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Old 11-15-2010, 06:31 AM
WAHM Regular
Join Date: Jun 2010
Posts: 38
Default sales tax on "free" items

I had a hostess who hit the 10 orders and 2 bookings so received the 40% in free jewelry. She was rather upset when she found out she had to pay sales tax on the "free" items. I explained to her that since they were purchased and Lia Sophia gave her hostess credit that they were not exempt from sales tax. She told me that I should have explained this sooner because she was not prepared to pay that much money. How do you all handle explaining the sales tax question? I am guessing I am not the first advisor to have someone upset over this.

Thank you.
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Old 11-15-2010, 06:51 AM
LynnAndreske's Avatar
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Join Date: Oct 2007
Location: WI
Posts: 803
Default sales tax

I don't have the # in front of me but on AA you can find a sales tax chart under LSU. That will show each state and which ones charge for the free, the $15 fee, etc.

I have this with me at all times, especially when I have a host from a state that taxes the free.

You may want to let her know that it is not LS taxing her, but rather the State she lives in. To soothe her you may also wish to offer her a free retired item or extra HC..but she will then pay tax on that as well.
My state is wonderful in that we only pay the sales tax on price of items purchased (not free or $15 fee)

Someone from another state that does charge may have a better idea?!!
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  #3 (permalink)  
Old 11-15-2010, 07:33 AM
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Join Date: Sep 2007
Location: United States
Posts: 70

My state charges tax on shipping, free, everything It's only been an issue with one hostess because she did get so much free that the tax was quite high. She actually opted not to use some of the credit because of how expensive it was getting. I felt bad, but there wasn't really anything I could do about it. She was thrilled with what she got and it didn't upset her too much, she was just disappointed.

  #4 (permalink)  
Old 11-15-2010, 12:46 PM
Registered WAHM
Join Date: Sep 2010
Location: Buffalo, NY
Posts: 2

Yes, I too was very dismayed when I found out that my state taxed the 'free' items. My advisor never told me .. I found out by seeing seeing my charge statement ... Now that I am an advisor, I tell my hostesses upfront about the taxes ... its really unfair. How are we suppossed to get people to want to host parties, when its going to cost them so much?
  #5 (permalink)  
Old 11-15-2010, 01:04 PM
WAHM Regular
Join Date: Oct 2010
Posts: 47

I live in NY which does tax the free jewelry, but the 1/2 price jewelry is taxed at half price and we have to pay tax on Shipping as well.
I make sure when I am explaining the hostess benefits that they know they are going to get lots of free jewelry (and the only down side is that we live in NY who taxes that free jewelry, but that's not so bad, right?)
If she is a stellar hostess and has a huge party and several friends attending I pay the tax (and take it as a deduction on my taxes).
I make sure to be clear its not Lia Sophia's policy but NY's policy.
  #6 (permalink)  
Old 11-15-2010, 01:45 PM
WAHM Regular
Join Date: Jun 2010
Posts: 55
Default NY Tax

Did you NY-ers ever notice that while the State tax for Hostesses sheet says no tax on the $15 upgrade to 40%, the system does calculate tax on that? Not sure which is correct, but I stick to the safe way of taxing everything.

Then again, I rarely calculate the hostess total on my own, I usually figure the hostess amount out on the computer and give her the total & breakdown, so I could be wrong - but I remember noticing that.
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Old 11-15-2010, 07:33 PM
Super WAHM
Join Date: Jul 2008
Location: United States
Posts: 318

I'm lucky that Washington State does not charge sales tax on the "free" jewelry. It doesn't quite seem "free" when your hostesses have to pay the sales tax, but you can tell them that it's not lia sophia but their state that is requiring it.
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  #8 (permalink)  
Old 11-16-2010, 09:02 AM
WAHM Regular
Join Date: Oct 2010
Posts: 47

yes they pay tax on the $15 upgrade, but I have never seen the tax sheet, since I know NY charges tax on everything, if they could figure out a way to tax us for the air we breathe they would.
  #9 (permalink)  
Old 11-16-2010, 08:55 PM
Leanne McGarr's Avatar
WAHM Master
Join Date: Oct 2005
Location: United States
Posts: 6,024

Sometimes putting it into the perspective of a lottery helps them realize that free isn't always free. And it also attaches the tax to state law.

I always said "well, you know the state is going to get their money. Gosh, even if you in the lottery, you still have to pay taxes on it" That sort of helps them put it into perspective that free still gets taxed.

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