The Retail EmployerApril 2008

State Issues

Sales Tax Holiday

Sales Tax Holiday!! In May??

 The 2007 General Assembly passed legislation that created the Hurricane Preparedness Sales Tax Holiday.  The Sale will begin May 25th and end May 31st each year beginning in 2008.  Those retailers participating may begin advertising 14 days prior to the event. The Retail Merchants Association and the Retail Alliance of Hampton Roads joined forces to lobby in favor of this legislation which includes the provision to allow ALL RETAILERS to participate.

For a detailed list of exempt items, click here.  For items not on the exempt list, retailers may include them in the Sales Tax Holiday by absorbing (paying) the Sales Tax for the customer.

The RMA encourages all retail members to participate in this sale opportunity by joining retailers selling exempt Hurricane Preparedness items.

For complete Department of Taxation sales tax guidelines click here or go to www.retailmerchants.com and click on the Sales Tax Holiday logo.  Please note that the sales tax holiday logo is the logo to be used with all sales tax holidays.

If you have any questions regarding the Sales Tax Holiday, please call George Peyton, 662-5505.

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Transportation

The funding for transportation has been a topic of discussion throughout the 2008 General Assembly Session and it will continue until the Governor brings the legislators back for a special session to address transportation funding. 

We have received word that the Governor will present his funding plan by mid April, and that there  are two likely options in his plan: 1) a statewide increase in the Sales and Use Tax and/or 2) an increase in the Virginia Motor Fuel Tax.  Please help us as we lobby on your behalf by giving us your feedback through this brief survey >>

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Federal Issues*

* © 2007. NRF Enterprises, Inc. used with permission.

Senate Approves Consumer Safety Overhaul That Bush Opposes

by Mark Drajem

March 6 (Bloomberg)—The U.S. Senate, responding to a spate of recalls of Chinese-made goods, voted to require more product testing and raise fines tenfold on the makers of unsafe goods as part of an overhaul of consumer safety laws.

The Senate's 79 to 13 vote today sets up a political clash because it contains provisions that the Bush administration opposes and the House of Representatives left out of its version. The disputed provisions include an expansion of whistleblower protections and the creation of a new database of complaints.

The legislative action stems from the recall last year of Chinese-made products such as lead-paint tainted toys, contaminated toothpaste and defective tires. Toymaker Mattel Inc. recalled 21 million Chinese-made toys in the last year because of excessive lead paint or detached magnets that could be swallowed.

``This bill will help protect the public and return consumer confidence to the marketplace,'' said Alaska Republican Senator Ted Stevens, one of the measure's authors.

The legislation is the first governing the Consumer Product Safety Commission in almost two decades. The bill would raise potential fines on companies to $20 million, 10 times the current maximum, require independent testing of toys and impose criminal penalties on those who violate safety laws.

Three provisions

The measure passed by the House last year doesn't include three provisions the Senate included and the Bush administration opposes. The differences with the House version will have to be resolved before it can be sent to the president.

The administration said this week that expanded whistleblower protections would increase frivolous claims against employers. The proposed database would ``be of limited public safety benefit and will result in a significant increase in wasteful litigation,'' a statement from the administration said.

In addition, a provision giving state attorneys general the ability to enforce consumer safety laws would lead to ``a confusing patchwork of safety standards that would make it impossible to enforce uniform, national policies,'' the statement said.

There could be difficulty negotiating a compromise with House of Representatives. Yesterday, Representative John Dingell, chairman of the House Energy and Commerce Committee, wrote Arkansas Democrat Mark Pryor, the Senate measure's chief author, to complain that he has ``mischaracterized'' the House bill during remarks on the floor.

``The House bill has many protections that greatly promote consumer health and safety that are noticeably absent from the Senate bill,'' Dingell wrote.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

Last Updated: March 6, 2008 17:18 EST

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Budget Resolution Extends AMT Relief but Rejects Most Bush Tax Cuts

The House and Senate this week passed a Democratic budget blueprint that would provide another temporary patch for the Alternative Minimum Tax and extend some tax relief for low-income families, but which would allow major Bush Administration tax cuts enacted in 2001 and 2003 to expire.

