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Sales tax hike meets with mixed emotions

Ohio's new sales tax has many business owners concerned, but a few are ready to roll with the punches.

After last week's 1 percent increase, Lawrence Countians now pay 7.5 percent on all taxable goods, making the county's tax rate one of the highest in the state.

Tom Allyn of Allyn's Jewelers in Ironton is one of the many small business owners who was not pleased with the increase.

Business has been a lot slower this week compared to last, for whatever reason, he said.

"I think this puts us at a distinct disadvantage because people can go across the bridge and save one-and-a-half percent," he said. "Business has been terribly slow anyway. This is just another nail in the coffin."

The politicians do not seem to understand, Allyn said. This increase has even affected his out-of-town business because he has to pay a higher sales tax on shipping and handling.

Last week's increase brought the total state tax to 6 percent. The county has a 1 percent tax that goes into the general fund and another half-percent tax that funds emergency services and the 911 system.

Taxable goods include most merchandise sales and some services. Exempted goods include prescription medicines, food, newspapers and phone and cable services.

The tax laws have been expanded now to include services that require a county vendor's license such as vehicle towing, dry cleaning and personal care services.

Last year, total sales in Lawrence County amounted to $422 million.

Based on the previous 5 percent tax rate, the county contributed $21.1 million to the state budget.

Because of the increase, Lawrence County Deputy Auditor Chris Kline estimates that Lawrence Countians will contribute an additional $4.2 million.

"Last year's (county) sales tax receipts was roughly $4.2 million, this was off of its 1 percent (tax)," Kline said last week. "The state should be able to expect that amount additionally off of its new 1 percent increase, if sales in the county remain steady."

Statewide, the tax changes are expected to generate $2.7 billion in revenue over the next two years.

Jim Hacker owns The Iron City Hardware Co. Although he said it is too soon to really judge the effects, the change did cause the store to spend a couple of hundred dollars to have the cash registers adjusted.

Luckily,

a spare was available or it would have been back to the money in the shoebox days, he said.

"We have had a lot of people come in complaining. It is just 1 percent, but it adds up," Hacker said. "It is just one more reason for people to go across the river."

Sales tax is only 6 percent in West Virginia and Kentucky. Many business owners fear that more Lawrence Countians may go shop there.

However, residents would still be required to pay Ohio sales tax on some purchases, even if they are made out of state.

What many people do not realize is that there are two types of taxes related to purchases - sales tax and use tax, said Mike Sobul, assistant administrator of the Tax Analysis Division of the Ohio Department of Taxation.

A use tax, a privilege tax for using an item in Ohio that was not purchased here, comes into play when someone purchases a large item such as a refrigerator or couch. If it is going to be delivered to another state, no sales tax would be added and the purchaser is asked to report this on their taxes at the end of the year, Sobul said.

Some other purchases, such as buying a new car, also have different guidelines. When someone purchases a motor vehicle, they do not pay sales tax on it until they title it in their home state, so it does not matter what the rate is where they purchase it, he said.

However, most people are only aware of the common sales tax, he said.

The last state sales tax increase was in November 1981. Unless it is extended, the 1 percent increase will expire in 2005.

Hacker, the hardware store owner, said he is not convinced that it is only temporary.

"About 20 years ago, the county put a half percent increase on us," he said. "We are still paying that."

More changes are already on the horizon. Several categories of goods and services that were not subject to sales tax in the past will become taxable August 1.

Newly taxed businesses include storage facilities, vehicle towing, satellite broadcasting service, dry cleaning and laundry services, larger snow removal service, intrastate transportation such as taxi and limousine services and some forms of personal care such as manicures, pedicures, tanning, skin care, application of cosmetics, hair removal, tattooing, body piercing and non-medical massages.

Debbie Broughton, office manager at Cogan's Big Wrecker Service in South Point, said she is still waiting for the state to send her all the paperwork so she can understand everything that is required.

Although she does not live in Ohio, she said she thinks it will hurt the residents and businesses the most because it will push people to the neighboring states.

"I feel for the people of Ohio," she said. "I feel like it is an unfair increase. I hope they use it wisely, like for the roads."

Some business owner are trying to take this increase and turn it into a positive.

Tim "Wolf" McDowell, owner of Wolf's Tattooing in Ironton said he will make the best of it and take his business to the next level.

"It kind of motivated me to take the business a little further. I went and became incorporated this week," he said. "It gave me more incentive to accept credit cards and checks. I am going to try to expand the shop and see how far we can take it."

The increase will cause his business to double up on some paperwork and rework their pricing so it will include all the sales tax, "Wolf" said.

"When someone comes in to get a $40 tattoo, they want a $40 tattoo," he said. "They do not think about that extra tax."

Though, "Wolf" said that he disagrees that the tax should apply to tattooing because it is not merchandise, he said he will take the bad idea and use it as a

motivation.