New levies may be quite taxing New tax provisions affect both payers and collectors.

April 21, 1992|By Michael Dresser | Michael Dresser,Staff Writer

For Marylanders, April 15 could soon be just a happy memory. It's May 1 that will have many consumers and businesses crying "Mayday."

That's the day some business people will have to begin their new careers as state sales tax collectors. For many others, it's the deadline to reprogram their computers to collect taxes at a new, higher rate.

And for consumers, it marks the first day of Maryland's open season on revenue, bringing taxes on goods and services the state has never taxed before.

It's all part of a budget package hammered together by the General Assembly less than two weeks ago -- including the most sweeping sales tax changes since the levy was introduced in 1947.

In 10 days, the new tax laws will start reaching into Marylanders' wallets. And the state expects businesses, some of which aren't even aware of their new roles, to be ready.

As of May 1, if your dog needs to be put on a prescription diet, your veterinarian will have to collect sales tax on the food.

If you grab lunch in a college lunchroom, the cafeteria management will have to collect 5 percent.

If you make a call to a 900 number or use a cellular phone, the telephone company will see that Maryland gets its cut.

And if you buy the May 1 edition of this newspaper at your local convenience store, the state will take its cut on that, too.

Oh, and if you grab a pack of smokes and fill your tank at the same time, the store will have to collect tax at a higher rate -- 36 cents, up from 16 cents, on cigarettes, and 23 1/2 cents a gallon, up from 18 1/2 cents, on gasoline.

If that weren't enough, on June 1 a second wave of new 5 percent sales taxes arrives -- affecting snack items from Popsicles to pork rinds.

Also to be taxed are a variety of services, including security services, commercial building cleaners and credit-reporting agencies. Even the cost of trapping a faithless spouse will go up: Private detectives must charge sales tax.

The Maryland comptroller's office expressed concern yesterday that many of the businesses affected by the tax law changes have no idea that they will be expected to register for state sales tax licenses. Failure to do so could lead to penalties.

"It will be to their financial advantage to get registered," said Marvin Bond, the comptroller's spokesman.

Ed Szweda, who runs the one-man Szweda Investigative Services firm in Ellicott City, had not detected that the sales tax would affect his business until asked about it yesterday.

"I never considered that it might be applied to our service," he said.

Nevertheless, Mr. Szweda was unconcerned about the new requirement. He said he would just have to tack it on to his clients' bills and doubted he would lose any business as a result.

The only thing that upset him was when he was told that lawyers' fees would not be taxed. "What kind of clout do the private detective agencies have?" he said. "Most of your state legislators are lawyers."

Michael McNamara, vice president for sales of National Credit Reports and Appraisal Service, also was surprised to learn that his firm's services would be taxed. He said that because of heavy price competition in his business, the firm would not immediately pass on the $2.75 tax on a $55 credit report.

"It'll hurt us," he said.

But he welcomed the move as good policy.

"I think it's something that should have been included a long time ago," he said. "There are so many companies that are exempt from the sales tax that it's ridiculous."

Barry Scher, Giant Food's vice president of public affairs, wasn't nearly as philosophical. Giant must reprogram its computers to account for the changes, he said, and its reward will be a cut in the amount of money the retailer gets to keep to defray its tax collection expenses.

"We don't feel that's fair because we're going to be doing more for the state and getting paid less," he said of the provision, which cuts the "vendor discount" for large retailers from 1.2 percent to 0.6 percent for all amounts over $4,200 in tax.

Giant's reprogramming will be an enormous task because of large number of provisions of the tax package that will affect its business. After adjusting its programs to account for the higher cigarette tax and new newspaper tax effective May 1, it faces a host of new snack and prepared-food taxes on June 1.

The law defines these newly taxed items in excruciating detail. The list of snack foods to be taxed specifies potato chips and pretzels, but the beer that washes them down escapes this round of tax increases. Popped popcorn is taxed, but if you pop it yourself, you're home free. Lettuce isn't taxed, unless you got it from the salad bar. A single ice cream sandwich will be taxed, but a box with a dozen of them is exempt.

After these taxes are collected, businesses will have less time to forward the revenue. The payment of July's taxes, which are due in August, must be sent to the state by the 15th rather than the 21st.

Mr. Bond said the comptroller's office will be sending packets of information to about 100,000 vendors, along with new tax licenses for each of them.

He urged tax licensees to hold their questions until they receive their packets this week.

He said the comptroller's office hoped to keep telephone lines clear for those who need licenses for the first time. Those businesses were encouraged to call the agency at 225-1300 in the Baltimore area or 1 (800) 492-1751 elsewhere in Maryland.

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