By Rich Lindblom
This is the first part in a two-part series.
I’d be willing to bet that most of you who sell appliances have heard the same type of comments from your customers at some point in the past. Things like:
- The salesperson at Home Depot told me they don’t have to charge sales tax on this model.
- If I buy this microwave at Best Buy I don’t have to pay tax.
- If Lowes installs the dishwasher for me they said I don’t have to pay any sales tax.
Maybe it wasn’t those exact words, but you get the idea.
As for me, I’ve been hearing it for as long as I have been selling dishwashers, which was before I could even drive and I’m 58 years old now. Suffice it to say, that’s quite a long time.
It drove me nuts, how were these retailers getting away with it? I spoke to our accountant and looked at some tax information from the Illinois Department of Revenue and came to the conclusion that my company was correct in charging sales tax on both dishwashers and over the range microwave ovens whether we installed them or not. Yet these retailers kept doing it and getting away with it.
Sometimes I was lucky enough to have a customer actually tell me they were quoted a no tax price by one of my Big Box competitors. At least then I had a chance to save the deal. Sure, it meant discounting my price on the product by the amount of the sales tax but at least I could salvage the deal at a substantially reduced profit margin.
But, what scared me the most was that for every customer who actually told me they were quoted a price without sales tax that I heard about, I was left wondering just how many customers got a price from my store then went to one of these Big Box retailers and got a price that was 10% (current sales tax rate in my area) lower. How many sales was I losing every single week that I never heard about?
We all know the way customers think. All they remember is that my store was 10% higher than the Big Box store down the street, which probably meant that the next time they need an appliance they won’t even bother checking out my store. I had very likely lost a customer for life, it was maddening.
It started with Sears originally, but as the other Big Box retailers entered the Chicago market, they too started doing the same thing. They told customers that if they were installing a dishwasher or over the range microwave that they didn’t have to charge sales tax. Their justification was that they were acting as construction contractors, not retailers so they didn’t have to collect Retailers Occupation Tax (R.O.T.).
By 2015, we had all of the big guys doing this to us: Sears, Home Depot, Lowes, Best Buy and H.H. Gregg. With everyone in on the scam, I likely was losing sales every single day and when I was lucky enough to actually salvage the sale, I still had to sacrifice my profits just to get the deal. I was fed up and decided I had to try to do something about it. Somehow I had to level the playing field for my company.
It took some time and persistence, but in February of 2015 I got in touch with someone at the Illinois Department of Revenue who took an interest in what I had to say. He asked me to explain as best as I could what was happening and why it mattered. I explained to him why every retailer in Illinois who was collecting sales tax properly was being put at a huge competitive disadvantage compared to those Big Box retailers and I pointed out how much Sales Tax revenue Illinois was being cheated out of at the same time. After a few emails back and forth he seemed to fully grasp what I was saying. He told me that he believed I was correct and that in his opinion they should have been collecting sales tax all along. Needless to say I was overjoyed, I had finally gotten in touch with someone who seemed to not only understand what I was saying, but this person actually cared enough to want to make a difference.
Be sure to check out the conclusion of this story later this week.
I always get a kick out of it when someone reaches out to me after reading one of my articles because it struck a particular chord with them. So if you have a question or comment (good or bad) about something I wrote about, please reach out to me at firstname.lastname@example.org, I’d love to hear from you – Rich