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Retail Advocate

 March 2007

Local Issues

March is BPOL (gross receipts tax) Payment Month

Have you paid your gross receipts tax? Now is the time to look at how much you paid in BPOL tax and compare it to your gross and net profit. The RMA continues to tell local governments that the BPOL tax is unfair to retailers because the gross receipts calculation includes the retailer’s inventory investment. Example: if you purchase an item for $50 and sold it for $100 you would pay the tax on $100 ($50 gross profit and $50 inventory investment). Another example: you purchase an item for $50 and after markdowns sold it for $49.99-- then you pay the tax on your investment without making even $.01 in gross profit.

This tax is worse for Henrico retailers because there is no differential in rates between what a Retailer pays and other categories. For example, a retailer with $800,000 in gross receipts pays $.20 cent per hundred or $1,600. An attorney who has the same amount of gross receipts ($800,000) pays $.20 cents per hundred or $1,600 in BPOL Tax. The attorney has no cost of inventory included in his gross receipts. You have to ask yourself if it’s fair for the retailer to pay the same rate as the attorney.

Chesterfield County at least has a $.01 cent differential between what retailers pay and other categories. The immediate past Chairman of the Chesterfield County Board of Supervisor, Dickie King, has formally challenged the County’s Budget staff to find opportunities to lessen the BPOL burden on retailers.

The City of Richmond’s BPOL rates range from $.20 cent per hundred for retail to $.58 per hundred for professionals, (attorneys). While we continually urge the City to lessen the retail burden, we do appreciate the differentials in place that recognize the inventory investment difference between retailers and other categories of business.

If you have any questions concerning the BPOL tax please call George Peyton, 334-2932

Click here for local elected officials >>

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State Issues

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Federal Issues*

© 2006. NRF Enterprises, Inc. used with permission.*

Columnist: Union organization bill misnamed

The Employee Free Choice Act, which is likely to pass in the House of Representatives this week, would allow unions to organize workplaces without workers voting for unionization in elections with secret ballots. Columnist George F. Will argues against the legislation and predicts the president will veto it if it gets past the Senate.  The Washington Post 

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Bill requiring mental illness coverage passes Senate committee

The Mental Health Parity Act, which would require health insurance plans that cover mental illness to do the same for other illnesses, passed a Senate committee by an 18-3 vote. The National Retail Federation supports the legislation and is "greatly encouraged by the carefully targeted preemption of inconsistent state laws, the clear protection for medical management of the benefit, and the preservation of employer control over benefit and network design," said Steve Pfister, the group's senior vice president for government relations.  American City Business Journals/Phoenix 

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New merchant-pricing tier for MasterCard

MasterCard is changing its merchant-pricing tier for its branded credit cards, splitting its basic tier into two groups that will have a variety of different rates. The new structure, which has created an outcry among retailers, is designed to capitalize on the increased number of credit cards that offer numerous rewards.  The Wall Street Journal (subscription required) 

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House Approves Card Check, Fight Moves to Senate

The Democrat-controlled House this week approved "card check" legislation that would take away the right to secret ballots in union elections, ignoring a veto threat from President Bush and protests from Republicans that the measure was payback for union support in last fall's elections.

H.R. 800, the Employee Free Choice Act, sponsored by Education and Labor Committee Chairman George Miller, D-Calif., passed the House 241-185 on Thursday. The bill would require the National Labor Relations Board to certify a union if presented with signed authorization cards from a majority of employees the union is seeking to organize, eliminating the long-standing National Labor Relations Act requirement for secret ballots in union elections. The legislation also includes other anti-employer provisions such as compulsory arbitration of first contracts and enhanced penalties. With membership declining in traditional areas like manufacturing, card check is the key element in unions' survival strategy as they begin to target industries like retail.

"Under this system, the union organizers themselves -- not the federal government -- oversee the process, and the workers' votes are made public to the employer, the union organizers and co-workers," NRF Senior Vice President for Government Relations Steve Pfister said Wednesday in a letter to Speaker Nancy Pelosi, D-Calif., and other members of the House. "There are many examples where card check elections have been challenged on the basis of coercion, misrepresentation, forgery, fraud, peer pressure and promised benefits."

