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How does Intuit make money on TurboTax?

How does Intuit make money on TurboTax?

I bought TurboTax Deluxe for a net cost, after $10 Costco rebate, of $25. In the box is a rebate coupon for the state software, which I purchased for $30 from another store. So I will have paid a grand total of $25, after I get my $30 check from Intuit.

If Intuit gets half of the retail price I paid, that's $32.50. They sent me $30. How do they make money doing this? I can think of a few possible ways:

1. Not everyone sends in the rebate coupons or cashes the checks

2. Intuit hopes to sell you their e-File, professional advice,  Quicken or ItsDeductable products/services

3. Intuit actually receives more than 50% of the retail price I paid.

Is there another explanation? Or am I just a particularly unprofitable customer?

Larry
Sunday, March 21, 2004

The percentage of Turbo Tax N users who upgrade to Turbo Tax N+1 the next year is extremely high. As you'll see next year, they now just go ahead and send you the CD with next year's product in December just in case. If you want it, you plug in a credit card number. If you don't want it, you throw it away.

The refunds are mainly set up for first year customers so they are considered a marketing / customer acquisition expense which can be amortized over the lifetime of the customer.

Also if they're lucky they'll persuade you to buy Quickbooks, and then they've got you on that treadmill. Have you seen what they charge for laser checks?

Joel Spolsky
Fog Creek Software
Monday, March 22, 2004

They also charge $15 for federal, and another $15 for state to e-file your taxes.  That, after they make back what they pay the IRS in whatever fees they get charged, is all profit.

Andrew Hurst
Monday, March 22, 2004

Yeah I got the TurboTax CD in the mail last year, it wanted full price.  I think this is a stupidity tax.  I just wait until the annual offer at CompUSA where you can get TaxCut, Money, TaxCut State, DeductionPro, e-Filing, Norton SystemWorks and a shiatsu massage for like 20 bucks after rebates.

Ken Klose
Monday, March 22, 2004

While we're tangentially on the subject, has anyone figured out yet just why paper filing is free but e-filing costs 9.95 or 14.95 or whatever?  I thought the wonder of IT is that it saves money, at least in the long run, so why does the government charge more for what ought to be cheaper?  (I always do paper returns for this very reason.)

Kyralessa
Monday, March 22, 2004

Or you buy from one of their competitors--TaxAct is $10. For the deluxe version. Free for the cheap-o version.
My assumption is that they rely on repeat customers, especially buying online (very low production cost).

(I'll no longer buy from Intuit after being a customer for many years.)

mb
Monday, March 22, 2004

I'll have to agree with Ken that Intuit's CD-in-the-mail (which I also received) is somewhat of a stupidity tax. It's priced at 100% of MSRP ($40). I can get the program at Costco for $25, so I just threw Intuit's CD in the garbage.

I'm in favor of buying direct from the vendor if I can, so more of my money goes to the company doing the actual software development, but I'm not willing to pay more to do so. On the other hand, I appreciate that Intuit is reluctant to compete on price with its own retail sales channel.

Larry
Tuesday, March 23, 2004

Kyralesa, I wondered the same thing for a very long time, but I've finally figured out why they charge for e-filing:

because they can.

Ken Klose
Tuesday, March 23, 2004

They lose money on each unit, but they make it up with volume.  ;-)

Anon
Tuesday, March 23, 2004

I hate them because they send me a bunch of advertising telling me how wonderful TT Deluxe is and that I get a free state package with it. You'd think they'd have figured out by now that Texans don't have state tax.

Andy in Austin
Tuesday, March 23, 2004

"I thought the wonder of IT is that it saves money, at least in the long run, so why does the government charge more for what ought to be cheaper?  (I always do paper returns for this very reason.)"

When you e-file, it is always through a company that facilitates the process. You can't directly e-file to the IRS (correct me if things have changed!).  The company naturally would charge something for getting involved.

However, if the IRS takes a cut of the $9-$15 that you pay to e-file, something is wrong there.

T. Norman
Tuesday, March 23, 2004

T. Norman:

"You can't directly e-file to the IRS (correct me if things have changed!).  The company naturally would charge something for getting involved."

There are instances where you can eFile federally at no charge:  http://www.irs.gov/efile/article/0,,id=118986,00.html

Cybersuraa
Wednesday, March 24, 2004

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