ANNAPOLIS -- Take a stroll tomorrow up this historic city's Main Street to the State House for a firsthand lesson in how Maryland lawmakers balanced the state's budget.
Bring your appetite -- and your change purse.
Stop at Mann's Sandwiches in the Market House next to City Dock, where a turkey club sandwich that costs $3.59 today will be $3.77 tomorrow. The extra 18 cents is a new sales tax on carryout food. The money, of course, goes to the state.
Forgot to buy cigarettes? Run into the Rite Aide drugstore, where a pack of Marlboros that sells for $1.67 today could cost as much as $1.79 by tomorrow. Not only did the state increase the 13-cent-a-pack excise tax to 16 cents, but it also decided to require smokers to pay the 5 percent sales tax on cigarettes. The double whammy will add as much as another 12 or 13 cents to the cost of a pack -- and even more if the price is higher -- all of it going to the state. Where else?
Thirsty? Run into Chick and Ruth's Delly, a Main Street institution where judges, lawmakers, townspeople and even governors congregate. That 70-cent cup of Coke, previously tax-free because of a peculiar exemption for soft drinks sold in a cup, tomorrow will be taxed at 5 percent. Ship off another 4 cents to the state.
If the heat gets to you, duck into the air-conditioned confines of the State House itself, where all these tax changes were enacted by the 1991 General Assembly and where Gov. William Donald Schaefer allowed them to become law without his signature -- as a protest to legislators who refused to raise taxes even more.
Head down to the vending machines in the basement for a 1-ounce bag of potato chips to go with your sandwich and drink. Cost today: 40 cents. Cost tomorrow -- or as soon as the machines can be adjusted -- 45 cents, as vending machine companies pass on the tax that will apply for the first time to all foods costing less than $1.
All of these tax changes, and more, go into effect at midnight tonight. The changes were enacted as stopgap measures intended to raise an estimated $90.1 million to help balance state budgets for this year and next that were thrown millions of dollars out of whack by the recession.
The state was so desperate for money, it made the effective date of the increases June 1 instead of the traditional July 1 to be able to collect an additional month of revenue.
If most consumers are unaware of what is about to hit them, or confused as to what is taxable and what is not, the same could be said of many store owners, including some who should know better.
Tyras S. Athey is owner of Ye Olde Farm Spirit Shop in Severn. He also is a Democratic delegate from Anne Arundel County and chairman of the tax-writing House Ways and Means Committee. Mr. Athey had to call the head of the state's Income Tax Division yesterday to be certain whether the bags of pretzels and potato chips he sells in his liquor store are subject to the tax or not.
"It is very, very, very confusing," he confessed.
It is confusing, in part, because stores that qualify as "substantial grocery or market business" are not subject to the sales tax unless the food is intended for consumption on the premises. And the lenient definition of a "substantial grocery or market business" is any business in which at least 10 percent of the food sold is intended for more than one serving or is not ready to eat as is.
Translated, that means that if most of the chip dip Mr. Athey sells is packaged in large cans and most of the pretzels and potato chips are in big family-sized bags, then he probably does not have to charge the sales tax on any of his food items.
One result is that the same item -- an individual-size bag of potato chips, say -- may be taxed in one place, but not in another.
Marvin Bond, spokesman for state tax collector Louis L. Goldstein, gave these examples:
* Whether items are taxed in a doughnut shop would depend on whether 10 percent or more of the shop's business is in large quantities or is primarily limited to one or two doughnuts per customer.
* Pizza shops that have no place for customers to eat currently collect the 5 percent sales tax when they deliver pizzas. Beginning at midnight tonight, they also will have to collect the tax when a customer picks up the pizza at the shop's counter.
* Food markets that also make sandwiches for lunch off the premises would not charge a tax for them because the bulk of their business would be in grocery sales.
* Coffee, pastries or other currently exempted items sold in office coffee shops would suddenly be taxed as the sales tax is expanded to food items that cost less than $1.
* Sales of crabs for consumption off the premises will remain exempt.
Several store owners said that they doubted that the new taxes on food would hurt their businesses because they generally will be evenly applied to everyone.