BUDGET Merchants oppose new business tax

Gas sellers have been granted an exemption, but grocers continue to fight.
COLUMBUS (AP) -- Grocers and companies that sell gasoline both fought for an exemption from the state's new business tax on sales, arguing they would suffer because of thin profit margins. Gasoline won by reasoning the tax could be paid multiple times from the refinery to the pump.
Grocers are now considering their options, including a legal challenge on constitutional grounds.
"It's ironic that the legislators are more sensitive to the cost of what people put in their cars than what they put in their bodies," Jason Wetzel, vice president of governmental relations for the Ohio Grocers Association, said Monday.
The tax debate is part of sweeping changes to Ohio's tax system contained in the two-year, $51 billion state budget up for final approval in the House and Senate this week.
The proposal by Gov. Bob Taft replaces the current 8.5 percent business tax on profits, criticized as too high and full of corporate giveaways, with a low tax of 0.26 percent on sales by a broader variety of businesses.
Gasoline
Under the plan approved this week, the petroleum industry gets two years to come up with a plan for how it should be taxed under the new system.
The industry argued that gas is already subject to numerous state and federal taxes, including a new 2 cent gasoline tax taking effect July 1.
"Ninety-five percent of the price of the product is already in it by the time you reach the street," said Roger Dreyer, president of the Ohio Petroleum Marketers and Convenience Store Association. "If you figure the tax on our gross sales, some of our people will have to borrow money to pay the tax."
Grocery
James Stoll, who owns Bag-n-Save Foods, Inc., in Dover, with his wife and five daughters, said he has even lower profit margins than gas stations.
Stoll, 65, estimated he'll pay $20,000 in the new commercial activities tax for every $10 million in sales.
"All we'd have to do is $12 million to be equal to what our property tax is now," Stoll said Monday. He wouldn't divulge annual sales, but said they are substantially higher than $12 million.
"How do we cover the increased taxes?" Stoll said. "It's not something we can just add to the customer's bill. So we either find a way to reduce expenses, or we raise prices, and we really don't want to raise prices."
Legislators' discussion
Lawmakers tried to hold the line on exemptions to the new tax, saying such so-called carve-outs were one of the things that limited the effectiveness of the current business tax.
For example, they also rejected auto dealers' arguments that, like grocers, the new tax hurts their world of high sales volume but low profit margins.
Senate President Bill Harris defended the petroleum exemption, pointing out it's only for two years. He said the industry will also give up part of a discount they receive for collecting and paying the state gasoline tax.
"The thing that we've attempted to do is be very restricted on what the carve-outs are and only do those that we felt ensured that we've protected Ohio jobs," Harris, an Ashland Republican, said Sunday.
But Democratic Rep. Dale Miller of Cleveland argued it was inconsistent to tax grocers and not the petroleum industry.
If a lawsuit is filed by a grocer, it would focus on a constitutional provision against taxing food, said Wetzel of the grocers' association.