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Stores should not tax
new beverage fee

Question: I took a close look at my grocery receipt and noticed that I was charged a general excise tax on the total amount, including the new beverage fee. Isn't this fee passed directly to the state and therefore should not be taxed?

Answer: You're right.

The state ruling, for now, is that consumers should not be charged a tax on the 1-cent beverage container fee or the new 5-cent beverage deposit fee, because the state is not assessing merchants the GET on those fees.

"Merchants should not be charging consumers any more than they are allowed to do so by law," said Stephen Levins, executive director of the state Office of Consumer Protection.

As the "bottle law" continues to go into effect, "There will be a steep learning curve for everyone," Levins said, noting this includes merchants who have to re-program their cash registers. "But to the full extent possible, they should take every step to comply with the law," he said.

Call OCP at 587-3222 if you are being taxed on the beverage fees.

While the Tax Department oversees tax policies, OCP is responsible for monitoring the "visible passing on" of the GET to consumers.

The GET is a tax on a business's total gross income; it is not a sales tax on consumers, explained Cathleen Tokishi, spokeswoman for the Tax Department. It is up to a merchant whether to pass the GET on "visibly" to consumers.

"That's not a tax issue; that's a consumer protection issue," she said.

Under the bottle law, which is aimed at encouraging recycling, merchants could start charging customers the 5-cent-a-container deposit fee beginning yesterday.

Customers, meanwhile, have been paying a 1-cent beverage container fee since October 2003. The 1-cent-per-container charge is not refundable; the 5-cent deposit fee will be refundable but not until Jan. 1, when the state hopes to set up redemption centers.

Under Act 176 of 2002, which implemented the bottle law, the 5-cent fee was exempted from the GET, Tokishi said. However, the legislation did not clearly exempt the container fee (which was initially 0.5 cents and is now 1 cent) from the GET, she said.

"To ease compliance with Act 176," the Tax Department issued an announcement in 2002 saying both the container fee and deposit fee would not be subject to the GET.

But, Tokishi said, the 2004 Legislature "did not clarify the exemption provision" when it passed Act 241, which was to have addressed concerns about the deposit program set up in the 2002 law.

For now the Tax Department will continue to exempt both fees from the GET.

But if the 2005 Legislature fails to specifically exempt them from the GET, "the department will interpret that as an indication that the Legislature intended to tax (these fees), and will withdraw (its earlier) position," Tokishi said.

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