No Money Made After a Year in Mary Kay

This was left as a comment on my business blog on the article Can You Make Money With Mary Kay:

As a Mary Kay consultant of a year, I would have to say I completely agree with this article! After 1 year of vendor shows, “parties” where only 2-3 people came, hundreds of hours of follow-up, driving, meetings, and appointments, I didn’t even have enough money in my bank account to register for Seminar! Currently, I am trying to sell $1,900 worth of inventory at cost (and even covering the shipping). Depending on how much I can sell by August 1st, I’m highly considering sending it back to the company (and even then, I have to cover shipping and insurance), to get back 90% of what I paid.

Three things that I didn’t fully consider until it was too late:
1. As a consultant, when you purchase your product, you must pay tax on the RETAIL value. So say you get a travel roll-up bag for $35 and your wholesale cost is $17.50– you still have to pay tax on the $35. Then, when your hostess chooses that as her free gift, you are out the tax on $35, not $17.50. This does qualify as a tax deduction as unrecovered sales tax, however it is going to add up FAST, and is a lot to keep track of.

2. The credit card fee for to use the Propay system (which you’re required to have if you want to use the Customer Delivery Service) will EAT YOU ALIVE. Propay charges about $40 a year, PLUS 3% of the total you run the card for, and another flat fee of $0.30 on top of that. So say you run a card for $20.00. You’re going to be charged $0.90 for that transaction. For a $300 order, you’re looking at $9.30 in fees. When doing my taxes, I was shocked that Propay took nearly $300!!

3. Directors will brag and brag about the 90% buyback guarantee. This ONLY applies to product purchased within the past year. If you bought it over a year ago, you are STUCK with it. Furthermore, if the price dropped on the product (such as foundation brushes, in my case), they are only going to give you the lowest price back.

At the end of the day, I am stuck with inventory that just won’t ever sell. It’s impossible to carry every product, yet if you don’t have it on hand, you’ll be stuck paying $9.35 in shipping for one little eye color, or running all over town trying to trade with fellow consultants. If I could do it all over again, I’d sign up just to receive the discount for myself, and never order inventory to have on hand.

13 Comments

  1. PinkyTuskMascara

    Help me here… When you buy at wholesale you give a tax idea and don’t pay the tax until the product is sold at retail, at least that is, when you buy for an actual retail store. So why is the consultant on the hook for retail tax? Isn’t this proof that the customer is indeed the consultant? Sort of proves again the pyramid scheme.

    1. Char

      And what I’d like to know is what happens to the extra amount. Well use a 6% rate:

      $100 retail
      $50 fake wholesale
      6% of $100 = $6 paid to MK Corp. upfront

      What if the consultant unloads it at $50? What happens to the other $3 that was collected on the extra $50 retail commission that never happened?

    2. Lazy Gardens

      “. So why is the consultant on the hook for retail tax?”

      Because states and cities were NOT getting sales taxes payments from MLM participants. Either they weren’t collecting taxes or not remitting it and were not getting sales tax ID numbers … large mess!

      Now they collect from the mother ship, and then it’s up to the distributor to collect it.

      “What if the consultant unloads it at $50? What happens to the other $3 that was collected on the extra $50 retail commission that never happened?”

      Unless you file for a return of overpaid tax, the state keeps it.

      http://www.vetscher-cpas.com/marykay/marykayfaqWords.aspx

      “If you sell products to customers in lower sales tax areas than the sales tax rate you are charged, you may apply for a refund on the non-recovered portion of sales tax. To apply for a refund, simply request a form titled Sales Tax Refund Claim Form from your branch, or you can access a form from the Mary Kay InTouch® Community Web site. The Sales Tax Refund Claim Form is located on LearnMKTM.

      Complete and sign the form and remit it, along with copies of your retail sales tickets, to your branch. “

  2. Raisinberry

    Mary Kay never knows what you sold it for. They report retail sales and pay taxes accordingly, based solely on wholesale orders. But it was your money anyway, no skin off their nose,right? It’s on you to report your unrecovered sales tax …think how much that adds up to when you are discounting everything or giving it away.

  3. Colleen B Halbert

    I’m still working on my coffee but I just realized something. In my retail sandwich business I handle my own sales tax filing.

    If I recall correctly MK “handles” sales tax submission for the consultants based on what is purchased from them. So yes, where is that money going? If they are paying all to the state then that’s an issue of overpaying the state due to some assumption. And if they are not sending it all then that’s got to be fraud of some kind.

    And then we get into the if I’m not submitting my own sales tax and never even see the form how am I my own business owner? Sure I have my accountant do that for me now but they work for me. Surely MK would never agree that they work for me.

  4. Lazy Gardens

    “This does qualify as a tax deduction as unrecovered sales tax, however it is going to add up FAST, and is a lot to keep track of.”