The budget resolution, formally known as the Concurrent Resolution on the Budget for Fiscal Year 2009, passed the House 212-207 Thursday afternoon and the Senate 51-44 early this morning. Differences between the two versions will be negotiated when lawmakers return from their spring recess in two weeks.

The resolution is non-binding, but gives an important indication of lawmakers' position on key tax and spending issues. Actual spending is determined in a set of appropriations bills that will debated during the summer and fall.

Both budget resolution bills would extend current AMT relief for middle-class taxpayers for another year, though the two chambers disagreed on how to pay for the relief. A variety of tax provisions that expired at the end of 2007, including a 15-year depreciation period for improvements to leased retail stores supported by NRF, would be renewed retroactively.

Both chambers rejected Republican proposals to make permanent the full $1.7 trillion package of tax cuts President Bush signed into law in 2001 and 2003, which included politically popular reductions in personal income tax rates along with reductions in rates for dividends and capital gains and a phase-out of the estate tax. All of the provisions are scheduled to expire at the end of 2010, with taxes returning to pre-2001 levels unless Congress acts to renew them before then.

Instead, the bills would make permanent only portions of the package that were aimed at low and middle-income families. Included are the 10 percent income tax bracket, the increased child tax credit, marriage penalty relief, the child care tax credit, and the increased adoption credit. Other income tax rate cuts and cuts in capital gains and dividends were left out.

Estate tax would be made permanent at the 2009 level of the current phase-out plan, exempting the first $3.5 million and taxing amounts above that figure at 45 percent. The Republican proposal would have raised the exemption to $5 million and set the rate at 35 percent.

NRF strongly supported enactment of the Bush tax cuts because of their boost to retail sales by putting more money into consumers' pockets, and continues to support efforts to make them permanent.

For more information, contact NRF Vice President and Tax Counsel Rachelle Bernstein at (202) 626-8168.

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States Trying to Boost Tax Rebate with Sales Tax Holidays

With federal tax rebate checks set to hit the mail this spring in an effort to bolster the nation's sagging economy, a number of state and local governments are seeking ways to use sales tax holidays to encourage consumers to put the money into circulation by spending it in retail stores.

Legislation introduced in the Illinois General Assembly last week would create a four-day sales tax holiday beginning May 23, the Friday of Memorial Day weekend. Timed to coincide with the arrival of the first rebate checks, the bill would suspend the state sales tax of 6.25 percent on purchases up to $600. The $600 limit ties into the amount of the rebates -- up to $600 for individuals and $1,200 for couples, and an additional $300 per child.

"Aiding Illinois families through a sales tax holiday will generate sales, encourage job growth and provide lower costs for Illinois consumers," Illinois Retail Merchants Association President David Vite said. "The Memorial Day timing of the holiday will allow Illinois families to have additional benefits from the federal stimulus checks which are scheduled to arrive in May."

Illinois does not currently have a sales tax holiday, but would join 15 states that already do if the legislation is enacted.

Neighboring Missouri, which already has a sales tax holiday for clothing, computers and school supplies in August, is considering a special three-day sales tax holiday for all products that would begin June 27. Like Illinois, it would exempt items costing up to $600 from the state's 4.225 percent tax, and the bill is being considered as emergency legislation "because immediate action is necessary to encourage immediate spending" of tax rebate checks.

"The hope is the state can give a little boost to get people out spending," bill sponsor Representative Mike Sutherland, R-Warrenton, said. The measure has been backed by Governor Matt Blunt and the House Ways and Means Committee, and could be debated by the full House late this month.

Both states are using sales tax holidays to encourage consumers to purchase energy-efficient appliances. In Illinois, the first $600 of the cost of appliances certified under the federal Energy Star program would still be tax exempt even if the total cost of the appliance exceeds the normal $600 limit. In Missouri, a separate week-long sales tax holiday for such products will be held in November this year and moved up to April next year to coincide with Earth Day.

In New York City, City Council Speaker Christine Quinn has proposed suspending the 8.375 percent sales tax for a full week in May, also citing the rebate checks.

"We have every reason to believe that this 8 percent solution, giving its timing, will be even more successful at priming the consumer pump," Quinn said.

