Friday, June 18, 2004

Revised sales tax drops some items

Bottled water, gum off list in Internet move

The Associated Press

COLUMBUS - Ohio is changing its legal definition of food as part of a nationwide effort to allow states to collect sales tax on Internet and catalog purchases.

Ohio consumers, who don't pay sales tax on grocery store food items, will save money as a result.

The new definition starting July 1 adds items such as bottled water, breath mints and chewing gum to the list of tax-exempt foods, said Gary Gudmundson of the Ohio Department of Taxation.

"It's like a tax cut for consumers of those products," Gudmundson said.

Ohio merchants don't charge the 6 percent state sales tax on food unless it is consumed where it is bought, such as in restaurants.

The changes will cost Ohio an estimated $21.4 million a year in tax revenue. Local governments that charge sales tax on top of the state rate also will lose money.

But officials are expecting to collect an estimated $600 million that state and local governments lose each year from sales taxes not charged by out-of-state vendors, primarily for Internet and catalog purchases.

Making the definition of food consistent among states is one part of the 42-state Streamlined Sales Tax project to go after that revenue.

Congress still must pass legislation to mandate that vendors charge sales tax on certain out-of-state purchases.

Another change as a result of the project will require vendors to charge the sales-tax rate in the county where the customer takes delivery of a product or service, not where it is bought.

That change was supposed to take effect this year but was delayed.

Retailers expect removing the tax from bottled water will be the most noticeable change. Americans bought nearly 6.4 billion gallons last year - 7.5 percent more than in 2002, according to industry statistics.

"I never really thought about paying the tax, but I'm all for not paying it," said Jim Koch of Columbus, who was buying bottled water Tuesday at Giant Eagle in Grandview Heights.

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