For millions of shoppers, a membership to Costco is a gateway to bulk savings, discounted gas, and a host of additional perks.
In fact, I’ve been a Costco member for 20 years, and I can say with certainty that the amount of money I spend on a membership each year is more than worth it when you account for the benefits I receive.
Right now, a Gold Star membership at Costco costs $65 per year, while an Executive membership costs $130. The Executive membership costs double because it includes a few important perks.
First, Executive members get an annual 2% reward on most Costco purchases. And that’s on top of any cash back you might get if you have Costco’s branded credit card.
Secondly, Executive members get access to early shopping hours — a perk Costco recently reintroduced.
Given the amount of Costco shopping I do, the Executive membership makes sense for me. But recently, when my membership came up for renewal, I was surprised at the amount I was charged. And the same thing might happen to you.
Why some Costco members might pay more to renew
I’m used to paying $130 a year for my Costco Executive membership. But when I checked my credit card statement a few weeks ago, I saw that I was charged $138.61.
My first inclination was to visit customer service and ask why I was charged more. But then I went back to Costco’s membership page and read the fine print. And it says that memberships “may be subject to sales tax.”
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Upon further digging, I stumbled upon a Reddit thread where a user asked “Does Costco charge a sales tax for membership fees?” And the response was yes, and that it varies by state.
One user said that New York memberships are subject to taxes, but Connecticut memberships aren’t. Another stated that Costco memberships are subject to taxes in Arizona. And I can confirm that in New Jersey, members pay sales tax to sign up and renew.
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Taxes on memberships aren’t Costco’s fault
It may be annoying to learn that you’re going to pay more than $65 or $130 to renew your Costco membership. But thing to keep in mind is that if you’re charged sales tax, it’s not Costco’s fault.
Costco has to follow local tax laws. It doesn’t really have a choice.
As Numeral reports, “Failure to collect sales tax can result in fees and fines, and a requirement to pay those amounts (in addition to paying previously unremitted sales tax amounts) can have an immediate impact on a business’s bottom line.”
Furthermore, it’s not like Costco gets to keep that extra money as revenue. Rather, Costco is required to remit that tax to the states it operates in that require it.
When I saw that I was charged sales tax on my membership, I was admittedly annoyed – but not at Costco. Rather, my anger was directed toward the State of New Jersey which, incidentally, has the property taxes in the nation. So paying taxes is something residents should just be used to.
If you’re gearing up to join Costco or renew, know that you may end up paying a bit over $65 or $130. But don’t let those few extra dollars be the reason you don’t buy that membership.
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Costco has done a great job of catering to members and offering outstanding customer service through the years. And during its most recent earnings call, the company confirmed that it’s working on even more improvements, including a faster checkout process and digital enhancements.
Plus, you never know what amazing products might one day show up on a Costco warehouse club shelf. So it’s worth keeping your membership for that element of surprise.
Maurie Backman owns shares of Costco.
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