Cash "Discounts" on purchases

[euro]

Skeptical? Do you work for the IRS? If not, why would you be concerned one way or another?

Edit to be clear: Not trying to argue. Just don't understand.

Well, pretty simple really: if someone cheats the IRS out of revenue then we all foot the bill in the end, either through higher taxes for all, or through reduced services.

 

[Sunset]

Going a little OT, I noticed this fall while buying airline tickets with my Costco Citi Visa card that Citi has dropped its trip cancellation and interruption insurance benefit for travel purchases.

Yes, this is terrible, and it even affects trips for next year that have been purchased but not fully paid.

Until this point I liked the Costco Card, now it's nearly useless for me, as I can get 2.6% of everyday purchases with another card.

I'm in the process of getting a BOA CC that will have this travel coverage and then switch the card used on my trip for the final payment of $5,000.

 

[OldShooter]

Well, pretty simple really: if someone cheats the IRS out of revenue then we all foot the bill in the end, either through higher taxes for all, or through reduced services.

Sigh ... I get that. Here is what I don't understand:

The illogic that says merchants preferring cash are tax cheats and that all cash tips go unreported*. Both conclusions are prima facie false.

Then the rants about how reprehensible these theoretical sins are. That's mostly what I don't understand. What is the point of this?

Why get upset over something so economically trivial? Really, if you want to get upset about something that is not trivial, worry about the US position of #22 out of 180 countries in the Transparency International corruption index -- even behind Estonia. Or maybe get upset that a majority if Illinois governors seem to move from the mansion to prison? A few shopkeepers and a few servers not reporting 100% of cash income does not even move the needle.

-------------------------------
*BTW, the IRS understands this potential problem and goes to some lengths to ensure that cash tips are reported: https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting

 

[travelover]

Apparently the big tax cheats are in rural Mississippi.

Humphreys County, Mississippi, seems like an odd place for the IRS to go hunting for tax cheats. It’s a rural county in the Mississippi Delta known for its catfish farms, and more than a third of its mostly African American residents are below the poverty line. But according to a new study, it is the most heavily audited county in America.

https://projects.propublica.org/graphics/eitc-audit

 

[Chuckanut]

Handling cash in a store is often a problem. It has to be counted, secured and deposited. Often cash takes more time at the register which night require more staffing during busy hours. All of the previous require time and effort ($$'s). Of course, if one is robbed, there goes the cash. Credit cards require the use of special terminals that the business needs to purchase. That's another expense.

I think each business can figure out what works best for it.

 

[OldShooter]

It looks like they audit most in areas where the weather is nice year around.

 

[pacergal]

We have several businesses around that are either cash only (well advertised) or discount for cash. When I plan to shop there, I take cash.
Doesn't bother me.

 

[Teacher Terry]

I pay less because they aren’t taking cards and I always write a check and see most people paying with checks. They are small businesses.

 

[cathy63]

Sigh ... I get that. Here is what I don't understand:

The illogic that says merchants preferring cash are tax cheats and that all cash tips go unreported*. Both conclusions are prima facie false.

Then the rants about how reprehensible these theoretical sins are. That's mostly what I don't understand. What is the point of this?

Why get upset over something so economically trivial? Really, if you want to get upset about something that is not trivial, worry about the US position of #22 out of 180 countries in the Transparency International corruption index -- even behind Estonia. Or maybe get upset that a majority if Illinois governors seem to move from the mansion to prison? A few shopkeepers and a few servers not reporting 100% of cash income does not even move the needle.

-------------------------------
*BTW, the IRS understands this potential problem and goes to some lengths to ensure that cash tips are reported: https://www.irs.gov/businesses/small-businesses-self-employed/tip-recordkeeping-and-reporting

The thing is, that nobody in this thread seems remotely "upset" except for you. Nobody said "all cash tips go unreported" except for you. Of course you can argue against those opinions, but you're fighting your own strawmen when you do.

For the rest of us, we're capable of wondering whether someone running a cash business is paying all their taxes and being concerned about government corruption at the same time. We don't have to abandon one of those thoughts in order to adopt the other.

 

[OldShooter]

The thing is, that nobody in this thread seems remotely "upset" except for you. Nobody said "all cash tips go unreported" except for you. Of course you can argue against those opinions, but you're fighting your own strawmen when you do. ...

Could be. If so, sorry. I think I've made my point by now.

 

[brett]

Last month we rented a condo on a Greek Island for a five days. 350E credit card through booking.com or 250E cash direct.

Which option do you think we chose

 

[SmallCityDave]

Last month we rented a condo on a Greek Island for a five days. 350E credit card through booking.com or 250E cash direct.

Which option do you think we chose

Obviously you want to make sure you get your 1% cash back and you want to be a good global citizen making sure everyone "pays their fair share" (Go Bernie!) so you used a credit card?

 

[athena53]

Sigh ... I get that. Here is what I don't understand:

The illogic that says merchants preferring cash are tax cheats and that all cash tips go unreported*. Both conclusions are prima facie false.

The way I'd express it is that it's far easier to cheat on taxes with a cash-based business.

 

[The Cosmic Avenger]

The way I'd express it is that it's far easier to cheat on taxes with a cash-based business.