By contrast, "The secret ballot election guarantees the right of employees to freely choose whether or not to be represented by a union and it allows for a private, confidential vote by employees based on the principles of the American system of democracy," Pfister said.

Thursday's vote came less than a month after the legislation was introduced on February 5, even though the only hearing was a subcommittee session dominated by union supporters with little input from other workers or business groups.

"If this bill is passed, Congress would be throwing away over half a century of labor law in a single month," NRF Vice President for Government and Political Affairs Rob Green said. "Most lawmakers haven't had a chance to examine what this bill would do, and American workers aren't being given a chance to learn how this bill takes away their rights. When they do, they're going to oppose it. The changes proposed in this bill are too drastic to be pushed through on a fast track that hides the facts from the public."

NRF co-chairs the lobbying committee of the Coalition for a Democratic Workplace, and efforts by the coalition were able to reduce the number of House Republicans supporting the bill to 13 from the 30 expected by labor. Two Democrats voted against the bill.

House Republicans said passage of the legislation had clear political motivations.

"The bill simply amounts to Big Labor's big payback," Education and Labor Committee Ranking Member Howard "Buck" McKeon, R-Calif., and Representative John Kline, R-Minn., said in a letter to fellow House members.

The White House issued a statement saying Bush would veto the measure if it reaches his desk.

"H.R. 800 would strip workers of the fundamental democratic right to a supervised private ballot election, interfere with the ability of workers and employers to bargain freely and come to agreement over working terms and conditions, and impose penalties for unfair labor practices only on employers -- and not on union organizers -- who intimidate workers," the White House said. "If H.R. 800 were presented to the President, he would veto the bill."

Whether the bill will make it to Bush is uncertain. With Democrats holding a 32-seat majority, House passage was never in question, but Senate numbers work much more in favor of the business community. Democrats hold 51 of the 100 seats, but it takes 60 votes to overcome procedural hurdles. Even if the measure passed, it would take 67 Senate votes to overcome a presidential veto.

Senate Health, Education, Labor and Pensions Committee Chairman Edward Kennedy, D-Mass., said he would move quickly to introduce a Senate version of the bill. But committee Ranking Member Michael Enzi, R-Wyo., vowed to fight the bill.

"The so-called Employee Free Choice Act would not only require the imposition of a workplace union based solely on signed authorization cards, it would radically alter the longstanding process of collective bargaining," Enzi said. Enzi called the private ballot "one of the cornerstones of our democracy."

Even if the measure can be defeated in the Senate or vetoed by Bush, NRF is concerned that unions will not give up easily. Organized labor has a history of long-term commitment on its priorities as seen in multi-year efforts to pass initiatives such as the Family and Medical Leave Act or minimum wage increases. If Democrats strengthen their Senate majority and win the White House in 2008, the issue could easily return.

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NRF Urges House to Adopt Senate Wage Hike Tax Relief

NRF this week urged the House to adopt the Senate's $8.3 billion package of tax relief to ease the impact of a minimum wage hike, arguing that the Senate measure includes provisions small retailers need in order to remain competitive.

A key provision of the Senate bill is language requested by NRF that would allow retailers who own their stores to depreciate remodeling and other improvements over 15 years, the same as retailers who lease their stores. Under current law, improvements at owned stores must be written off over 39 years.

The provision would initially apply only to improvements made through March 31, 2008, but NRF would seek extensions if it were enacted. Even with that time frame, the change would save retailers an estimated $1 billion over 10 years, according to the congressional Joint Committee on Taxation.

NRF Senior Vice President for Government Relations Steve Pfister argued in a letter to House Ways and Means Committee members Wednesday that small Main Street retailers are more likely to own their stores than mall-based national chains, and shouldn't have to see a higher tax bill.

The difference in tax treatment is "particularly harmful to small retailers who represent a significant share of our nation's small businesses and are among the industries hardest hit by a minimum wage increase," Pfister said.

