Why Costco And Sam's Club Memberships End Up Costing More In These States

Over the years, the cost of membership at warehouse clubs like Costco and Sam's Club have slowly risen — we can't believe how much a Costco membership cost when it first came out. But to add insult to injury, you're not always just paying the flat fee membership rate that you might be expecting. The actual cost can be higher than listed, and that's thanks to sales tax rules in various states. That's why it's worth it to dig a little deeper into what this means before you decide to join a club based on the listed price.

A basic Costco membership (called a Gold Star membership) starts at $65, while Sam's Club is listed for $60. But look closely at the fine print. Costco's site has a whole section devoted to sales tax rules. Specifically, the club states, "The member agrees to pay Costco any sales, excise, use or ad valorem tax that is imposed." However, this could be considered a bit confusing by some shoppers, because while it does acknowledge taxes, it doesn't specifically spell out that this includes a state sales tax on membership fees in some locations. If a shopper isn't deeply familiar with the tax system, the fee might still feel like a surprise.

Sam's Club, on the other hand, lists this out explicitly. The site has a section that asks, "Do I have to pay taxes on Sam's Club Membership fees?" The answer is: it's determined by state and local tax regulations. Sam's Club then goes on to list which states collect tax on the fees, and notes that tax exemption does not apply to membership fees.

The handy list on Sam's Club website includes Arizona, California, Hawaii, Louisiana, Nebraska, New Jersey, New Mexico, New York, South Carolina, South Dakota, Utah, West Virginia, Wisconsin, and Puerto Rico. Costco, on the other hand, doesn't specifically list which states apply sales tax to its membership fees. (It does, however, list which states apply sales tax to general Costco product purchases.) It's safe to assume you'll likely pay sales tax on Costco membership in the same states you'd pay sales tax on Sam's Club membership, but always check your local regulations to be sure.

If you're trying to decide which warehouse to join, it's worth considering your state's tax rates as one of the things you need to know before buying a Costco membership or a Sam's Club membership. While Sam's Club appears to be the cheaper membership, tax rates may raise the price closer to Costco's base membership, while Costco's membership becomes even more pricey. For instance, Louisiana has one of the highest sales tax rates, at over 10%, which can raise a Sam's Club membership rate to over that of Costco's basic membership. So if you're asking yourself Costco Vs Sam's Club: which membership is a better value? You should make sure to factor in those hidden tax fees before you pick a club solely based on price.