Published: June 08, 2008 12:43 am      

Retailers not luring customers by paying sales tax

Many businesses don’t even know about repeal of state prohibition

A new tool for Maryland retailers that could help seal the deal for some consumers isn’t being used much in Allegany County.

An amendment to the sales tax increase bill, which passed in the special legislative session in November, repealed the 60-year-old prohibition against businesses paying or advertising to pay the sales tax on behalf of the customer. The process is commonly referred to as seller’s privilege.

“You know, I haven’t really heard much about it,” said Steve Colby, newly elected president of the Downtown Cumberland Business Association. “It hasn’t come up for the DCBA. It’s just nothing that we’ve even considered at this point.”

Barb Buehl, president of the Allegany County Chamber of Commerce, said she wasn’t even aware of the possibility until it was brought to her attention this week. At first glance, though, she said that another way to help a merchant complete the sale couldn’t be a bad thing.

“It’s just another tool they can use for marketing and differentiate themselves from someone else,” Buehl said. “I’m not sure how aware our retailers are.”

Buehl likened the incentive to the state’s tax-free holiday shopping on a weekend before the start of each school year. This is different, though, because the retailer is liable for the tax.

Still, “on the consumer’s side, it looks the same,” Buehl said.

Colby said he felt the offer could be useful on big-ticket items such as a vehicle, furniture and jewelry, where the 6-cent sales tax liability for the customer is higher — and thus could be more of a factor in the decision to buy a product. For a $10,000 car, the savings realized by the customer if the dealer paid the sales tax would be $600.

Larry Hayman, general manager of Laurel Mountain Spa in Corriganville beside Culligan Water and in Friedens, Pa., said he was not aware of the repeal. He seemed open to the possibility of trying the concept at his Maryland store, perhaps during one of two annual tent sales.

“I’m sure that would probably help close (a deal) a lot,” Hayman said. “I have never, ever been asked, never been approached. I don’t even know if consumers are aware of it. But the way we have our tubs priced ... people always bartered with us. People just negotiate the hell out of you with a hot tub. Very, very few people have ever paid full price.”

“It would make an excellent tent sale promo,” Hayman said. “ ‘Buy now, save sales tax.’ Very possible.”

The Maryland Retailers Association distributed a notice this week regarding the repeal and the history of the sales tax, which was first levied in 1948. The provision that retailers could not pay or advertise to pay the sales tax was of a concern that doing so would “start a race to the bottom by competing on the sales tax,” according to the notice.

Seller’s privilege is being used by some Eastern Shore retailers to keep shoppers in Maryland. Before Jan. 3, consumers were going across the state line in droves to Delaware, a sales tax-free state. Shoppers also travel conveniently to Pennsylvania, where clothes are exempt from that state’s sales tax.

Former Gov. Bob Ehrlich told the Times-News during a visit Friday that he thought the repeal was “a little bit of a gimmick” that “cuts into the bottom line” of a merchant.

But he didn’t say it wouldn’t be successful at a point of sale.

“It makes sense,” Ehrlich said. “Hopefully, it will be successful and people will stay in Maryland to buy.”

For more information, visit the Maryland Retailers Association online at www.mdra.org.

Contact Kevin Spradlin at kspradlin@times-news.com.