COLUMBUS, OHIO — Ohio retailers are confronting cost increases on many fronts, including rising taxes levied by the debt-ridden state government.
One such tax is the commercial activity tax, or CAT, which the Ohio Grocers Association here is seeking to kill.
The association filed a lawsuit in 2006 claiming the tax is unconstitutional, and is waiting judicial acceptance by the Ohio Supreme Court after an appellate court ruled that the CAT is an excise tax, not a franchise tax, as the state contends. As an excise tax, the CAT cannot constitutionally be applied to grocery stores and fast-food restaurants, among others.
“This tax has a negative impact on any business that has high sales and low margins,” said Tom Jackson, the association's president and chief executive officer. He explained that the tax on gross receipts applies whether a grocer makes money or not. “If you go out and open a new store, and you are budgeted to lose money for a year, you still are going to pay this tax,” he said.
Passed in the name of tax reform and to minimally tax a broad base of taxpayers, the goal was to raise $188 million just from the grocery retail sector. So far revenues raised through the sector have far exceeded initial goals. Revenues collected from the grocery sector totaled $273 million in 2006 and $594 million in 2007, according to association research. That means that the average-sized supermarket will pay $5,000-$8,000 in new taxes over what they paid prior to the initiation of the tax, said Jackson.
“We need to get this thing back to where it is legal and fair to our industry,” he said.
However, a state deficit of $7 billion is looming over the lawsuit, Jackson said. He expects the case to be argued in the state Supreme Court this spring or summer.
Separately, the Ohio Grocers Association said last week that Gov. Ted Strickland has signed into law SB 320, the state's bill to fight organized retail crime, which was supported by retailers.
The new law goes into effect in 90 days.
“This is a huge victory for OGA and our partners at the Ohio Council of Retail Merchants,” the OGA said. “It is our hope that SB 320 will help combat and seriously penalize the organized crime rings targeting our businesses and that it will help to put a plug in the $90 million sales tax hole that has been afflicting Ohio.”