Comments on: Groupon’s legal risks and hidden gift to merchants

By: kells1001

kells1001 — Fri, 08 Feb 2013 17:26:59 +0000

There are other issues that seem to go unaddressed by Groupon or Living Social. For instance a merchant agrees to run the Groupon for a service that often must be done at cost or below cost with the hopes of attracting more business. Is the merchant allowed to write off any of their costs as advertising? Highly unlikely although it would be much simpler if these sites could provide better guidance on just how taxation should be applied, but instead its most about getting the credit card payment and securing the money until that 60 days has passed. Its most likely the merchant is most vulnerable when it comes state departments of revenue and the IRS.

By: bxg07

bxg07 — Fri, 17 Jun 2011 01:35:56 +0000

Your comment on the tax sitation is on the face of it implausible, and seems to be a misreading of the sourced document anyway.

In your example, you claim that tax should be on the post coupon amount only ($20, even though you also paid $20 for the groupon, so you actually spent $40). Suppose I get a gr/coupon for $X and spend exactly $X _at the restaurant_ (so I pay $0 extra on the spot). Do you claim that I own no sales tax? This seems like an obvious and unlikely hole in the tax laws if true. (I’d expect a lot of “no discount at all” groupons if this were the case, since they would still allow the diner to avoid tax).

Now I only read far enough into the Edelmen/Kolmers report to get to the first tax authority cited: an opinion from the Massachusetts Department of Revenue. It seems totally clear: tax is due on “the amount the consumer actually pays” and in their example this absolutely includes what they paid for the groupon (in their example, there was no over-spending beyond the group-on face value anyway). Based on this, surely Massachetts expects tax not on the full 60, nor on 20, but on the $40 the diner actually paid!

By: absinthe

absinthe — Thu, 16 Jun 2011 18:54:09 +0000

@AnonymousChef : No, it’s the kind of sentiment that prevents people from conflating accounting standards, legal obligations, and business practices. Pick one of the three and maybe you can argue clearly about it. Mix all three into one post and you can’t say anything of substance.

Your comment is even more confusing since this blog post advocates shifting of responsibility onto the only entity that’s capable of being a class action target.

By: dWj

dWj — Thu, 16 Jun 2011 17:44:41 +0000

> Voucher services are far better positioned than merchants to determine what the legal system requires: Voucher services can research regulations centrally, once for each state in which they operate, then notify affiliated merchants of applicable requirements.

I would think it would be the other way around; a merchant who sells wine in a state that forbids discounting wine might well already know that, while someone like Groupon would simply never guess that a state might do that. Am I incorrect as to local small business knowledge of relevant law?

By: KenG_CA

KenG_CA — Thu, 16 Jun 2011 17:08:00 +0000

Felix, you say that Groupon is swimming in money these days”, but they are losing money hand over fist.

The more I learn about Groupon, the more I lose respect for Google. Did they really offer $5 billion for this company?

By: AnonymousChef

AnonymousChef — Thu, 16 Jun 2011 16:50:18 +0000

“I’d leave the speculation here to lawyers and accountants, and take even their advice with a grain of salt until there’s actually an AG investigation or verdict/settlement.”

This is the kind of sentiment that keeps class action plaintiff’s lawyers in business.

By: absinthe

absinthe — Thu, 16 Jun 2011 16:29:04 +0000

Eh. These “important legal issues” are largely unsettled (and would vary from state to state, if not municipality to municipality), and companies like Restaurant.com have operated in this gray area for a long time. It’s not surprising that Groupon does its best to push the responsibilities onto the local business, since the alternative is impossible to articulate (“spend some of its millions on decent lawyers” sounds like a great way to lose millions with no positive outcome). I’d leave the speculation here to lawyers and accountants, and take even their advice with a grain of salt until there’s actually an AG investigation or verdict/settlement.

Some of this stuff is so minor as to be laughable. Do you really that this particular sales tax leakage from restaurants comprises even a small fraction of their tax evasion? Restaurants probably screw this up (on purpose) just like they intentionally screw up gift certificate taxation (not to mention cash transaction reporting…).