PG Graphic: Some taxable and non-taxable items compared
By Patricia Sabatini Pittsburgh Post-Gazette
D o you double-check your store receipts to make sure sales tax was charged correctly? If you're like most shoppers, the answer probably is no. You simply assume the store got it right.
Maybe you shouldn't be so trusting.
On a recent shopping trip, the Post-Gazette found numerous examples of retailers collecting the tax on products that clearly aren't taxable. When stores get it wrong, you get ripped off.
The newspaper's first stop was at a Kmart on Butler Street in Shaler, where we bought a random sample of 12 nontaxable items. On three of those items -- saline solution, adhesive bandages and toilet tissue -- we were incorrectly charged the 7 percent sales tax. That's a 25 percent error rate.
We purchased the same three incorrectly taxed items at four other area Kmart stores to see if they made the same mistakes. Even though Kmart is a chain, the mistakes differed. None of the four stores charged tax on toilet paper. But all four incorrectly taxed the saline solution. And one store, on Mall Boulevard in Monroeville, also inappropriately taxed the bandages. In short, every Kmart we visited got something wrong.
Getting to know Pennsylvania's sales tax law
For a list of taxable and non-taxable items in Pennsylvania, call 1-888-728-2937 and ask for the retailers' information guide on sales tax, form Rev-717. The guide can be mailed or faxed. The guide also is available at the State Office Building, Downtown, and online at www.revenue.state.pa.us/revenue/ .
"We have a third-party company that we employ to make sure taxable information is correct," said Kimberly Freely, spokeswoman for Sears Holdings in suburban Chicago, which owns Kmart. "Occasionally, items get missed."
Ms. Freely's boss, Chris Brathwaite, added that Kmart would be "reaching out to [Pennsylvania] stores again to remind them to be vigilant about what needs to be taxed and what shouldn't be taxed." He added that customers who discover an error should return to the store for a refund. He couldn't explain why Kmart stores were not applying Pennsylvania sales tax consistently across the chain.
The newspaper's shopping trip also included a Big Lots discount store in West Mifflin and a popular Downtown lunch counter.
At Big Lots, we were charged sales tax on five of nine randomly selected items. But two of them -- wet wipes and cotton balls -- should not have been taxed.
Those items "should have been tax exempt," Big Lots' Pittsburgh district manager Darrell Elan said. He declined further comment.
At the lunch counter -- Eadie's Kitchen & Market in One Mellon Center -- we bought a bottle of plain water, a bag of chips and a candy bar. The store correctly charged sales tax on the chips but incorrectly collected tax on the water.
Owner Maggie Joyce said last week that she would immediately fix her registers to stop charging tax on water.
The last store the Post-Gazette visited, a Target in West Mifflin, passed our spot check. It correctly charged no tax on five products we purchased that had been inappropriately taxed by other stores: toilet tissue, wet wipes, saline, cotton balls and adhesive bandages.
Help from the state
The Pennsylvania Department of Revenue, which oversees sales tax collections in the state, said businesses have the tools to assess sales tax accurately.
"We hope that retailers in Pennsylvania apply the sales tax appropriately, and we provide them resources to do that and are available to answer questions," spokeswoman Stephanie Weyant said last week.
The revenue department publishes a retailers' guide that lists taxable and nontaxable items. The guide, available online and through the mail to businesses and the public, is updated every three years to list new products and to make clarifications based on questions the department receives, Ms. Weyant said.
Ms. Joyce, of Eadie's Kitchen, said she was collecting tax on bottled water because she was using an old retailers' guide that did not specifically list water as nontaxable.
"I would love not to
charge my people tax. It's not like I keep the tax," Ms. Joyce said. "You think the state would alert people to changes so they could change their registers."
Businesses are responsible for obtaining and complying with the updated guides, the revenue department's Ms. Weyant said. She said water has always been exempt from tax by law but it wasn't specifically listed in the retailers' guide until 2006. Flavored water, in contrast, is taxable because it is classified in the same category as soft drinks, which the law says are taxable.
Confusing and bewildering
To be sure, Pennsylvania's sales tax system can be confounding.
In general, clothing, groceries and medicines are exempt from the tax. But quirky, seemingly senseless, exceptions abound.
Consider, for example, that toilet tissue is exempt from sales tax, but facial tissue is taxable. Toothpaste, toothbrushes and dental floss aren't taxed, but mouthwash, antiperspirant and shampoo are.
In addition, the same item can be considered taxable or nontaxable depending on where it is purchased. Buy a bag of pretzels or a Hostess pie at a lunch counter and you pay sales tax. Buy the same bag of pretzels and pie at the supermarket and they are rung up tax-free.
Places that serve ready-to-eat food, such as a restaurant or caterer, are required to collect tax on virtually everything, including prepackaged foods and snacks that are sold tax-free at the supermarket. The only exemptions are for bottled water, ice, candy and gum.
"That means a bag of chips you buy at a grocery store is not taxable, but a bag you buy at a lunch counter would be," Ms. Weyant said.
Ms. Weyant could not explain the reason for such differences, other than to say that was the way the sales tax statute was written when enacted in 1954.
The general premise was to exempt basic necessities from being taxed, she said. Over the years, any questions or ambiguities were settled by the courts.
There are roughly 300,000 businesses that hold state sales tax licenses in the state, Ms. Weyant said. Of those, about 2,500 are audited for compliance each year. Each audit covers up to four years of records.
The department has no authority to fine a business for misapplying sales tax, Ms. Weyant said. The department can assess penalties only if a business fails to remit any sales tax it collects.
If consumers find a mistake, the state recommends returning to the store for a refund. If that doesn't work, consumers can save their receipts and request a refund from the state by filing an appeal at the department's e-Services Center at www.revenue.state.pa.us /. People also can call 1-717-787-1064 for instructions on filing a sales tax appeal for a refund.
The revenue department tries to follow up with retailers reported to be overcharging sales tax, Ms. Weyant said. Consumers can report sales tax problems online at the Enforcement Spotlight section on the right side of the department's home page by clicking "Report suspected tax fraud." Another way to make a report is by calling the department's business taxes section at 1-717-787-1064.
Anna-Mary Cullen, a sales tax expert with ADP Taxware in Wakefield, Mass. said Pennsylvania's sales tax regulations are confusing, but no more so than many other states' systems.
"Everyone likes to do their own thing," she said.
In one regard, Pennsylvania's system is easier, Ms. Cullen said. Some other states allow local taxing bodies, such as a county or municipality, to tax items differently than the state, but in Pennsylvania, the 1 percent sales tax levied by Allegheny and Philadelphia counties is applied the same way as the state tax.
Getting to know Pennsylvania's sales tax law
For a list of taxable and non-taxable items in Pennsylvania, call 1-888-728-2937 and ask for the retailers' information guide on sales tax, form Rev-717. The guide can be mailed or faxed. The guide also is available at the State Office Building, Downtown, and online at www.revenue.state.pa.us/revenue/cwp/view.asp ?A=190&Q=174555.
Patricia Sabatini can be reached at email@example.com or 412-263-3066. First Published February 24, 2008 5:00 AM