Many retailers already face challenges just keeping their heads above water, so the state and local sales tax increases that go into effect starting April 1 have some businesses worried that it's drowning time.
Across Los Angeles, many retail businesses have had to offer deep discounts just to get people into their stores. An increase in sales tax will make surviving even tougher.
"We understand that there's a budget deficit and everybody has to live with that," said Sal Fabatino, manager of Tabbert's TV & Appliances in Downey. "But business is not going that well. It's difficult for people to come in the doors. People are afraid of losing their jobs, so what can do you?"
To help relieve a $42 billion state budget deficit, a 1 percent increase for the entire state goes into effect this week, bringing Los Angeles County's sales tax to 9.25 percent. The county will also impose its own hike of 0.5 percent July 1, bringing the tax rate to 9.75 percent.
"Small businesses and consumers are in no position to absorb sales tax, income tax and vehicle license fee increases," said John Kabateck, executive director of the California branch of the National Federation of Independent Businesses. "They do not stimulate, let alone expand, business. This is one more disincentive for consumers to go to their stores. It makes it that much more of a challenge when (shops) are paring back shifts, laying off and eventually closing their doors."
Some retailers, big and small, have been advertising heavily in an attempt to drum up business before the tax hike. Toyota, Honda and BMW dealers have been running ads on local radio stations urging listeners to buy before April 1.
One of those dealers is Norm Reeves Honda in Cerritos.
"It's unfortunate that the sales tax is increasing," said Brad Mugg, the dealership's general manager. "We'll just do everything we can for our customers. You have to for your business. And if we have to give a little, by golly, we'll do it."
Friedmans Appliance Center in Long Beach is also advertising with the "buy now" approach, but the shop has another concern customer leakage into neighboring Orange County, where the sales tax is lower.
The store specializes in kitchen remodeling and appliances, and has placed ads in all local newspapers, said Sales Manager Christopher Ybarra.
"It's a good thing to advertise because everybody matches everybody's price," he said. "It's such a competitive market with such low margins to begin with that every little dollar helps."
Ybarra said when Orange County residents come to the store, they tend to balk at paying more in sales tax some have even walked out over having to pay an extra $50. He expects this behavior to increase come April 1, so he plans on having to absorb the difference in sales to keep those customers.
For some cities within the county, sales tax will be even higher due to local voter-approved increases: As of April 1, sales tax will be 9.75 percent in Avalon, El Monte and Inglewood, and 10.25 percent in Pico Rivera and South Gate. When the countywide half-cent sales tax kicks in July 1, these cities' rates will either match or surpass the highest sales tax of major cities in the country, which is Chicago's 10.25 percent. (In parts of Alabama, sales tax is as high as 12 percent.)
Martin's TV & Radio Center, which is in the older part of South Gate with many other mom-and-pop stores, is one of the businesses that will be affected by the state and local tax increases.
Though much of its business is service-oriented, the store charges tax on the parts used in repairs. But any kind of increase will be hard, especially because the store's customers don't have the resources to pay much more.
"We're Latino, and our customers say, 'You're not going to charge me tax, are you?'" said Eduardo Arreola, one of three employees at Martin's. "They want us to pay the taxes, but we lose money that way. We live in a community where you cannot charge a lot."
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