Tax increases coming in 2008

Erica Kritt, Carroll County Times

December 25, 2007

Maryland consumers will be paying more when the state's sales tax increases from 5 percent to 6 percent Jan. 3.

"By increasing the rate, at the end of June [the state will make an extra] estimated $205 million," said David Warner, legislative librarian at the Department of Legislative Services.

Money the state collects from the sales tax goes into a general fund that pays for Medicaid, public schools and state employee salaries, but starting in July, 6.5 percent of total sales tax revenues will go into the Transportation Trust Fund, Warner said.

"There is a general concern that there is a transportation backlog, and people aren't real happy about paying an increase in gas tax," Warner said.

Tom Saquella, president of the Maryland Retailers Association, said this sales tax increase will decrease sales and persuade shoppers to purchase outside the state.

"People can shop online to avoid sales tax, and Delaware has done a great job promoting tax-free shopping," Saquella said.

The state's sales tax was last raised in 1977, from 4 percent to 5 percent.

Saquella estimated that Maryland will be losing between $300 and $500 million a year in sales.

"Bigger-ticket sellers like jewelry stores and furniture sellers will have a real competitive problem," he said.

But some merchants disagree.

Donna Scrivner, a sales associate at Shipley's Fine Jewelry in Hampstead, said she doesn't believe the increase will change her business.

"I don't know that [a] 1 percent increase is going to make a difference," she said.

Mike Goodwin the business manager at Don's TV and Appliance in Westminster, said the increase won't be a big factor for his store, but he is encouraging customers to buy before Jan. 3.

"It's a $3 to $30 increase," he said. "I don't like paying it, but it's got to be done."

While everyone faces the sales tax increase, David Dailey is particularly worried about a tax on computer services that won't be applied until July.

Dailey said there is no tax for computer repair service now, and people might go out of state to avoid paying the 6 percent tax.

"Pennsylvania isn't far away," he said.

Along with the general sales tax increase, the excise tax on purchasing a car is increasing from 5 percent to 6 percent on Jan. 1. But Mike Meagher, general manager at Len Stoler Inc., said the new law is better for people trading in cars.

The new tax law gives full credit to trade-ins.

Meagher said that before the new year, if someone wanted to purchase a $20,000 car and traded in a used car that was valued at $10,000, he or she would be paying a 5 percent sales tax on $20,000. In the new year, that person would be paying 6 percent tax but only on $10,000.

"It's gonna help," Meagher said. "The majority of customers aren't first-time car owners. They usually have something to trade," Meagher said.

Though Meagher said the deal works out better on Jan. 1, people may not want to wait because dealers are offering incentives to boost year-end sales.

Meagher added that the week between Christmas and New Year's is one of the busiest in his industry.

LAWS GOING INTO EFFECT FOR 2008

•·          The vehicle excise tax rate increases from 5 percent to 6 percent of the vehicle's price or fair market value on Jan. 1

•·          A one-time certificate of title fee increases from $23 to $50 on Jan. 1

•·          Maryland state sales tax increases from 5 percent to 6 percent on Jan. 3

•·          State tobacco tax increases from $1 to $2 per pack of cigarettes on Jan. 3

•·          6.5 percent of revenue from the sales tax will go into the Transportation Trust Fund starting July 1