U.S. Takes Charge in TV Converter Box Purchases

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No new taxes on federal subsidies for TV converter boxes, that is.

With the February 2009 deadline looming for conversion of all broadcast television signals to digital format, retailers who sell set-top converter boxes are being warned not to charge sales tax on the $40 federal government coupons that customers present.

That’s because those coupons are in effect federal government payments that states cannot tax.

“We’ve been alerted that several retailers have been charging sales tax on the entire purchase price of the digital converters when they should only be taxing the portion of the price not covered by the coupons,” said Anita Gore, spokeswoman for the state Board of Equalization.

For the standard converter box, which typically retails for $49 to $59, that means only the amount above $40 is taxed.

Gore said that all registered retailers in the state will be receiving a notice about this in coming weeks.

In the meantime, retailers who have been charging sales tax on the full purchase price of the converter boxes are being encouraged to contact their customers and let them know they are eligible for a refund of the excess sales tax. And customers who have recently purchased converter boxes with coupons and paid sales tax on the entire purchase price are being encouraged to return to the retailer with their receipt and request a refund.

Those retailers who have overcharged the sales tax and then paid those taxes to the Board of Equalization can get a refund from the agency, but only if they can prove they have begun to make reimbursements to customers. To claim a refund, retailers can log onto the agency’s website at www.boe.gov.


Inspection Program

Meanwhile, the Board of Equalization is about to expand enforcement of registration for payment of retailers’ quarterly sales tax receipts provided the funds to do this remain in the 2008-09 state budget that’s now being debated in Sacramento.

For the last couple of years, the agency has conducted a pilot program in Los Angeles and San Francisco that resulted in inspections of around 44,000 retail establishments, according to agency spokeswoman Anita Gore. About 4 percent of the establishments had not registered at all to pay sales taxes, while another 20 percent needed to update their registration. For example, Gore said several retailers had not notified the agency that they had begun selling tobacco products, which require a special license.

The pilot program generated $24 million for the 2007-08 fiscal year ending June 30. Gore said making the program permanent and expanding it statewide would generate about $38 million for the 2008-09 fiscal year. Funds to do that are allocated in the state budget, but lawmakers are gridlocked over how to close the $15.2 billion deficit.

If the program is funded, Gore said that retailers in parts of L.A. County not targeted in the pilot program especially in the San Fernando Valley can expect visits from agency inspectors in coming months.


Tobacco Retailer Fee

L.A. city officials are back with another attempt to raise the annual permit fee for tobacco retailers and expand the city’s program to enforce the ban on tobacco sales to minors.

Currently, the permit fee of $208 raises about $1.1 million annually.

Two years ago, the City Attorney’s Office proposed raising that fee nearly 50 percent, to $300. The extra hundreds of thousands of dollars would fund the hiring of an additional city inspector and double the number of site inspections and sting operations involving undercover California Department of Health Service officers posing as minors.

But the proposal was set aside until the number of establishments paying the permit fees had grown enough to fully fund existing staffing and program levels, which would mean about 5,200 business entities paying the fee.

With 5,284 establishments paying the fee in the 2007 calendar year, the program had passed the threshold, and Chief Administrative Officer Raymond Ciranna has approved the fee increase and expansion of the program. The issue goes to several city council committees in the next few weeks before going to the full council for a vote.

Tobacco retailers did not mount opposition to the plan when it was first raised, though some lamented the prospect of a fee increase. One specialty tobacco shop owner, for example, said that while this particular fee increase would not have a tremendous impact, the cumulative effect of dozens of local and state-imposed tobacco taxes and fees prompted him to get out of the business when his lease expired.

But another tobacco shop owner said the fee increase was so small about 25 cents per day that it would have little effect on his bottom line.



Staff reporter Howard Fine can be reached at [email protected] or at (323) 549-5225, ext. 227.

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Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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