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Regional Report: Midwest Rules and Regulations

Once upon a time, seven years ago, several states saw a pot of gold at the end of the Internet rainbow.

It was sales taxes. Billions and billions of dollars of sales taxes on items bought on the Internet. All the states had to was collect it.

But when they tried to, the courts said, "No. You can't charge a sales tax because each state has a different sales tax law. Get a uniform law for everyone, and then we can talk about it."

So the National Conference of State Legislatures set up the Streamlined Sales Tax Committee to do just that -- and it's been chaos for restaurants and grocery stores ever since.

"In Indiana, as in many other states," notes Joe Lackey, president of the Indiana Grocery and Convenience Store Association, "the Committee has run into a mine field of problems defining what's taxable and what isn't in prepared foods.

"For example, the law says that if utensils are provided with food the item is taxable. But what does "provided" mean? If you order a dish in a restaurant, no problem. But if you order a salad in a retail store and the utensils are on a side counter, available to the buyer, is that "providing," or is that simply "making available?"

"Store owners have been having a problem knowing what to do, and soon auditors from Indiana's Department of Revenue may be checking on transactions, which raises the danger that some retailers will be charged for taxes they never collected because they weren't sure they should.

"Then there's the candy conundrum, involving the rule that candy with flour as an ingredient is not really candy and therefore not taxable, while one without flour is taxable. But how is a clerk in a c-store without a scanner going to know if a particular candy has flour unless he looks at the print on every bar of candy before he rings it up?

"As a result," says Lackey, stores without scanners may opt to charge tax on all candies, even though they may be overcharging, and the state -- are you ready? -- has said there are no provisions for penalizing retailers who collect too much tax, as long as they turn over all the revenue collected."

The tale enters Never-Never Land when the state says okay to overcharging, but punishes retailers who undercharge by not collecting taxes on taxable items.

When will all this be straightened out, Lackey was asked by Convenience Store News.

"Maybe in five or six years," he said. "Maybe never."

Stay tuned.

Hybrids don't just come on four wheels.

They also come as concepts, such as the one combining the direct shipment of wine with the three-tier system of wine distribution.

One such concept is skittering around inside the Ohio Council of Retail Merchants.

"What we're thinking about," says Nate Willison, the Council's legislative affairs director, "is a system that will benefit the state of Ohio three ways -- helping prevent alcohol abuse, collecting sales taxes that would otherwise be lost, and generating retailer traffic.

“We are working toward an end result that combines benefit to the wine industry and attention to societal concerns. The specifics will be worked out among interested parties and members of the Ohio General Assembly in the coming months. We, however are advocating to use the three tier system already in place as the cornerstone of the proposal. The three tier system exists to encourage responsible consumption and distribution through trained professionals. Utilization of this system addresses these issues and concerns.

"It's no secret that the Supreme Court decision permitting interstate shipment of wine has raised fears of minors ordering wine with uncertain and unproven ways to check on them," notes Willison. "The three tier system, employs trained professionals, and encourages responsibility so we feel that it's a good starting point to begin addressing the concerns of business and social interests.”

Finally, in South Dakota, retailers are facing a triple threat come November 2006.

Three petitions are being circulated throughout the state, each calling for a referendum on legislation that would adversely affect c-stores that a) sell cigarettes, beer and/or wine, and b) hire people.

One petition calls for a $1 per pack rise in cigarette taxes, one asks for a $1 rise in the minimum wage of $5.15 per hour, and the third seeks a one percent increase in alcohol taxes at the retail level.

"Seventy-five percent of our population lives within 50 miles of our perimeter," says Jerry Wheeler, executive director of the South Dakota Retailers Association, "and if we raise our cigarette taxes a dollar a pack, to $1.53, five of the six states we touch -- Iowa, Nebraska, North Dakota, Minnesota and Wyoming -- will have lower taxes than us, and we all know what that will do to cigarette revenue in South Dakota. Only Montana will have higher taxes at $1.70 a pack.

"The alcohol tax raise will have a similar effect of sending people out of state to make their purchases and although a one dollar raise in the minimum wage won't matter much in the bigger cities, it will certainly affect us in the small towns, where living is cheaper and a lot of people are willing to work for minimum wage."

November '06 is a long way off, but if the petitions gain momentum and succeed in getting the proposals on the ballot, Wheeler expects his lobbying efforts to increase exponentially.
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