Sales tax border wars - 'Unfair fight'
By Bruce Burdett
Rick Patel needs only walk out the front door of his Tiverton Liquor Store to see where much of his business has fled.
"The state line is just a few hundred feet that way," he said pointing north. "There they charge no sales tax; here I have to charge 7 percent."
No sooner did Massachusetts eliminate its sales tax on alcoholic beverages in 2011 than his sales started to tumble — by from 23 percent to 28 percent. "And it has not gotten any better."
It's no accident, he said, that liquor stores are lined up just over the Massachusetts line.
"I charge $19.99 for a bottle, they charge $19.99 — but then I have to add $1.40. People complain about that."
And a popular brand of little cigars — "They charge $1.99; because of taxes I have to charge $6.59 for the same thing. I pulled them off the shelf. What's the point?"
Others, owners of restaurants, liquor stores, hardware stores and more say the same thing — "It's not a fair fight."
It is to address sals tax inequity that state Rep. Jan Malik (Dist. 67, Warren and Barrington) has introduced a bill to cut the state sales tax from a near highest in the nation 7 percent to zero. The owner of a liquor store just a couple of miles from the Massachusetts line, "I am one of the small business owners getting hammered … I cannot compete with my nearby Massachusetts competitors. I am down 20 percent in business over the past two years, and it doesn’t matter if we have low prices at my liquor store or not. People just don’t way to pay a sales tax when they can drive a few miles to Massachusetts where there is no sales tax on liquor."
He admits that he is not optimistic of immediate passage but said the sales tax discussion is one Rhode Island must have.
"How can Rhode Island restaurants compete at 8 percent? They can’t. We need to find a way to fix this, and a serious discussion of our sales tax is a discussion we need to have, now, before more small stores close their doors," he said.
Among the casualties of the state line tax wars is the not so accurately named George's Gas on Stafford Road in Tiverton, just south of the state line.
Owner George Alzaibak pulled gasoline his pumps out not long ago and now does repairs only
"They are stored out back now — I can't afford to sell gas"
"I stopped selling because Tedeschi's opened just over the line. Because of taxes, they were 10.5 cents less than me. I went from selling 125,000 gallons a month to 26,000. I couldn't pay my help so three people lost their jobs — that's tax money Rhode Island loses..
"I put an ad in your paper asking people to shop local but when they can drive down the road and save 10.5 cents a gallon, you lose," Mr. Alzaibak said. Add to that "all the fees that we pay that they don't (like a litter fee) and "we don't stand a chance. It's not a fair fight."
"Give me a fair shot — that's all I ask."
Michelle Kazem, owner of Stone Bridge Liquors in Tiverton said people come in from Massachusetts, "see the tax that I have to add and say, 'Next time we'll get it in Massachusetts."
Crossroad Liquor (Bulgarmarsh Road, Tiverton) used to get lots of customers from across the line in Westport.
"Our prices are good but how do you compete when you have sales tax and they don't?" said Johnny Patel. "Now we don't see them like we used to … Especially with wine, liquors, it makes a difference … it's tough times, people will do anything to save 50 cents." He said they especially miss out on the big purchases — "when people are shopping for parties. The sales tax adds up."
After listening to the sales tax frustration talk "everywhere I shop in Tiverton," Rep. Jay Edwards twice introduced legislation that would have reduced the Rhode Island sales tax in stages from 7 to 3 percent.
It would have been revenue neutral, he said, because it would have taxed more things, and also because "with a lower tax, our businesses would be generating more sales."
But then "our governor must have gotten a copy of my proposal" because he came out with his own plan for broadening the sales tax base — "except that he didn't want to reduce that tax — a real killjoy."
"Sales taxes are killing businesses in these East Bay border towns," he said. "Want to save pennies on gas, liquor, anything — just drive five minutes to Massachusetts. They are all set up right at the state line."
It's especially brutal in Tiverton and Little Compton, he said.
"First they have to struggle with the sales tax inequity and now our state wants to go out and slap a bridge toll on them … Their Massachusetts customers stay away because of the sales tax and their customers from the rest of Rhode Island are blocked by a toll bridge. They are cut off from everybody. It's wrong."
Asked if he would support the Malik bill, Rep. Edwards called it "a great way to open the discussion. This is something Rhode Island needs to be talking about before we lose what little business is managing to hang on."