    You can file a form with Mary Kay to recover the excess sales tax they collected. Bet they didn’t mention that in training, did they.

    It’s a PITA but if you have records (sales slips) showing what you sold it for, they HAVE TO REFUND that tax. (this would be in addition to the 100% tax refund of the product you return).

    http://www.vetscher-cpas.com/marykay/marykayfaqWords.aspx

    “If you sell products to customers in lower sales tax areas than the sales tax rate you are charged, you may apply for a refund on the non-recovered portion of sales tax. To apply for a refund, simply request a form titled Sales Tax Refund Claim Form from your branch, or you can access a form from the Mary Kay InTouch® Community Web site. The Sales Tax Refund Claim Form is located on LearnMKTM.

    Complete and sign the form and remit it, along with copies of your retail sales tickets, to your branch. “

  5. MLM Radar

    Furthermore, if the price dropped on the product (such as foundation brushes, in my case), they are only going to give you the lowest price back.

    Check your contract on this. Unless MK rewrote it recently, it says MK will refund 90% of the price you paid them. Period. And there’s no hold-back clause saying they have the right to pay less. The only restriction is that the purchases were made within the last year, and they were made by you in your name. (You lose everything when you’re making purchases for ghost consultants.)

    Texas law allows them to refund based on the reduced price for discontinued items and refuse to refund on Limited Edition products. So if you read the return form fine print you’ll find a clause modifying the original agreement and accepting this lower amount. But that’s NOT what your original contract says.

    The trick is that you have to present the records saying what you paid. Now, MK knows what you paid. They’ve always known. But you have to be able to prove it, and since they block your access to your InTouch records after about three months that means you need to have kept your own copies.

    Ever wonder why it takes MK so long to send you the return authorization form? It’s because they’re checking your purchases for discontinued and limited edition, and reducing the amounts they intend to pay you!

    Here’s how to get the full refund you’re entitled to receive: Check your return authorization against your purchase records. Mark any discrepancies. Add any Section 1 products they omitted. Make copies of your records showing their calculation errors, AND the return authorization with it’s errors. Attach a copy of your contract reminding them of what they agreed to do. Contact the MK returns department and INSIST that they correct their paperwork.

    Then box it all up, including the corrected forms, any “free with purchase” junk, and any prizes for “sales” that they sent you. Send it ALL back, with copies of your paperwork showing their calculation errors and what you’re REALLY entitled to get.

    Be prepared to call them and continue insisting, if your Blue Check is any lower than what you expect.

  6. Jamming Berry

    All those eye shadows!! UGH! Too many — I’m stuck with at least 2 of each color and we all know no one buys them when you can get perfectly good stuff at Sephora, Target, or Ulta.

  7. Morningstar

    The upfront payment of retail taxes indicates to me that I am the one MK corporate is selling items to as an end means. It is CYA with IRS. It lets them off the hook for the advertised retail prices. Just another reason to stay away from their scam to pretend you are a sales rep. All MK corporate was is you to recruit others to buy this shiz.

    1. PinkTuskMascara

      Right! This is how they justify their retail sales! Because the consultant IS the customer. When I pay sales tax collected on my sales in my store, I pay MY state.. Not Texas. So are they paying MY state, My county? I have to account for all of that. I even got a mandatory government survey on my shipping activities out of state! The burden should be on MK to assure the Independents have a tax ID number. Is you aren’t collecting it yourself for YOUR sales, YOU are a sales rep, not a business owner.

      1. MLM Radar

        No, the sales tax MK collects doesn’t go to Texas, unless the consultant lives in Texas. The sales tax goes to the consultant’s state and local sales tax collectors.

        The arrangement is a special provision written into state and local tax laws for MLM companies. To make sure the states and cities and counties get their cut the MLM companies collect sales taxes in advance, based on the maximum “suggested retail” selling price. MK then files large multiple-payee sales tax returns with each tax collector. Or rather, MK hires accountants to do the work for them, because they can afford it.

        The MLM companies know that few of their target recruits are financially sophisticated enough to set up an LLC, get an EIN, track sales, collect sales tax from all customers, account for it, and file the necessary sales tax returns with all appropriate taxing agencies. And they don’t earn enough money to pay an accountant to do it for them.

        1. Lazy Gardens

          ^^^ THAT … Mary Kay pays bulk tax to each state, ensuring the state gets their taxes.

          Consultants could be filing to overpaid tax – but that would mean keeping good records, and Mary Kay doesn’t teach how to do that. They don’t want you actually adding up the income versus outgo.

          With all the discounts and give-aways and obsoleted product, a consultant is probably giving an extra couple hundred a year to the state and county, but has no clue it’s even happening.

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