H.R. 5140, the Recovery Rebates and Economic Stimulus for the American People Act of 2008, was signed into law by President Bush on February 13. NRF, which strongly supported the bill, has worked since then with state retail associations and individual retail companies that are seeking to establish or expand sales tax holidays in their states.

An NRF survey conducted last month found that consumers plan to spend about 40 percent of the rebate money, or about $43 billion. Most of the remainder of the $105 billion will be saved or used to pay off debt.

Fifteen states held sales tax holidays last year, including Alabama, Connecticut, Florida, Georgia, Iowa, Louisiana, Massachusetts, Missouri, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia, plus the District of Columbia. Most are held in August and are limited to clothing and school supplies.

Polling conducted by NRF has found that consumers support sales tax holidays and say they make purchases they would not otherwise make. Retailers say the holidays result in an overall increase in sales, and state officials say the loss of tax revenue is partially offset because consumers buying tax-free items also increase their purchases of items not covered by the holidays.

For more information, contact NRF Vice President and Tax Counsel Rachelle Bernstein at (202) 626-8168.

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NRF Urges Lawmakers to Support Credit Card Legislation

NRF and other merchant organizations this week ran a newspaper ad calling on Congress to support legislation that would require Visa and MasterCard to negotiate with retailers over the $40 billion in fees charged annually to process credit card transactions.

"Members of Congress from both parties agree: It's time the credit card companies play fair," the ad said. "The bipartisan Credit Card Fair Fee Act stops the price fixing by the credit card industry (and) uses existing negotiating mechanisms already proven to work."

The ad was run by the Merchants Payments Coalition, a group chaired by NRF that includes trade associations representing retailers, supermarkets, convenience stores, drug stores, gasoline stations, Internet merchants and a wide variety of other businesses that accept credit cards. The full-page layout ran in The Hill, a newspaper covering the House and Senate, and may run in other Capitol Hill and mainstream newspapers as well.

The ad referred to H.R. 5546, the Credit Card Fair Fee Act, which was introduced March 6 by House Judiciary Committee Chairman John Conyers, D-Mich., with committee member Representative Chris Cannon, R-Utah, as the lead co-sponsor. The ad quoted Conyers as saying the fill would "give merchants a seat at the table" and Canon saying the current system of setting fees "is anti-competitive and secretive."

At issue is interchange, a fee averaging close to 2 percent that Visa and MasterCard banks charge merchants every time a credit card or signature debit card is used to pay for a transaction. Visa and MasterCard collected an estimated $42 billion in interchange fees in 2007, an increase of 17 percent over the previous year and more than 150 percent since 2001.

The legislation would require credit card systems possessing "substantial market power" to negotiate with merchants to reach a voluntary agreement on credit card terms and conditions. If an agreement cannot be reached, both sides would submit their final offers to a three-judge panel appointed by the Department of Justice and Federal Trade Commission, and the panel would choose the version that most closely reflected the marketplace. Terms and conditions set by the panel would be in effect for three years, at which time the process would repeat itself.

The bill was the outcome of a hearing Conyers held last summer where NRF Senior Vice President and General Counsel Mallory Duncan testified that Visa, MasterCard and their banks have operated as illegal price-fixing cartels in violation of antitrust law when setting interchange rates. Duncan testified that the fees are charged on a take it or leave basis with merchants given no opportunity to negotiate, but that Visa and MasterCard's dominance of the credit card market means retailers cannot afford to refuse to accept the cards.

For more information, contact NRF Senior Vice President and General Counsel Mallory Duncan at (202) 783-7971.

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CPSC Chair Says Complaint Database Would Drain Too Many Resources

The head of the Consumer Product Safety Commission said this week that a consumer complaint database mandated under legislation passed by the Senate would consume too large a portion of the agency's budget and would likely be filled with erroneous information.

"This is going to be a very, very expensive undertaking," CPSC Acting Chairwoman Nancy Nord said. "The agency gets into it a tremendous amount of information … Much of that information is inaccurate. Much of it is wrong."

Nord's comments came as she testified before a House Appropriations Committee subcommittee on Monday.

Nord said implementation and operation of the database would take about a quarter of the CPSC's current $80 million annual budget. Nord said she would prefer that any information included in the database first be verified by the agency, but the Senate bill makes no provision for doing so, and verification would increase the amount of money and staff time required.

