Indiana sales tax to increase

INDIANAPOLIS -- A looming increase in Indiana's sales tax has retailers taking to the airwaves and newspapers to urge consumers to buy big-ticket items now to avoid paying extra.\nThe advertising campaigns by auto dealers and retailers of household appliances are meant to boost their sales and also save customers a few dollars if they buy before the increase takes effect Dec. 1.\n"Anytime you can save money on a major purchase, it's a help. When people are already in the frame of mind to buy, several hundred dollars in savings can be the decision maker," said Jim Ellison, sales manager for Don Ayres Honda and Don Ayres Pontiac/GMC, in Fort Wayne.\nIndiana's sales tax jumps from 5 percent to 6 percent -- or to 6 cents on the dollar -- starting Dec. 1.\nRevenue raised by the increase, which was approved this year during the General Assembly's special session, will offset property tax cuts the legislature also made.\nRetailers said consumers can save if they buy before Dec. 1.\nKelley Chevrolet General Manager Steve Hug said if a customer buys, for instance, a $45,000 SUV now, they would save about $450 in sales tax.\n"This is a one-time shot that customers have a chance to take advantage of," Hug said.\nNeither Hug nor Ellison said the tax increase will hurt their business because sales taxes in area states are at or above 6 percent.\n"It won't keep a customer from a purchase, but it does give them a reason to buy now," Ellison said.\nFurniture stores and retailers selling expensive appliances are also looking to offer sales tax specials.\nJeffrey Fox, sales manager at John Klopfenstein Furniture in Fort Wayne, said Klopfenstein plans to do a promotion in which the store pays all the sales tax if customers make large purchases before Dec. 1.\n"That's not a huge amount, but people have a general perception that they are being overtaxed, so they will take advantage of it," Fox said.\nWhile the sales and specials are nice, most Hoosiers probably won't even notice the change because it accrues so slowly.\nIt will add 15 cents to the purchase of a $15 compact disc, and $1 to a $100 shopping spree at the mall.\nStudies show a sales tax increase neither helps nor hurts the economy.\n"There is no real effect -- it's usually a wash," said Liz McNichol, senior fellow at the Center on Budget and Policy Priorities in Washington. "One cent isn't really going to affect people's buying habits too much."\nHowever, McNichol said the increase will hit low-income families harder because they typically purchase only the necessary things they need to live and don't have any luxuries to cut to save money.\nBob Lain, assistant director in the Tax and Revenue Division of the State Budget Agency, said the state expects to take in $463.2 million in sales tax revenue during December. About $78 million of that is attributable to the sales tax increase.