Confusion over taxes

May 01, 1992

Let's see if we've got this straight: Starting today, you have to pay sales tax if you buy this newspaper over the counter or through home delivery. But you avoid that sales tax if you purchase this newspaper out of a vending machine, at least until Jan. 1. And you don't pay sales tax if the paper you pick up is distributed for free.

The raft of new products and services now subject to Maryland's percent sales tax illustrates how legislators didn't give much thought to the problems they were creating. It's one thing to raise new revenue through a well-devised updating of the tax code. It's another to simply select a hodge-podge of new tax items without careful planning.

zTC The direct approach to taxation always works best. For instance, the cigarette tax increases today from 16 cents to 36 cents per pack. That's not hard to comprehend. Likewise, the gas tax rises today from 18.5 cents to 23.5 cents per gallon.

But try some of the other new taxable items:

* Food at hospitals is taxed, except when the food charge is included in the room rate. You don't pay tax when your lunch tray arrives, but you are taxed if you buy something off the snack cart.

* Food at colleges will be taxed, unless part of a meal plan. Students not on a meal plan are out of luck. Evading the sales tax at the cafeteria cash registers could become a new college fad.

* Cellular telephones and other mobile telecommunications services are taxed. But if you make a long distance call this way, it won't be taxed.

* Customer calling phone services are taxed, but not normal telephone services.

* Pay-per-view television services are taxed, but not if you attend closed-circuit telecasts. If you subscribe to television broadcasts boxing or wrestling, you get clobbered -- a special 10 percent tax and the 5 percent sales tax.

Worse news in on the way. Far-reaching tax changes take effect June 1, July 1 and Jan. 1. Wait till you get a look at the snack foods that will or won't be taxed; the ready-to-eat grocery foods that may or may not be taxed (one ice cream sandwich is taxable; a package of a dozen ice cream sandwiches isn't); the security services being taxed (you're taxed for using a security system but not for installing it), and the commercial cleaning services (carpet-cleaning is taxed; sofa-cleaning isn't).

It's a mess. Thousands of businesses and individuals who must collect the sales tax don't even know they have to do so. The state comptroller's office has no idea how many there may be -- or how to contact them. The General Assembly hurriedly passed a tax package and fled Annapolis. The comptroller's office is left with the chaos and costly paperwork of administering these new taxes.

Over the summer, the situation could prove unmanageable. The General Assembly didn't simplify the tax code or close loopholes. It created new loopholes and added new complexities. No wonder legislators have an image problem. Even when they take action, they manage to gum it up.

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