Jan. 29, 2009
Take a penny, leave a penny -- pay the tax?
They sit next to cash registers in stores across America, little cardboard boxes or styrofoam cups or old plastic ashtrays.
"Take a penny, leave a penny," they say, or some variation -- a penny exchange that makes it easier for clerks to make change and for customers to avoid burdening their pockets with excess coins.
But at the end of the day (literally), where do those pennies fit on a store's bottom line? Cristi Gleason, an accounting professor at University of Iowa's Tippie College of Business, guesses that thousands of stores across the country have bowls filled with thousands of dollars in pennies that may or may not be properly accounted for.
"If the store sweeps them into the till, it counts as income," said Gleason, an expert in tax accounting. "As far as the IRS is concerned, it's taxable."
Although the penny bowls have become commonplace in stores across the country, Gleason doesn't believe any attempts have been made to figure out exactly how much money sits in them. Nor have any rules been issued that would require they be treated differently on an accounting or tax basis than any other income. On a store-by-store, day-to-day basis, she said the sums are so small that a handful of pennies will make little if any difference in a merchant's profit or tax bill.
"Realistically, the IRS won't care," she said. "They're not going to go looking for 10 or 12 cents in pennies."
But she said that if it's 10 or 12 cents everyday for a year, and it's at a few dozen or a few hundred stores under the same ownership, then someone might notice.
She said that's one reason why stores that are much larger than the mom-and-pop variety don't have countertop bowls full of pennies. And especially not in stores that are part of publicly traded companies and subject to the SEC's strict internal control and financial reporting rules requiring they maintain good cash management practices.
"You won't see them at McDonald's or Wal-Mart because those companies have extremely tight cash management procedures and they don't like to see pennies on the counter," she said.
Gleason said the penny jars have their benefits. They provide a service to customers who don't want to drag around a lot of low-value metal. They also limit the amount of change clerks have to make, reducing the risk of a change-making error that messes up the stores accounting.
She recommends, though, that stores keep the money from the bowls out of the register, and hope that as many people take a penny as leave a penny.
"In that case, the pennies are treated by the IRS to be a gift from one customer to another and the store isn't involved in the transaction at all," Gleason said.
STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Iowa City, Iowa 52242-2500
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