VSP claims it is not for-profit; courts disagree

However, that is incorrect, with three courts in the US having found that VSP is a for-profit organisation – and a very successful one too, complete with impressive profit levels, reluctant payment of tax and a team of highly-paid executives.
The United States Internal Revenue Service revoked VSP’s section 501(c)(4) tax-expt status effective 1 January 2003 on the grounds that it operates primarily for the benefit of subscribers rather than the community as a whole.
According to Mr Peter Lewis, the head of General Optical, “more than 300” practices have signed up to participate in the program, each one having agreed to purchase a minimum of $1,800 worth of frames and lenses from his company ($21,600 a year) and agreeing to provide 20-per-cent discounts for glasses and 15-per-cent discounts to mbers of Medibank Private under its no-gap Mbers Choice Optical Plan.
As previously reported, the OAA has warned mbers: “It is generally accepted that the net profit of the sale of spectacles is approximately 20 per cent of the sale price, therefore without other changes to the way in which your practice functions, a discount of 20 per cent would result in no net income from the sale of goods at all. If the margin on goods is even smaller, then each pair of spectacles sold to a mber of a health fund would represent a loss to the practice. It does not matter how many ore patients are attracted to the practice, the loss could not be recovered unless other actions were taken.”
For the full story, check out the Decber issue of Insight out from 7 Decber, 2012.