S. 2663, the Consumer Product Safety Act of 2008, sponsored by Senator Mark Pryor, D-Ark., was approved by the Senate March 6. The bill would increase the CPSC's annual budget to $80 million to $155 million, providing additional inspectors and other staffing and money to improve research and testing facilities. But it also includes dramatically increased fines, whistleblower provisions, a provision giving state attorneys general the right to sue, and other components NRF believes would harm product safety by discouraging businesses from cooperating with the agency. NRF is supporting a more balanced bill passed by the House in December.

One of the key elements of the Senate bill is a requirement that the CPSC establish a public database that would include a wide variety of consumer complaints, reports of injuries or deaths, and confidential and proprietary information collected from businesses.

NRF last week warned senators in a letter that without verification, such a database could be filled with erroneous information, and that the inclusion of business data would "stifle" communications between companies and the CPSC.

The White House said the Bush Administration is "strongly opposed" to the database proposal.

"Such a database will be of limited public safety benefit and will result in a significant increase in wasteful litigation, especially if there are no controls for the quality of data," the White House said. The database would also place "significant, unnecessary burdens on the CPSC."

Nord also said at Monday's hearing that the commission will consider placing staff at the U.S. Embassy in Beijing to monitor the quality of products manufactured in China. Recalls of Chinese-made toys with high lead content and lead paint last summer set off the call for the legislation currently being debated in Congress.

In addition to Nord's comments, CPSC Commissioner Thomas Moore said the agency "ought to look more closely and lean more heavily on the retailers because the bottom line is who's selling it" but offered no details. Nord made similar comments earlier this year but aides said afterward that she was referring only to retailers' existing role in the recall process and not any new laws or regulations to increase retailers' legal responsibilities.

The House and Senate still need to reconcile differences between the bills passed by each chamber. A formal House-Senate conference committee could begin meeting in April, but the chambers might decide to negotiate informally.

For more information, contact NRF Vice President for Supply Chain and Customs Policy Jonathan Gold at (202) 626-8193.

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NRF Urges Oakland Port to Reject Container Fees

NRF this week urged the Port of Oakland to reject a proposal to impose huge new container fees similar to those approved recently in Los Angeles and Long Beach, and instead adopt a plan to ease air pollution and congestion that is supported by shippers.

"NRF and its members support efforts to reduce emissions and congestion at ports in California and other states," NRF Senior Vice President for Government Relations Steve Pfister said. "However, we have serious concerns and have expressed opposition to parts of the plans by the (LA/Long Beach) ports that we believe have several serious legal and other flaws, including a substantial likelihood of failing to achieve effective environmental quality improvements."

"Shippers have demonstrated our willingness to pay our fair share of the cost of improving air quality and infrastructure in the ports," Pfister said. "But we cannot support proposals that would be illegal, unfair, and ultimately ineffective."

Rather than following the lead of Los Angeles and Long Beach, Oakland should consider the recommendations made in an industry study released last year. Those recommendations "would achieve our common objectives to impose air quality and reduce congestion in a way that would be fair, legal and generate strong private-sector support," Pfister said.

Pfister's comments came in a letter sent Monday to Port of Oakland Executive Director Omar Benjamin.

The Oakland Board of Port Commissioners is scheduled to meet on Tuesday and is expected to consider a plan similar to one recently adopted by the Los Angeles and Long Beach Boards of Port Commissioners that would impose new fees intended to pay for road, bridge and rail infrastructure improvements and diesel truck replacements as part of a plan to ease traffic congestion and air pollution around the ports.

The Oakland plan reportedly could include a truck concession program under which only a small number of trucking companies would be allowed to move cargo through marine terminals at the port. In order to receive a concession the companies would be required to use only employee drivers as opposed to the current practice of hiring independent owner-operators -- a move that is widely seen as an attempt to make it easier to unionize port truckers. Long Beach recently rejected a proposal for a similar requirement, but Los Angeles is likely to approve the provision.

The plan could also require an undisclosed "clean truck fee" to pay for replacement of current trucks with a fleet of cleaner-burning trucks, and another undisclosed fee to pay for undetermined transportation projects.

