but those exclusions are not common to typical consumer products.

        • Shadowman615 says:

          But the point is, they aren’t refunding it. So this does not meet the conditions you specified.

          • stevied says:

            Have they been given a chance to correct the situation?

            As much as we all want instant gratification sometimes these things take a day (or two) to validate and correct and some of these big businesses have just too much buracracy to overcome.

            • RandomHookup says:

              Sure sounds like the consumer asked for it to be corrected and was told no. That’s why were are here today. It’s one thing to be told that Borders will look into it and get back to him. We don’t have the full story, but I don’t see anything that makes me think the wheels in the background at Borders are turning to fix this problem eventually.

            • JennQPublic says:

              Yes, if he keeps getting low-level CSRs on the phone, he likely hasn’t spoken to anyone who a) understands sales tax at all, and b) could do anything about it if they understood the error.

            • coren says:

              I emailed them several times and even called them. Their Customer Service cannot even conceive that their computer program could have made a mistake. One lady even told me that the tax was $1.77 per book, even on one book worth $3.14.

    • gamblepsu says:

      What are you talking about?? It’s illegal to charge sales tax on items that aren’t taxable (ie gift cards). If no refund is giving he can go to small claims and they’ll have to pay some fines.

      • stevied says:

        Excess or improper sales taxes collected are not typically subject to fines.

        The State doesn’t care if a business collects more than what is required AS LONG AS the State gets the $, OR (if the customer complains) is refunded to the customer.

        How do I know? Because I have seen $10,000+ errors in Sales Tax collection. The State smiles and said Thank You. No harm, no foul per State law because the funds were submitted to the State.

        Can consumers get a refund. Absolutely. Are they owed a refund. Absolutely. But no laws, from the perspective of the State, are being broken.

  10. Qantaqa says:

    I’m surprised she could put an order through at all. Every time I check their website to compare prices, it either freezes on me or the search function borks. They do have way better coupons than BN, though. Though less so recently.

  11. SPOON - now with Forkin attitude says:

    and you get to report them to the states consumer affairs for collecting excessive tax?

    • stevied says:

      Why? The State doesn’t care if excess taxes are collected as long as the State gets the $.

      • RandomHookup says:

        The Attorney General does care when people are overcharged, even if it means the state collects a little less tax.

        • stevied says:

          Under collect Sales Tax and the AG is going to get all hot and bothered. Under collect enough and the AG is going to have an orgasm just anticipating the legal action.

          Over collect? Was the overpayment, as directed by State law, paid to the State? Then all is happy and the AG moves on.

          This is one area of State law that is weird. Overpayments have been addressed. The $ is either refunded to the customer (conditional upon the customer being identifiable {ie credit card that can accept a refund} or the customer requesting the refund) or the $ goes to the state.

          The only way a business is going to get in trouble is if the business fails to refund (if possible) or if the business refuses to give the $ to the State.

          • IT-Princess: I work in IT, you owe me $1 says:

            I understand the reason they wouldn’t care, but I’m wondering if this only because most people don’t sit and calculate sales tax if it’s correct. So I’m curious if when there are complaints, and if there’s enough, they don’t want these payments to be noticed by consumers. They’re not going to proactively look for mistakes though.

      • IT-Princess: I work in IT, you owe me $1 says:

        Does the state only not care when the consumers aren’t aware?

  12. Razor512 says:

    If you want to see bad math, check out college book stores when you buy snacks.

    They charge tax for snacks

    So you buy a snack for $1.49, and with tax it comes out to $2

    when I ask the workers about why their taxes are so high when NY sales tax is only about 9%

  13. evilpete says:

    Report it to the local Tax board, they take this very seriously

  14. Bad_Brad says:

    It seems they applied sales tax to the purchase of the gift cards. Which should not have happened. Sales tax should be applied when the gift cards are redeemed. Pretty simple problem, actually. Borders should have simply said, “Whoops, our bad, here’s a free store credit for $20 or something, and we’ll refund the amount we overtaxed you.”

    • stevied says:

      Sounds like a fair plan to me.

      One key point. Gift Cards can be taxed, but then the sale of the goods is to be tax-exempt. Since that is difficult to handle for a business of consumer products than it is acceptable (and preferred) practice to sell gift cards without sales tax being applied and tax the actual goods.

      • rambo76098 says:

        Ah, but what if you don’t use the whole gift card? Or what if you somehow buy something tax exempt? Or if it’s bought by person A in a taxing state and gifted to person B in a non-taxing state such as New Hampshire or Oregon?

        • bar_foo says:

          The opposite of your second example is why no sales tax is charged on gift cards: if the cards were sold tax free, and no sales tax was incurred when they were used, people would buy them in Oregon and sell them on eBay for use in states that do charge sales tax. Charging the tax based on the jurisdiction where the final purchase is made is the only solution.

  15. MickeyMoo says:

    I sent in a similar story about an Amazon merchant charging me tax on S&H (Not allowed in CA) and never got a response… Hmmmmmphh

  16. StevePierce says:

    Simply return the items at a local store for a full refund. Then buy the books back and make a separate purchase for the gift cards.

  17. fantomesq says:

    Definitely sounds like he paid sales tax on the gift cards. I’m wondering if the “bonus gift cards” transformed the gift cards into taxable items. I’ve seen many situations like this. In CA, order a sandwich cold, no tax. Order in hot, tax. Nationwide, order a digital service with no physical product, no tax. Order a digital service where they get you a physical software disk, tax. Borders isn’t being honest with him but the bonus gift cards probably transformed the items into taxable… so you’re paying $6 in tax for those $10 in gift cards…

  18. Bog says:

    Gift cards are not “taxable” because they are treated like cash. Any sales tax would be paid with and on whatever is purchased through the gift card, tax will be extracted at that time. UNLESS, the merchant indicated that taxes would be covered at the time of the purchase.

    I could be possible someone is double dipping and trying to keep the difference.

    Anyway, gift cards generally suck.

  19. shthar says:

    I stopped buying from Borders and Barnes and Amazon because they started charging sales tax.

    If I want to pay tax, I’ll, well I don’t know what I’ll do, I never want to pay tax.

    But I buy most of my books on ebay now.

  20. TampaShooters says:

    Um, chargeback or return everything. Solved. I’m going to McDonalds..

  21. coren says:

    If they charged you that much tax on the books, as they claim, then returning just the books should get your tax refunded, no?

  22. TPA says:

    40%? Haven’t had an online vendor try this, but every year the IRS sends me a love note for about that much.

  23. SiddhimaAmythaon says:

    where there any coupons or credits involved in some states (like cali) the have to calculate tax. before certain promos like when i bought my MP3 player i got $100 instant rebate for signing up for or when you get a free/discounted cell phone.