Some small retailers choose to own their buildings as a means to finance their retirement if their business does not succeed, Pfister said. Others are forced to buy a building because mall owners concerned about the credit worthiness of an independent store refuse to rent to them.

Pfister said Congress should support small retailers who own their stores because of their commitment to the community. "When a neighborhood deteriorates, the retailer who leases his store can break the lease or wait for it to expire and move out," he said. "Retailers that own their stores have a bigger investment and a stronger incentive to work toward revitalizing the community."

The House on January 10 passed legislation raising the minimum wage from $5.15 to $7.25 over two years but refused to consider tax provisions. The Senate approved the same increase on February 1 but only after adding an $8.3 billion package of tax provisions.

The House reversed course on February 16 and passed a tax package of its own, but included only $1.8 billion in relief. The measure extends the Work Opportunity Tax Credit for one year (compared with the Senate's five-year extension), includes the Senate's one-year extension of small business expensing and addresses restaurant tips, but leaves out the Senate's depreciation language.

House and Senate leaders are currently posturing over the size of a compromise bill and have yet to sit down to begin formal negotiations. President Bush has said he would veto a minimum wage hike without tax relief, and that the House bill is not large enough.

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Country-of-origin labeling might be on horizon

Farmers groups, congressmen and senators are meeting to discuss legislation that would require country-of-origin labels on all foods sold in the U.S. Groups such as the Food Marketing Institute and GMA/FPA oppose the law, saying it is costly and unnecessary. FMI has worked with one food group to develop a strategy that includes voluntary labeling.  The Palm Beach Post

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Shoplifters an organized, major threat

Shoplifting, once an occasional crime attributed mostly to teenagers, is an organized, highly successful criminal enterprise across the country. Organized retail theft losses in the U.S. range from $15 billion to $37 billion a year, according to estimates, and police say they need retailers' help to address the problem.  The News Journal (Wilmington, Del.) 

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Postal Rate Hike Could Cost Retailers Millions

The U.S. Postal Service Board of Governors is currently considering an unexpectedly large rate increase that could cost retailers millions of dollars. NRF this week wrote to the Board Of Governors to protest this hike which could drive merchants to reduce their volume of mailings and perhaps seek other ways to reach customers.

The increase currently being considered averages 7.6 percent, or half a percentage point less than the 8.5 percent USPS requested when the rate case was filed in May 2006. A first-class stamp would go to 41 cents from the current 39 cents and would most likely become effective May 6.

But the increase under consideration for certain classes of mail, particularly catalog mail, would amount to 20 percent -- roughly twice the 9-11 percent requested by the Postal Service. The increase for some types of catalog mail could be as high as 40 percent. The increase would come despite the recent approval of $874 million for new sorting machines intended to improve the efficiency of handling catalogs and other "flats."

"This rate increase will have a devastating impact on retailers of all sizes who rely on mail to drive business and to communicate with their current and future customers," NRF Senior Vice President for Government Relations Steve Pfister said in a letter to Board of Governors Chairman James C. Miller III on Wednesday. "Such an exorbitant rate increase will hit small retailers the hardest and will further cut into retailers' already slim profit margins."

"These recommendations directly undercut the spirit of the recently enacted postal reform legislation, which NRF long supported and sought to provide badly needed predictability for the mailing industry," Pfister said. "Throughout the debate, NRF argued that the Postal Service should have the ability to operate more like a business. The industry should be able to rely on the Postal Service as a reliable and trusted business partner, but an unexpected 30 percent rate increase virtually overnight would never be tolerated from other vendors."

With the rate increases under consideration so much larger than those requested by USPS and coming in the middle of a fiscal year, most retailers will have no choice other than to reduce postal spending, Pfister said. The rates "will also force retailers to look at alternative means of reaching their customers and to reduce future mail volume," he said.

This rate increase comes only three months after President Bush signed the Postal Accountability and Enhancement Act. The new law was the first major overhaul of the Postal Service since 1970 and would take a number of steps to make it run more like a private business and compete more effectively.

