Senate passes bill to reduce inventory tax

Every February, car dealerships in Indiana tout sales to "beat the tax man."\nMost try to unload their stock to lessen the toll of the state inventory tax, which can cost up to $1,000 per car for newer models. \nBut the annual spring sales might soon be a thing of the past.\nThe state senate unanimously passed a bill Wednesday that would phase out the inventory tax, which is levied on unsold merchandise. While it would save Indiana businesses hundreds of millions of dollars a year, it might lead to tax hikes in other areas.\nThe bill, written by Thomas Weatherwax, R-Logansport, would reduce the inventory tax by 10 percent annually during the next decade. It would not require the state to make up for the lost revenue, but it would allow counties to increase local income or property taxes to cover the shortfall. \nThe legislation would also allow counties to opt out of the tax, but they would then forfeit business tax breaks through the state. \nIndiana is one of 10 states that have the tax, which Weatherwax said is a deterrent to businesses that might come here.\n"Since Indiana stands alone in the Midwest in taxing inventories, removing the tax could send a clear signal to businesses that the state is in the chase for investments and jobs or all types," he said.\nThe state is not taking advantage of its geographic location, Weatherwax said.\n"Because the state enforces the inventory tax, we lose this competitive advantage," he said.\nWhile car dealers get good publicity from inventory tax sales, most are excited about the bill's progress.\n"It's long overdue," said Herb Wetzel, general manager at Family Chevrolet-Buick in Martinsville.\nWith car dealers, the tax can either be collected on inventory on stock on March 1 or on the average inventory for the preceding 12 months. Most choose to have their taxes collected on March 1.\n"I think it's a well-used advertising maneuver," Wetzel said. "But the tax wouldn't be missed."\nThe tax also burdens lumber yards.\n"We have to delay bringing in materials constantly," said Jim Watson, controller of Bender Lumber Company Inc., 611 W. 11th St. "We lose a large amount of cash in one fell swoop"