Revenue plan adds sales and use
tax to single article items
By Thomas Wilson
STAR STAFF
twilson@starhq.com
A new sales and use tax on a purchase identified
as a "single article" will affect consumers purchasing big
ticket items such as new and used automobiles, boats and mobile
homes.
The state revenue plan passed by the General
Assembly earlier this month levies a sales and use tax of
2.75 percent on the amount between $1,600 and $3,200 on purchases
of single article items of personal property.
"I think it's totally ridiculous," said John
Colbaugh, owner of Rick's Auto Wholesalers on Elk Avenue.
"All the businesses are having a tough time with the sales
tax like everybody else, but now they put that on us, too."
State law sets the local option sales tax at
a maximum of 2.75 percent.
The local sales tax option -- 2.25 percent in
Carter County and Elizabethton -- may be assessed only on
the first $1,600 of a purchase price of any single item of
tangible personal property including automobiles, boats and
manufactured homes or other items of personal property.
The new sales and use tax levies the 2.75 percent
tax on the next $1,600 of the purchased items up to $3,200.
"The state has come up and said from $1,600 to
$3,200 we want you to charge an additional 2.75 percent,"
said Jerry Bowers of Bowers Auto Sales in Elizabethton.
The county and city currently receive $36 based
on the 2.25 percent local option sales tax for the first $1,600
of a purchased item. The state will receive $44 for the next
$1,600 based on the new 2.75 percent sales and use tax formula.
The revenue plan increased the state sales tax
rate from 6 to 7 percent on all purchases of "tangible personal
property."
"It's going to have a big effect on new cars
bought," said Mike Buckles, owner of Mike's Used Cars on Elk
Avenue. "That one percent adds up to quite a bit when you
put it on a $20,000 automobile.
"But if you can afford a $20,000 car, you can
afford the extra sales tax."
However, for citizens whose means only afford
them the ability to purchase more modestly priced vehicles,
the higher sales tax coupled with the new sales and use tax
create another layer of financial cost.
"They led the people to believe it would only
be a one percent tax increase on a vehicle," said Bowers.
"You've taxed us 1 percent on the gross and now the tax is
2.75 on the $1,600. That puts you at one of the highest tax
rates in the United States."
The single article tax cap applies only to the
sale of tangible personal property and not to the sale of
services, according to the state Department of Revenue.
"Basically, the small businessman is getting
killed," said Colbaugh. "People didn't even realize it until
you tell them what the tax is."
The state revenue plan passed by the General
Assembly went into effect on July 15.
Customers who learned of the 2.75 percent sales
and use tax were less than thrilled by the prospect of paying
another layer of sales tax, said Bowers.
"The reaction has not been good," he said. "We
have to do what the law says."