Quote:
Originally Posted by AustinChief
Would it piss you off if a bar charged 8.25% sales tax (normal in Texas) on credit card tabs but ate the sales tax themselves on cash purchases?
To clarify a bit... CURRENTLY all bars here eat the tax on ALL purchases... it has to be built into the price. They aren't allowed to break it out but that all changes January 1st.
Of course it would be a complete pain to add sales tax to cash purchases but a no brainer for cc purchases.
But let's assume consumers are completely ignorant of any changes in tax code. They only see that now their credit card tabs have sales tax added. I understand a certain amount of people will be pissy but how bad would you rate the backlash?
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I'm not entirely sure I want to read the 8 pages following this initial post, but my answer is no.
In every facet of business, aside from big money financial institutions or bulk/wholesale B2B, you're ALWAYS going to have the opportunity to "save" money through the use of cash. Cash is going to be king for a while and currently the only legitimate transaction out there in many instances that doesn't commonly keep a paper trail for the transaction.
Its a very grey area of business practice to keep things on and off the books like that, for better or worse.
Keep in mind, however, there are a few things specific to the bar experience that need to be taken into account.
Lets say we are at the local CP bar and we have two groups of people at separate ends of the bar. The left group paying in cash, the right group paying in credit.
Lets assume that both groups mirror one another in all things except payment.
If there are, say, 7 people in each group ordering an average of 6 drinks at 2 dollars a drink, the right group paying credit will be charged $90.93. Assuming they collectively tip 18%, the bar gets paid $107.30 for services and goods rendered. The bar then LIKELY, gets to keep $105.15 as (on average) the Processing company for the CC is likely going to keep about 2% of the payment.
The other group, however, is the cash group. These guys probably came with cash on hand and for all intents and purposes, are tipping out for every drink they receive. Lets say for the sake of argument these guys are getting 2 drinks at a time and tipping a dollar ($5 for 2) for each order. They then pay out $105 on the dot, out the door. And that's a pretty "cheap" tip, but for the sake of argument I wanted them close together.
In this scenario, the Bar is about equal in all things in terms of payment. It loses a grand total of 15 cents in this scenario (assuming 2% take on CC processing). They don't really "lose" money by "eating" the the sales tax because in all fairness, they have the right to schedule their own pricing on a piece by piece basis. What they are doing, however, is making the exchange process quicker, and in a heavily packed bar, that accounts for quite a bit more product sold over the course of a night. It also makes it easy for money to go under the "table" to dish washers, bussers, or completely off the books and what have you.
I know some people are going to be like "Oh no, that's bad business" , but lets be honest here, up until the creation of the IRS, business had been ran this way for thousands of years, and it is completion at the discretion of the owner to abide by tax law or not. The liklihood that these guys are ever going to see an audit is so absolutely close to "none" that most IRS audit guys are going to pass on the opportunity to do an audit because in bars especially, money can change hands 3 or 4 different times before it ever hits the registers and there's absolutely no way to keep track of it.
Ideally, however, the practice helps the owner out of the bar/store out, not in the sense of making more or less money from "you" the customer, but because it allows him to manage his finances with greater ease. Either via off the books income, or simply because cash deposited is instantly on the bank account keeping his business from being cash poor.
I've seen a ton of business out there take loans they didn't see coming due to cash flow getting tight while big charges are hung up in processing.
In reality though, most people are going to be tipping $3 on every $2 drink, and coming in with a $20 bill and breaking it for $5's on their first drink or two.