REGIONAL REPORT : Sales Tax Hike Rings Up Confusion on First Day : Business: Many consumers and merchants say the new levy is driving them crackers. But are crackers taxed as snacks, or exempt as food?
With a copy of Adweek in one hand, a customer at World Book & News in Hollywood plunked down $2.50 and turned to walk away--only to have the store’s manager stop him in his tracks.
“That’s $2.71 with the new tax, sir,” manager Herschel Weisman said in a booming voice that rang around the outdoor newsstand and carried down the sidewalk.
“I had to actually stop him,” Weisman said after collecting the 21 extra cents. “And that’s the way it’s been happening all morning. This sucks. It’s terrible. It’s a pain in the butt. . . . One big hassle is all it is.”
Across Southern California, the combination of a general sales tax hike and its expansion to more products was greeted Monday by merchants and customers with confusion and anger. Merchants appeared annoyed with--and yet resigned to--the tax bite, saying it made life at the express lane more complicated. Consumers seemed bewildered and a bit frustrated at yet another Monday morning annoyance.
As part of a plan put together by Gov. Pete Wilson and the Legislature to erase a projected $14.3-billion deficit, the 6% basic statewide sales tax--unchanged since 1974 except for a temporary earthquake assessment--rose by 1.25 cents on each dollar.
Under the new rates, the sales tax in Los Angeles and San Diego counties climbed to 8.25%. In Orange, Riverside, San Bernardino, and Santa Barbara counties, it rose to 7.75%. In Ventura and most other counties statewide, it rose to 7.25%.
And, for the first time, taxes were levied on a variety of previously untaxed items: candy, snacks, newspapers, periodicals, bottled water and the fuel used by aircraft and ships.
Also taking effect Monday were higher levies on beer, wine and liquor.
On Monday, it apparently all seemed a bit overwhelming. Harried callers, looking for answers, bombarded the state Board of Equalization, the state agency charged with collecting taxes.
“What we’re hearing is actually confusion about whether this goes into effect or not today,” said Delena Bratton, an agency spokeswoman in Sacramento.
Because legislators and the governor are still engaged in budget negotiations, many callers assumed the taxes had been put on hold, Bratton said. Wrong.
Merchants reported wide confusion Monday over the complicated rules for the unprecedented “snack tax.”
Under the new law, “food” remains untaxed. But certain “snacks” are no longer defined as food, according to a 10-page document distributed in recent days by the equalization board, and are now subject to tax.
For instance, Ritz crackers are snacks. Saltine crackers are food, according to the board.
“It’s just been driving me crazy,” said Yousef Abudayyeh, owner of Uneeda Market & Deli in downtown San Diego. “I spent the whole weekend figuring it out.”
Abudayyeh said it was too messy and inconvenient to relabel products, so he did quick math at the register. A sign over the counter warned customers that the new state tax was in effect, “so get your pennies ready and keep on smiling.”
Most customers, however, either forgot about the tax or didn’t care, Abudayyeh said.
Not so at a 7-Eleven convenience store in Los Angeles’ Mid-Wilshire district, where a stream of customers complained about the tax tacked onto the price of candy, chips and other snacks.
“This is stupid. I’ve been buying gum all my life and never had to pay extra,” grumbled 9-year-old Royce Jobe, assessed a penny tax for the 5-cent piece of Bazooka bubble gum he bought. “I’m gonna bring my uncle in with me next time. He’s a lawyer.”
According to state officials, Royce should not have been charged a penny for his nickel gum. Taxes are presumed included in the price of items that are 6 cents or cheaper in Los Angeles County, said Glenn Bystrom, principal business tax auditor for the Board of Equalization.
In a mini-mart parking lot in Ventura, 15-year-old Heather Flemmings was also indignant. She held a couple of packs of gum balls and a candy stick, a small handful that cost 70 cents--tax included.
“I think this is stupid,” she said, as she looked down at her change. “I don’t think they should tax junk food because a lot of people buy it.”
Meanwhile, at regional auto showrooms, furniture outlets and appliance stores, where thrift-minded consumers rushed the doors over the weekend to beat the tax hike, business fell severely Monday.
At BMW Valencia, where sales Sunday were up 50%, Monday brought little traffic, General Manager John Max said. “It’s been slow,” he said.
In Torrance, no customers were browsing and not a single sale had been rung up by midafternoon Monday at the Barn Furniture Mart. “I hate it,” salesman Robert Medeiros said, blaming the tax for the slowdown. “We would have at least five or six purchases by now on a normal Monday.”
The day before the new tax became effective, business at the furniture store was nearly double normal levels, Medeiros said.
“We were boogieing on Sunday,” Medeiros said. “One of the sales techniques was to say, ‘Well, you really should buy it now to save money on the tax.’ ”
The tax’s impact really hit home for him, Medeiros said, when he saw a boy being told he couldn’t buy a candy bar at a gas station because he didn’t have the extra pennies to pay the tax.
“I gave him the money,” Medeiros said. “I mean, geez, the poor kid couldn’t even get his candy.”
Times staff writers Aaron Curtiss, Janet Rae-Dupree, Peggy Lee, Hugo Martin and Thuan Le contributed to this report.
Taxing Your Snack
Under new sales tax legislation that became effective Monday, snack foods--such as cookies, potato chips, corn chips, pretzels and popped popcorn--lost their exemption from taxation. As a result, retailers are now required to charge a sales tax on these snacks, but they are not required to tax many similar foods, which retained the exemption. Here is a selected look at some of the distinctions:
NOW TAXED
* All forms of candy * Rice cakes * Cupcakes * Twinkies * Granola bars * Screaming Yellow Zonkers * Crackerjack * Fig Newtons * Ritz crackers * Carnation Breakfast bars * Pringles chips * Cheese puffs * Doritos * Cheez-It crackers * Ding Dongs REMAINING EXEMPT
* Baking chocolate * Baking confections * Glazed fruit sold for baking (but not when sold as candy) * Cereals * Muffins * Doughnuts, pastry sold as bakery products * Slice of pie purchased from a deli (but not as prepackaged snack) * Saltine crackers * Nuts * Seeds * Dried fruit SOURCE: State Board of Equalization
