Businesses prepare for tax hike

INDIANAPOLIS -- The state of Indiana has an early Christmas surprise for shoppers -- an increase in the sales tax.\nA 1 percent increase in the sales tax goes into effect Dec. 1, right in the midst of the holiday shopping season.\nWith the hike, the sales tax increases from 5 percent to 6 percent.\n"It's regrettable that the increase comes at the busiest time of the year for retailers," said Grant Monahan, president of the Indiana Retail Council, whose 300 members operate about 4,000 retail outlets.\n"Some retailers may take these increases and turn it into an advantage and encourage people to shop early," he said.\nAbout 40 percent of a typical store's business comes during the last three months of the year, Monahan said. \nFor example, the 1 percent increase means an additional dollar will be paid for a $100 purchase.\nThe tax increase was a key part of the tax restructuring and budget plan approved this summer during the General Assembly's special session and is expected to bring hundreds of millions of dollars a year to state coffers.\nCathy Henninger, spokeswoman for the state Department of Revenue, said the department was working to inform retailers early about the changes.\nShe said the department has not heard any complaints from retailers.\nIndiana last had a change in its sales tax in 1983, when the tax was increased from 4 to 5 percent, Henninger said.\nNeighboring states have similar sales tax rates. Kentucky and Michigan have a 6 percent sales tax, Ohio has a 5 percent sales tax rate and Illinois as a 6.25 percent rate.\n"The sales tax is a fairer tax than the property tax," he said, since it was based on a person's ability to pay.\nAlso, he said, although the sales tax was increased, businesses saw tax reductions in other areas that generally offset these increases.\nSome retailers said they were not too concerned about a loss of business because of the increase.\n"I think they might grumble a bit, but I think they'll be OK," said Nancy McLaughlin, a district team leader for 11 Target stores in central Indiana. "Because it's happening at Christmas, they'll have to buy anyway."\nMcLaughlin also said she expected no problems in preparing "cash registers ready to ring up the new tax rate.