Patronage dividends, or refunds, are the cooperative method of sharing a co-op’s earnings with its member-owners in profitable years. Your patronage dividend is based on your purchases for that particular year and the profit that the Co-op made on those purchases.
Patronage can only be distributed in profitable years and at the discretion of the Board of Directors. Typically, the General Manager recommends a number of options and the Board uses this information when making their decision.
Member-owners who purchased qualifying retail products. Equity payments, items that we sell at our cost which are considered a marketing expense, and class payments are not included in patronage dividends. Some examples of items that we sell at cost are the Co-op Café mugs, Stronger Together T-shirts and umbrellas, Erie Food Co-op T-shirts, Co-op shopping bags, etc.
No. We will issue a patronage refund voucher. You can use the voucher to purchase products or gift cards at the co-op. You can donate it to help subsidize our Food For All program which will assist low income people that want to join the Co-op or you can exchange it for cash (in the form of a check).
No. The IRS regards this as a refund, not income. If you are a business, you may want to check with your tax preparer.
At the end of the fiscal year (July through June), after determining the amount of member-owner generated profit (based on the member-owner’s percentage of total sales), the Board decides on a refund percentage to distribute. According to the IRS, at least 20% of the member-owner’s patronage dividend must be distributed as cash or equivalent when a dividend has been declared (this is the “refund”). The Board may choose to retain up to 80% of each member-owner’s patronage dividend for projected capital and other business needs. I’ve included a calculation example at the end of this section.
|Co-op sales at end of fiscal year||$5,300,000|
|70% of Co-op sales are to member-owners||$3,710,000|
|Board declares a patronage refund and|
distributes 50% to member owners and retains 50% for the co-op
(These percentages are arbitrary for this example)
|Suzy Sunshine spent $50/wk or $2600/year.|
This is her percentage portion of the total sales to member-owners.
This is the percentage of the total refund she's entitled to.
|Suzy's patronage refund||$35.04|