While details of the Oakland plan are not yet known, a similar plan adopted in LA/Long Beach includes a $30 fee for each 40-foot container moving in or out of the ports earmarked for infrastructure and another $70 per-container fee intended to help fund the purchase of new, lower-emission trucks.

The joint LA/Long Beach plan includes infrastructure projects and requires replacement of trucks serving the ports, but its emissions standards would apply only to port trucks. Many of the infrastructure projects funded are located off port property, and NRF has argued that the ports lack the legal authority to impose fees to fund projects outside their gates. NRF has also said the fees for highway and bridge projects should not be imposed on containers moved by rail.

The NRF-backed alternate calls for statewide emissions standards, would create a fund to help pay for truck replacement, and would create a public-private partnership to pay for infrastructure improvements. Independent truckers would not be banned. Released in March 2007, the plan was prepared jointly by NRF, the American Association of Railroads, the Pacific Merchant Shipping Association, the Waterfront Coalition and other groups involved in the shipment of cargo through California ports. While the fees address only California ports, they are of interest to retailers nationwide because those ports are the gateway for the majority of merchandise imported from Asia.

For more information, contact NRF Vice President and International Trade Counsel Erik Autor or Vice President for Supply Chain and Customs Policy Jonathan Gold at (202) 783-7971.

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IRS May Let Retailers Deduct Costs of Evaluating Store Locations

Retailers would see many favorable changes -- including the ability to deduct costs involved with evaluating new store locations immediately rather than having to amortize them over a number of years -- if new regulations proposed by the Internal Revenue Service are adopted.

The proposal is an update of draft regulations issued in 2006 that would have required the costs of evaluating a store site prior to making a decision to be lumped in with the costs of actually building the new store and capitalized.

NRF objected to the 2006 version, and submitted comments to the IRS pointing out the discrepancy that would be created between rules for the expansion of an existing business and the acquisition of a new business, for which the costs of investigating a new location are already deductible. The IRS on March 7 issued an updated version of the proposed regulations and adopted NRF's recommendation that the deduction be allowed.

The updated proposal also accepted a number of other recommendations made by NRF, including one that improvements made in the course of routine maintenance should be deductible as long as they don't substantially increase the life of the property. The proposal cites improvements made to update the appearance of a store rather than to fix material defects or make material additions to the store as an example of an expense that would not have to be capitalized.

Comments on the proposed regulations are being accepted by the IRS until June 9 and a hearing is scheduled for June 24.

If made final, the proposed regulations could provide significant savings for retail companies considering new store locations, especially major national chains that are constantly evaluating possible new sites. Evaluation of a location can involve a wide variety of expenses such as land surveys, building inspections, engineering, legal and accounting services, and fees charged by state or local governments.

For more information, contact NRF Vice President and Tax Counsel Rachelle Bernstein at (202) 626-8168.Back to top

Changes suggested to Tennessee grocery wine bill

A bill being considered in Tennessee to allow groceries to sell wine may be expanded. A state industry group has suggested that liquor stores should have the ability to sell additional items related to liquor and wine products such as ice, mixers and glasses. WSMV (Nashville, Tenn.)

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Seattle proposes fee for using disposable shopping bags

The mayor of Seattle is considering a 20-cent fee for using disposable shopping bags at grocery stores in the city. The fee would be split between the city and the retailer for large stores, and given entirely to the retailer if it has sales of less than $1 million a year. KATU-TV (Portland, Ore.)/Associated Press (4/2)

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Baltimore bans trans fats

The Baltimore City Council has approved a city-wide trans fats ban that will take effect in fall 2009. "We want to get rid of them, but one of the challenges has been to get rid of them in a time frame that allows [restaurants] to find suitable alternatives," said Melvin R. Thompson, vice president of the Restaurant Association of Maryland. "Now that the council has worked with the industry to give us a little more time, we do not oppose the bill." The Sun (Baltimore) (free registration) (3/18)

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Calif. Senate committee clears bill on cloned-food labeling

California's Senate Health Committee has cleared a bill requiring the labeling of all food products from cloned animals or their offspring. Opponents of the bill said it may undermine the benefits that cloning technology could bring to the livestock industry, such as breeding animals resistant to diseases. San Francisco Chronicle (4/3)Back to top

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