PATRONAGE REFUNDS

What is a patronage dividend or refund?

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.

Will I get a patronage refund every year and whose decision is it?

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.

Who qualifies for the patronage dividend?

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.

Will I get a patronage check in the mail?

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).

Do I have to claim this as income on my tax return?

No. The IRS regards this as a refund, not income. If you are a business, you may want to check with your tax preparer.

How is patronage calculated?

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.

Example patronage calculation for member-owner Suzy Sunshine

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)
$50,000
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.
0.070%
Suzy's patronage refund$35.04