Taxing New Taxes

April 30, 1992

Leave it to the Maryland General Assembly to make a relatively simple situation hopelessly complex. Take the matter of taxes. Come Friday morning, the state's 5 percent sales tax will be applied to numerous items in a way that will confuse plenty of consumers and businesses. No wonder the state comptroller's office feels overwhelmed.

On May 1, Marylanders will see the tax on cigarettes rise 20 cents per pack, and the tax on gasoline rise a nickel per gallon. That's the easy part to remember. What legislators did in finagling with the sales tax defies common sense. In the long run, it could cost the state millions.

For instance, the comptroller has mailed 120,000 packets listing these changes to everyone with a sales tax license. But what about the thousands of businesses without a license? In many cases, the state doesn't even know how to identify them. Yet that was of no concern to lawmakers, who hurriedly passed sales tax changes and then gave the comptroller only three weeks to handle this administrative nightmare.

What will be taxed that wasn't before? Newspapers; food sold at college or hospital cafeterias; dietary animal foods; phone calling services; answering services; cellular telephones; pay-per-view TV.

But it isn't that simple. Sales of food at hospital or college snack bars, cafeterias and vending machines are taxable -- but not food sold to patients and students if part of a meal plan or room charge. Newspapers are taxed if sold over-the-counter or through home delivery (and in vending machines next January) -- but free newspapers aren't taxed. Moreover, advertising supplements in newspapers are taxed -- but not if they are included in free newspapers or printed in-house.

The confusion multiplies June 1, then July 1 and once more Jan. 1 as other phases of the law kick in: snack foods, ready-to-eat groceries; home-security services; credit reporting services, and commercial building services.

For the comptroller's office, the logistical confusion could create a chaotic situation. What if many groups don't apply for sales tax licenses? How in the world can the state license all these thousands of businesses before the new taxes take effect?

The comptroller's office is receiving 1,100 calls a day regarding the new sales taxes. Yet few people are applying for sales tax licenses. The paperwork and enforcement activities could overtax the tax collectors. Administrative headaches -- and costs -- for businesses could be massive.

Sadly, the ones most likely to pay will be the consumers. Legislators didn't take the time to think through the consequences of their acts. They didn't factor in the confusion and extra expenses for taxpayers. And they didn't try to fashion a common-sense application of an expanded sales tax. So don't blame the comptroller or businesses for the higher prices and confusing tax levies you start to feel: put the blame where it belongs -- on the Maryland General Assembly.

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