An analogy: not everyone who buys cough syrup is going to make meth, but that's why they require ID now, to allow for legitimate purchases but to detect and deter purchases with illegal intent. When you detect certain behavior that is often a precursor to illegal behavior, you should be on your guard if you want to prevent it. And there's no denying that tax evasion harms us all, even if the harm from each particular instance is (usually) undetectable.

 

[PatrickA5]

I deal with a fair amount of contractors and a high percentage of transactions I get a decent discount if I pay with cash (sometimes I don't even ask and they offer) I assume that they are paying taxes/ss and since I'm paying cash I doubt they think it's drug money

It probably depends on what a "decent" discount is. If they are offering much more than 3% off for cash then they probably aren't paying taxes on it.

I once had a tree trimmer offer a big discount for cash. His ad said he took all major credit cards. When I pulled out my credit card, he said he'd take off 15% for cash. He said he LOVED cash and winked at me. Never used him again.

 

[Chuckanut]

I once had a tree trimmer offer a big discount for cash. His ad said he took all major credit cards. When I pulled out my credit card, he said he'd take off 15% for cash. He said he LOVED cash and winked at me. Never used him again.

Those people leave me wondering how they cheated me.

 

[PatrickA5]

Those people leave me wondering how they cheated me.

Right. Not only do they not pay taxes, I obviously overpaid.

I know it's normal for some contractors to "negotiate", so I'm willing to do so. But, when they say $1,000 and I come back with $600 (and they take it), then I feel like they were trying to rip me off in the first place. But, that's a whole new topic

 

[OldShooter]

... When you detect certain behavior that is often a precursor to illegal behavior, you should be on your guard if you want to prevent it. ...

Agree totally, but what does "detect" mean. If the pharmacist "detects" someone buying pseudoephedrine (Sudafed) should he refuse the sale because .001% of pseudoephedrine buyers are making meth with it? If the buyer is asking to buy the pharmacy's whole stock, this might raise suspicion but when I come in with a runny nose I certainly don't want to leave without the medicine.

I would argue that in the vast majority of cases where a merchant prefers cash he/she is not a tax dodger. So IMO a preference for cash is not a way of "detecting" a tax dodger. But sometimes, as in the case of @PatrickA5's tree trimmer, "detect" probably applies.

With servers, "detect" is even harder because of the way the IRS forces restaurant owners to track and report cash tips. Not to say tax fraud doesn't happen but I have also read stories where the restaurant owner, following IRS rules, actually estimated and reported higher cash tip income than the server received.

 

[Gumby]

I don't assume that people who want to deal in cash are evading taxes, but you better believe that if I find out you are evading taxes I will never do business with you again. You are not robbing some anonymous "government". You're robbing me and the people like me who pay our taxes.

There is local family owned grocery chain around here whose owners got busted for tax evasion over 20 years ago (also the store itself for "thumb on the scale"). It is very popular, but I have never once returned to shop there since that happened.

 

[Cobra9777]

Until recently, it was not legal in Texas to add a surcharge for CC use. That changed in late 2018. But I still have not seen any local vendors adding a surcharge or offering a cash discount. I've heard it's happening in some rural areas, but just have not seen it anywhere we go. So fortunately, this appears to be a non-issue for us at the moment.

If I do start seeing it, I'll likely seek alternative vendors... probably Amazon in some cases, since I get 5% cash-back plus another 15-20% on subscribe and save items. Plus they deliver to my door, which reduces my cost even further.

For stuff we buy locally, I'll just continue to seek out the lowest overall net cost, including base price, cash discounts, and CC cash-back. I don't like the idea of carrying cash again or using a debit card, but if the result is a significantly lower net cost vs using the CC, I can adapt. If it's not much difference, I'll still use the CC for convenience, ease of tracking, and some of the purchase protection features.

 

[rk911]

I thought this was a breach of contract with CC companies, as the butcher charging 2.99% more for CC. ??

I guess if it bothers you enough, you will bring some $50's next time, or shop somewhere else.

Would you get the "discount" if you pay with a debit card ?

before retirement i was state treasurer for a professional assn. i had a VISA/MC merchant account we used for our annual conference. our merchant agreement allowed discounts for cash but we could not set a minimum purchase amount or tack on any fees. maybe those agreements have changed since i see merchants doing both these days.

 

[steveinjersey]

I don't like to carry cash anymore

and usually avoid stores that charge more than by cash for paying with a credit/debit card or demanded cash only.

 

[Sanbenito1]

If the merchant saves money by not paying a credit card fee, I’m happy to take that cash discount. All those people using credit cards is a cost the merchants must pay, and it gets passed to all consumers, even ones not using credit cards.

 

[frances]

I have a local car repair shop that I use that gives a discount for cash.
LOVE that, and they love me coming in with my "real money". Even on over $1k purchases I'll do cash with them because whenever I call they ALWAYS work me in and get the work done quickly for me.

 

[msanniee]

It is in violation of the vendor’s contract with the cc. Venders can add a convince fee, but not a percentage.

If you see this happening, you can call the cc company and advise them of the vendor’s practices.

If a vendor does not want to accept credit cards, I’m fine with that. But if the fo accept credit cards, it is part of the cost of doing business.

I know the contra argument is “I don’t want to pay higher costs to cover the cost....”, but cc are such a part of our digital life.