Louisiana retailers aren’t expecting much of a hassle adapting systems to collect an extra penny of state sales tax, but they are worried about repercussions higher taxes will have on their expenses and their customers.
Retailers are just beginning to grapple with the changes taking effect April 1. That’s when the state sales tax will temporarily rise one cent, and scores of items that were exempt from taxes will face levies in an effort to plug a shortfall in the state’s budget.
Justin Alford, who co-owns the three B-Quik convenience stores around metro Baton Rouge, said it’s not a lot of work to reprogram cash registers and point-of-sale systems to collect the extra penny approved by the Legislature. The issue is that consumers will be paying more for items. That’s a real problem at a convenience store, where customers are making a lot of impulse purchases.
“What’s going to get us is the higher taxes for cigarettes,” Alford said. State cigarette taxes will go up 22 cents a pack to $1.08. “Paying 22 more cents, that means people won’t buy a pack of gum.”
Alford said he’s also concerned about customers now having to pay sales tax on a car wash, since he also co-owns the six Benny’s Car Wash locations. “Any time government takes more out of the private sector, that’s less people have to spend on other items.”
J.H. “Jay” Campbell, executive chairman of Associated Grocers, which offers services for independent grocery stores across Louisiana, said grocery store food will remain exempt from the state sales tax. But stores now will pay sales taxes on the utilities they consume. That’s a big issue because of all the refrigerated and freezer sections that keep food cold, even during the dog days of a Louisiana summer.
“That’s a significant add-on,” Campbell said. “Some businesses will have to go up on prices to cover the sales taxes on utilities, and consumers are going to have to pay for that.”
Kyle Robinson, the business manager for System Services Inc., a Baton Rouge-based company that provides point-of-sale systems and software, said he anticipates getting “a lot of phone calls” from companies before the sales tax changes go into effect April 1. “We’ll probably send out some email blast on how you go in and change tax rates, so we’re not inundated with calls,” he said. It’s not difficult to make the software change, but Robinson said businesses’ owners may not be familiar with how to raise tax rates because it’s not a regular occurrence.
System Services’ clients include local businesses such as Maxwell’s Market, Martin Wine Cellar and Mike Anderson’s Seafood.
What could be more difficult for retailers is adding items that shoppers will now start paying sales taxes on. There are almost 200 exemptions spelled out in state law for goods that sales taxes don’t apply to, such as newspapers, breast-feeding materials and Mardi Gras beads. From April 1 to June 30, the end of the fiscal year, these exemptions are mostly gone. After that, the exemptions will be reinstated but only for two of the five cents of sales tax.
“Every customer lists products differently,” Robinson said. “For some people, making these changes could be a royal pain, for others it could be a quick process.”
Mike Black, who handles tech operations for Razzle Dazzle, which has two home decor and gift shops in New Orleans, said depending upon how much work needs to be done to add individual items to taxable categories, it could take “a couple of days.”
“Even if you do this in-house, it’s still an expense because it takes people away from doing other work,” Black said.
Black said he’s leery of promises by legislators that the higher sales taxes and new taxes on items is temporary. “How many taxes have you seen rescinded?” he said.
Follow Timothy Boone on Twitter, @TCB_TheAdvocate.