Patronage rebates are linked to one of the core principles of a co-op: we exist to serve our member-owners. The redistribution of profits to our member-owners is aligned with the Third Cooperative Principle, “member-owners contribute equitably to, and democratically control, the capital of their cooperative. . . Member-owners allocate surpluses for any or all of the following purposes: developing the cooperative. . . supporting other activities, or distributed to member-owners in proportion to purchases.” If a store finishes the year with a profit, the board can decide that the surplus be distributed among owners based on how much they spend in the store.
Using your member-owner number when you shop is important because it is how we determine your rebate amount. Your transaction totals are recorded at the registers, and at the end of the year we run reports to determine your total purchase amount. We then total all the sales from member-owners. Next, we calculate your total contribution to member-owner sales as a percentage. This percentage represents your proportional share of the profits.
Within the co-op world, patronage rebates are viewed as an excellent way to get our member-owners invested in the success of their local co-op.
- Member-owners enjoy receiving a rebate. It is a great way to connect people with the success of a business they own.
- Rebates are equitable. Each member-owner’s rebate is directly proportional to how much he or she spent at the store. This is very different from the typical shareholder corporation in which a dividend is tied to the number of shares one has acquired rather than how much you support the business. The bottom line is serving our member-ownership rather than making a profit. When we have a surplus, we give it back to the member-owners.
- Rebates are flexible and change with the needs of the co-op and it’s member-owners. The board decides, annually, if the co-op will declare a rebate and how much the organization can afford to return to its member-owners.
- The rebate system gives the Board of Directors the opportunity to retain profits that can be used to buy new equipment, start new programs, or remodel a store to better meet their needs.
- Neither the co-op nor its member-owners need to pay taxes on the income we declare as a rebate. As long as the goods that were purchased are for personal use in one’s home, the rebate of profits is a tax-free exchange.
- Rebates promote the beneficial relationship between co-op and member-owners. When member-owners receive their checks, they see that when the co-op is successful, they benefit.