The most recent budget news to come out of Harrisburg has area retailers contemplating the potential pitfalls of raising the state’s sales tax.
In an effort to move forward with budget negotiations, a proposal was made to raise the sales tax rate from 6 percent to 7.25 percent in order to generate $2 million to be used to fund education.
“I think it’s a bad idea,” said Bob Geissinger Jr. of Western Auto, Huntingdon. “I can’t see that it’s going to improve anything. There are a lot of other areas they could increase instead.”Sales tax rates vary from state to state. Nationally, California has the highest rate at 7.5 percent and Alaska, Delaware,Montana, New Hampshire and Oregon have no statewide sales tax.
Pennsylvaniahashada6percent tax rate for as long as many working in retail sales can remember. Exceptions include Allegheny County, which adds an additional 1 percent in local sales tax, and Philadelphia County, which adds 2 percent in local sales tax.
Many items, such as food (except for prepared food items), clothing, footwear, Internet service, newspapers, textbooks and many over-the-counter drugs and supplies are exempt from sales tax.
“Obviously, as retailers, we don’t like this, but I don’t know what the impact is going to be,” said Don Shultz, owner of Sears Hometown Store in the Huntingdon Plaza in Smithfield Township. “Is a percent and one-quarter going to make a difference? Who knows.”
While 6 percent sales tax only adds 30 cents onto a $5 purchase, retailers who offer more expensive items are somewhat apprehensive as to how the increase may affect their customers.
“We sell lawn and garden items and tools, but we are still primarily an appliance store,” Shultz said. “Those are larger ticket items. There’s a big difference between buying something small and buying a $500 washing machine.”
The larger the purchase, the more the increase adds to the customer’s cost. “When you’re making a purchase like a bottle of soda, it’s one thing,” said Huston Ford sales manager Kirk Haverstock. “But when you’re adding another 1.25 percent to a larger purchase price, you’re not talking cents, you’re talking hundreds of dollars. You’re adding $200, $300 or $400 to the cost of the average new vehicle.”
Another concern is the work involved in updating the technology retailers use to calculate what they are owed.
“It’s going to add a lot of expense as far as setting up the cash registers,” Geissinger said. “We’ll reprogram them if we have to, but it’s a lot of added expense for businesses, just one more expense to throw on businesses.”
“Everything — all of our point of sale systems — are geared to add the 6 percent,” said Shultz.
While Geissinger expressed the opinion consumers will likely continue to buy needed items despite the sales tax increase should the proposal be adopted, Haverstock said the initial shock may deter some shoppers.
“The initial effect is going to be detrimental to the public. Most are already asking how much more they can take as taxes increase and insurance costs increase, but income isn’t going up to cover it,” he said. “It’s going to hit everyone, not in the pocketbook as much as the mind set. How long that initial effect will last is going to be the big thing. Eventually, everyone will get over it, but there’s the initial shock.”
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