The Times and Democrat - Grocery tax drop gets thumbs-up from most retailers, shoppers

Irene Gainey strolls down an aisle in the Riverside Drive Bi-Lo looking meticulously at the prices on various canned goods.

For the retired 74-year-old Gainey, searching and finding the lowest prices on groceries has become commonplace as she and her husband, a 10-year retiree from the former textile giant Greenwood Mills, are on a fixed income.

Despite Social Security, it’s just not enough to cover all the expenses of medicine costs, house payments, utilities and medical bills related to a recent health issue, on top of a $300-a-month grocery bill.

And so when the state sales tax on “unprepared foods” drops two cents on the dollar, from 5 percent to 3 percent today, Gainey says she will be breathing a little easier.

“We have all these bills piled up and no way in the world to pay them,” Gainey said. “Every little penny helps.”

Gainey is one of many shoppers who see the grocery tax reduction as an opportunity to save at least a little bit if not extravagant dollars.

Rowesville resident Sherry Allen says she grocery shops three time a week, spending an average of $130 for groceries. On top of this, Allen has one daughter who is currently a junior at the University of South Carolina, an 18-year-old son and an 11-year-old son.

She says any tax breaks available to offset the financial challenges in supporting a family is welcome.

“This will help a lot,” Allen said, adding that declining gasoline prices have also helped lessen financial stress. “The people that don’t make a lot and receive minimum wage, I don’t know how they make it.”

The tax change affects staples such as produce, milk and bread, as well as other foods intended to be eaten at home. Roughly half the items in a typical grocery store would be eligible for the tax break.

Not eligible for the lower rate are “prepared foods,” generally defined as foods to be eaten on the premises, as well as hot foods and beverages, alcohol, tobacco products and household goods.

While shoppers seem to be searching for some cost reductions wherever possible, retailers are mixed about the tax reduction’s impact on store sales.

“It is a good thing,” Chestnut Street Bi-Lo store manager Tim Smith said. “I believe that the people deserve a break. I think it is a great thing for anyone buying groceries and feeding their families. We are taxed to death on many things. This is one thing that will be a blessing.”

Smith said internally little had to be done for the transition. Most registers are already set to recognize food-stamp items, so it’s just a matter of reprogramming the machines slightly.

“It is automated into the system,” Smith said. “We don’t have to do anything. It works it out to food or non-food.”

At Hutto’s Grocery in Cordova, owner Timmy Hutto said while the tax break may not be significant, he reminded all that a “penny saved is a penny earned.”

“Out here, these people are well below the middle class,” Hutto said. “The money flux has people on EBT (Electronic Benefits Transfer or Food Stamps). Any penny they can save is a benefit for them. There are a lot of them out here. There are a lot of unemployed people.”

Hutto said in preparation for the tax reduction, the store has prepped its Royal and Casio cash registers to handle the change.

“All we are doing is setting the ringer up to do the right tax and let her rip,” Hutto said. “We are ready to go.”

David Faile, grocery manager at the Piggly Wiggle on Columbia Road, says he fails to see how the tax reduction will either have a great impact on the store sales or on the shopping habits.

“People are going to buy groceries anyway whether they are paying a 6 percent or 12 percent tax,” Faile said, adding that some shoppers may pick up extra things to save some extra money, but it won’t be a significant amount.

But some smaller food retailers said the specifics are a bit fuzzy.

“I don’t know much about it,” said Barbara Walden, office worker at the Elloree General Food Store. “It seems like it will help a lot of people out. I think it will help us out because more people will be buying groceries. It is not a hurt on anybody.”

At O’Cain’s Grocery in Rowesville, an unidentified employee, speaking on behalf of the store, said there was an expense of about $600 that went into the purchase and reprogramming of a new cash register.

The employee said he was skeptical on the tax’s impact on the store due to its location and size as compared to the bigger grocery retailers.

“We are not that big,” he said.

The tax cut is part of a recently approved property tax relief bill that takes effect in late 2007.

Responding to complaints of rising residential property taxes, state lawmakers this summer approved a plan that, among other things, will exempt owner-occupied homes from the property tax that pays for school operations.

To make up for that revenue, the statewide sales tax rate in June will rise by 20 percent, from 5 cents on the dollar to 6 cents, with a few exceptions – including accommodations and unprepared foods.

The food tax break doesn’t apply to local sales and use taxes. Items purchased with food stamps will continue to be exempt from sales tax.

For senior citizens 85 and older, who already get a 1 percent tax break on grocery purchases, they also get the lower rate on unprepared foods. State lawmakers said they decided to offer a break on food because the change in property tax collections won’t benefit all households.

While supporters of the property tax relief program say it will save consumers money, skeptics counter that it will do little to help low-income households who need the savings the most.

Opponents say the sales tax increases in June will offset much of the benefit from the grocery tax.

T&D Staff Writer Gene Zaleski can be reached by e-mail at gzaleski@timesanddemocrat.com or by phone at 803-533-5551. The Associated Press contributed to this report. Discuss this and other stories online at TheTandD.com.

Items ineligible for 3 percent tax; qualify for the 5 percent tax

Alcoholic beverages, such as beer, wine or liquor

Hot beverages ready-to-drink such as coffee

Tobacco

Hot foods ready to eat

Foods designed to be heated in a store

Hot foods that can be eaten in store or near store such as a mall food court

Vitamins and medicines

Pet food

Any non-food item such as tissue, soap, or other household goods

Foods eligible for 3 percent tax

Any food intended to be eaten at home by people, including snacks, beverages and seasonings.

Seeds and plants intended to grow food (not birdseed or flower seeds)

Cold items, which may include salads or sandwiches, intended to be eaten at home by people and that are not considered “prepared meals or food.” Prepared foods are usually those foods that may be eaten on site.

Source: South Carolina Department Revenue

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Comments:

Lizzie wrote on October 01, 2006 1:30 PM:"Of course this is a good thing at face value, but will anyone really be better off in the long run? Will the across the board tax increase include gasoline? If it does, then no one (including the ones qualifying for the property tax benefit), will be any better off. Then again, spreading the taxes out throughout the entire year is better than a lump sum. Even if we end up paying more overall. I need to know where to go to fully research the new law."

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