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Local News

Tax On Pre-Coupon Price Upsets Shoppers

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(Credit:  WTIC Photo)

(Credit: WTIC Photo)

By SUSAN HAIGH, Associated Press

HARTFORD, Conn. (AP) _ Devotees of coupons and discounts are angry at Gov. Dannel P. Malloy’s proposal to slap a new sales tax on the original price of a good or service rather than the discounted price.

Ending the sales tax exemptions for coupons, discounts and automobile trade-ins are among tax exemptions Malloy has proposed ending to help close the state’s projected $3.5 billion deficit. For example, the tax would be imposed on the $30 price of a blouse, not the $15 sales price.

Gina Juliano learned firsthand after she lost her job in 2009 as a vice principal in the Hartford Public Schools that coupons and sales can help a family make ends meet. She cut her budget for food, toiletries, pet supplies and paper goods from between $200 and $300 a week to $50.

“I turned to coupons because I would have had to lose my house and everything. I wouldn’t have been able to survive,” said Juliano, who now writes a blog in Connecticut called Gina’s Kokopelli that tracks coupons, sales and bargains for other shoppers.

Like many avid couponers, Juliano pays little or nothing for items after matching coupons with sales. For example, she recently used a $3 coupon to buy a bottle of Gain fabric softener that was on sale for $2.99 at Rite Aid.

“Under his proposal, I would have to pay tax on that, which is not right because I didn’t pay for the item,” said Juliano, who runs classes on couponing. “Everybody who does this, it’s not like they’re rich. They’re doing this to survive.”

Benjamin Barnes, Malloy’s budget chief, isn’t a particular fan of the proposal. But because of the state’s deficit woes, the administration is forced to examine the numerous tax exemptions currently on the books.

“It’s true, it’s a new tax. It sucks,” he said. “Every single one of those, however many, 20-odd taxes is a new tax and it sucks. I don’t know how to hide it. These are new taxes.”

Food items under Malloy’s budget would continue to be exempt from the sales tax and therefore not affected by the proposed coupon and discount exemption rollback which is projected to bring in $92 million in revenue over the two-year, nearly $40 billion budget. The coupon exemption is among many sales tax exemptions the new governor has proposed ending.

Malloy has also proposed raising the sales tax rate from 6 percent to 6.35 percent for retail purchases and ending the $50 exemption for clothing and footwear.

Kristen Ellis, a Connecticut blogger who writes “Funbeingfrugal.com” about ways to live inexpensively, said she and her husband are on unemployment compensation and have to count pennies and carefully plan their shopping.

“How can you tax me on what I did not spend? The short answer is, you can’t,” she said.
Ellis cites legal definitions of a “sales tax” and how they indicate a sales tax is to be levied on the sale price paid by consumers. She also cites a state law that says “all coupons and scan cards reduce taxable price.”

“If Mr. Malloy follows through with this proposal, he is opening himself and the state up to legal action,” Ellis wrote on her blog.

Barnes said the administration will need to change state law to collect taxes on the pre-discounted amount. “We can’t do it by administrative fiat,” he said.

Timothy Phelan, president of the Connecticut Retail Merchants Association, said he’s concerned that many of the exemptions Malloy has proposed repealing _ proposals to raise the sales tax and luxury tax _ will affect retailers. Shoppers may instead buy on the internet where sales taxes are not charged on many items, he said.

“It’s a loss for the state because they won’t get that sales tax revenue and it’s certainly a loss for the retail community,” Phelan said.

Car dealers also are concerned about Malloy’s plans to end the sales tax exemption for auto trade-ins, a proposal that would raise $81.8 million over two years. Currently, consumers pay tax on a new car minus the value of a car they are trading in to the dealer. Under this proposal, that trade-in _ essentially a coupon against the price of the new car _ would no longer count.
James Fleming, president of the Connecticut Automotive Retailers Association, said he believes such a move will make it more difficult for consumers to qualify for a car loan because they often use the value of the trade-in toward a down payment. Under Malloy’s plan, the trade-in value would be reduced by the sales tax.

“My dealers will say people will walk out of a showroom over a $20 a month increase in a car payment,” he said.
Connecticut residents will ultimately have to pay the tax if they buy the car from an out-of-state dealership, but Fleming said it’s been shown in other states that those consumers will go to that out-of-state dealership for repairs and oil changes. He estimates Malloy’s proposal could lead to possibly 500 layoffs across the state.

“The experience in other states is it’s a loser. It’s a big, big loser,” he said.

(Copyright 2011 by The Associated Press.  All Rights Reserved.)

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