The Herald Bulletin

Morning Update

Local Business

September 25, 2013

Emmett Dulaney: One more look at the sales tax issue

It seems as if there is a proclivity to make things as complicated as possible and very few questions are ever answered as unambiguously as they should be.

As a case in point, consider the topic of the Indiana state sales tax that was first discussed two weeks ago. There is a tendency to think that like items are either taxable or nontaxable, but the truth is that the matter is a lot more muddled than that. Per the Indiana Department of Revenue’s Information Bulletin #29 (effective Feb. 1, 2012), a number of food items are explicitly listed as nontaxable that are often associated with things that are taxed. For example, the category “Candy and confections” is listed as taxable but Nestle Crunch bars are explicitly listed as “Non-taxable Food Items” along with Kit Kat bars, Twix bars, and 72 other bulleted items (the full bulletin can be found here: http://www.in.gov/dor/reference/files/sib29.pdf).

In the past two weeks, I’ve collected sales receipts for identified nontaxable items from 16 area retailers and the compliance rate found is only 50 percent (a scan of receipts for those erroneously charging sales tax when they should not be can be found at: https://docs.google.com/file/d/0B4RpixnfkUSDczM0bEpPcVFJcUU/edit?usp=sharing). This means that half the time, a consumer is paying 7 percent more for the purchase of specific items than they should thanks to errors in the point-of-sale database that should have been corrected more than 18 months ago. While the cost of maintaining accuracy in the database can be viewed as burdensome for retailers when sales tax issues are so convoluted, it is still the law and the ethical thing to do to protect the consumer.

When I contacted a chain with approximately 50 convenience stores and errors in their database, the only response came from the director of human resources. Their response assured me, “We work closely with the Indiana Department of Revenue on all taxable and non-taxable products and undergo rigorous state audits of these products on a regular basis. [We] will introduce the specific examples from your email into its ongoing discussions with the IDOR.” From this response, I find two things surprising: first, that the state audits do not verify accuracy and compliance with the bulletins the department publishes, and second that the retailer will stop only when the Department of Revenue tells them to stop. If the scenario were reversed, I cannot imagine any retailer who would tolerate a wholesaler incorrectly charging them 7 percent more than they should for purchases and allowing it to continue for almost two years.

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