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By Hank Behar
There is a lot going on in the South at the turn of the year. The Mississippi tax commission came up with a twist on the certainties of death and taxes, while South Carolinians get ready for a special Retail Day to stave off an increase in cigarette taxes. Meanwhile, Louisiana finds itself embroiled in the temperature compensation issue and Tennessee prepares for its own version of the Battle of the Bottle Bill.
The only thing certain in life may be death and taxes -- except perhaps in Mississippi. In the magnolia state, if the state tax commission follows through on one of its latest moves, "the interpretation of taxes" may need to be added, and the result could be higher cigarette prices for consumers.
"It has to do with the 'buy down' promotion that cigarette manufacturers often run, in which the wholesale cost of cigarettes to retailers is reduced to help them promote a particular brand," said Jerry Wilkerson, executive director of the Mississippi Convenience Store Association (MCSA). "The tax commission is considering an interpretation of the tax that will treat 'buy downs' the same way it treats coupons -- as part of the purchase price. That would then subject them to sales taxes."
As an example, if a consumer uses a 50 cent coupon to buy a $2 product, there is a sales tax on the entire two dollars. But if a consumer buys a $2 cigarette product which has been subjected to a "buy down" equal to 50 cents, the consumer only pays sales taxes on $1.50. However, this could change if the tax commission wants to start charging sales taxes on the full $2.
"The problem with that is it's almost impossible to execute or manage," said Wilkerson. "Cash registers can't be programmed to calculate the number of 'buy downs' that flow through a retailer's inventory, especially since the 'buy down' amounts often change from month to month. Accurate records simply can't be kept.
"And besides that, it will raise prices to consumers, since they will have to start paying sales taxes they never had to pay before."
In response to the tax commission's interpretation, Wilkerson and the MCSA are in the process of developing legislation that will ban such taxes on buy downs.
Retailers looking for a way to stem the tide against ever-increasing cigarette taxes would do well to check out the upcoming Retail Day event in South Carolina.
Organized as a joint event with the South Carolina Petroleum Marketers Association (SCPMA) and the South Carolina Association of Convenience Stores (SCACS), Retail Day will take place Jan. 10 as an eyeball-to-eyeball meeting with state senators to request a hearing on the Senate's efforts to increase the state tax on cigarettes.
"Here in South Carolina, we have a traditional procedure for the public to be heard before legislation is debated on the Senate floor," said Leigh Faircloth, executive director of the SCACS. "However, the Senate has chosen to bypass this procedure, and the public, which includes retailers, wants the Senate to reconsider its decision.
"Our present state tax on cigarettes is 7 cents a pack, but some proposals would boost it to 90 cents a pack," she said. "That will put us at a distinct disadvantage with every state on our borders, not to mention the added cost to consumers right here in our own state. We can't let this legislation go through without being heard, so we're urging all convenience store and petroleum marketing retailers to participate in Retail Day on Jan. 10."
For details, Faircloth can be contacted at (803) 419-0804.
As if the great state of Louisiana hasn't had enough on its plate in recent times, the owners and operators of the state's oil marketing and convenience store locations are being asked to comply with the consequences of a law of physics, namely, that gasoline expands and contracts as the temperature changes.
"When it's hot, gasoline expands slightly, about a tablespoon per gallon," said Natalie Isaacks, executive director of the Louisiana Oil Marketers Association/Louisiana Convenience Store Council (LOMA/LCSC). "When it's cold, gasoline volume shrinks. We feel it's a wash for consumers, and at worst, only a slight difference in end product and pricing." She added: "When it becomes unfair is when the government asks the retailer to bear the brunt of the problem by installing temperature compensation equipment on dispensers. That would cost retailers anywhere from $2,000 to $2,500 per pump, and eventually, guess who will be paying the bill -- the consumer.
"We have a new agriculture commissioner, not to mention a new governor, and we think they ought to work toward preventing legislation that would force our retailers to install such expensive, and we feel unnecessary, equipment."
The issue is not exclusive to Louisiana, however. A January meeting in Albuquerque of the National Conference of Weights and Measures will take up the matter, and the Comptroller General of the U.S. Government Accountability Office (GAO) was asked to review and report to the Committee on Science and Technology about the issues related to transportation fuel pump temperature variations and its impact on the volume and energy density of fuel sold at retail outlets.
Eleven states have bottle deposit laws on their books -- California, Connecticut, Delaware, Hawaii, Iowa, Maine, Massachusetts, Michigan, New York, Oregon and Vermont – while six states are thinking about it -- Arkansas, Illinois, Maryland, North Carolina, South Carolina and West Virginia. In addition to Tennessee as a possible recruit.
"There's widespread opposition in the industry to a bottle bill in Tennessee," said Marylee A. Booth, executive director of the Tennessee Oil Marketers Association, citing a coalition of grocery stores, soft drink manufacturers and malt beverage manufacturers that are against bottle bills, in addition to the Grocery Manufacturing Association (GMA), the world's largest association of food, beverage and consumer product companies.
"The bill is too narrowly focused, creates unreasonable burdens on grocers and distributors, taxes consumers, creates an unnecessary bureaucracy and does not provide for a comprehensive solution," the GMA wrote in a letter to the Senate Environment, Conservation and Tourism Committee of Tennessee. "Experience has shown that beverage container deposit programs are expensive and inefficient. On average, they capture less than 2 percent of the solid waste."
Organizations supporting the bill include Pride of Place (POP), an all-volunteer group sponsored by Scenic Tennessee whose stated goal is to "clean up Tennessee's roads, increase recycling, bolster the economy and foster public pride by helping pass container-deposit legislation otherwise known as a bottle bill."
There will be several bottle bills up for consideration when the state legislature meets in January, but the prospects of any of them passing are slim, according to Booth. "There are too many problems associated with bottle bills," she said. "The public today is much more aware of recycling and protecting the environment than it used to be, which removes the need that many people once felt for bottle bills."