Red Sox win has tax-related ripple effect | AccountingWEB

Red Sox win has tax-related ripple effect

Boston Red Sox fan and owner of Boston's Jordan's Furniture store, Eliot Tatelman, has struck a home run in the eyes of his customers, although his insurance company has been left holding the ball. Tatelman ran a promotion last spring offering customers the right to full refunds of sofas, dining tables, beds, or mattresses purchased between March 7 and April 16 if the Red Sox won the World Series.

To make good on his promise, Tatleman will send millions of dollars in refunds to his happy customers. He estimates that customers placed nearly 30,000 orders that qualified for the reward program. While exact figures have not been made available, one can easily tally that if the average furniture order was for $1,000, Tatelman is faced with returning $30 million to his customers now that the Sox have indeed clinched the series.

Not to worry, says the store owner, who bought an insurance policy to cover the payout. "From a business point of view, it's been very, very successful," Tatelman said in an interview that appeared in the Boston Globe. "We got insurance. We're sending our customers back money for things they bought. It couldn't be better."

Tatelman's lawyers are now investigating the tax ramifications for the lucky furniture customers. Originally, Tatelman assumed the payments sent to customers would qualify as taxable income to those who made the furniture purchases, and he planned on sending them 1099 forms if the payout occurred.

Now he is looking at the payments as rebates instead of prizes, in which case his advisors have indicated that the sales promotion might not be a taxable event to the customers.

Taxable or not, there's no question that his customers have received a nice reward that enables them to enjoy a share of their home-team's victory.

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