The rates were recommended by the new Postal Regulatory Commission, which was formed under the new law to replace the former Postal Rate Commission.

Some observers believe the large increases for catalogs were recommended by the PRC because this is the last rate case before a major provision of the new law linking rate increase to the Consumer Price Index for the next 10 years goes into effect. USPS and the PRC have been seeking to gradually increase the rates for catalogs over the past several years in order to more accurately reflect the costs of sorting and processing by the Postal Service.

NRF supported last year's reform legislation because postage is a major cost for many retail companies. Retailers are among the nation's largest mailers, using the Postal Service to ship merchandise, mail catalogs and advertisements, send bills and receive payments. A final decision regarding the rate increase is expected by the Postal Board of Governors later this month.

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Coleman Says Senate Should Investigate Credit Card Interchange

The senior Republican on a key Senate subcommittee said this week that senators should include rapidly rising credit card interchange fees in their investigation of credit card company practices.

"Interchange fees can significantly impact the prices charged by merchants and retailers, many of whom already operate on extremely thin profit margins," Senator Norm Coleman, R-Minn., said Wednesday.

"Ultimately, it is the American consumer who bears the cost of these interchange fees, but local retailers also feel the squeeze as they compete with larger companies that can spread these costs over a broader customer base," Coleman said. "This important issue should be one of the continued subjects of our inquiry."

Coleman's comments came in his opening statement as the Senate Homeland Security and Government Affairs Committee's Permanent Subcommittee on Investigations held the first in a series of hearings on credit card practices. Coleman is ranking member on the subcommittee.

Subcommittee Chairman Carl Levin, D-Mich., didn't address interchange by name during the hearing but said he plans to push legislation to force credit card companies to be more open about their fees, interest rates and marketing practices.

The panel's interest in the issued was welcomed by NRF.

"We are very pleased that the Senate is shining a bright light on one of the most abusive credit card practices of all," said Mallory Duncan, NRF senior vice president and general counsel and chairman of the Merchants Payments Coalition, a business group formed to address interchange. "Interchange is the biggest fee you've never heard of, costing American consumers more than $30 billion a year. But unlike other credit card fees, interchange never shows up on your monthly statement. Credit card companies make it virtually impossible for merchants to tell you how much you are paying in interchange fees even though these fees increase the price of everything you buy."

Coleman is the third senator to focus attention on interchange this year. Senate Banking, Housing and Urban Affairs Committee Chairman Christopher Dodd, D-Conn., said in January that he plans to hold a hearing on interchange as part of a separate series of hearings looking into credit card industry practices. Senate Judiciary Committee Ranking Member Arlen Specter, R-Pa., who held a hearing on interchange last year as chairman of the panel, visited a Pennsylvania supermarket last month to highlight the issue and said Congress may use federal antitrust laws to address the issue.

Interchange is a percentage of each transaction that Visa and MasterCard collect from retailers every time a credit or signature debit card is used to pay for a purchase. The fee varies with type of merchant, transaction and card, but averages close to 2 percent for most transactions. Visa and MasterCard interchange totaled $30.7 billion in 2005, up 17 percent over 2004 and an 85 percent increase since 2001.

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NRF Conducting Retail Health Care Survey

NRF's CEO Health Care Task Force is conducting a survey of retailers' health insurance practices in order to assist the panel in its efforts to develop proposed solutions to the nation's health care crisis.

The four-page confidential survey compiles a wide variety of information including a retailer's number of full-time and part-time employees, the percentage eligible for health care, requirements for eligibility and the percent participating. Merchants are also asked for information on the cost of the plans both to employer and employee, changes they've made in recent years to deal with rising costs and whether those changes have worked.

Implementation of Health Savings Accounts, Health Reimbursement Arrangements and Flexible Spending Accounts are among the topics covered, along with innovations such as disease management, wellness programs and information technology use.

The survey is being conducted on-line at www.nrf.com/healthcaresurvey. Individual companies' responses will be kept confidential, but a blind summary of the results will be shared with companies that participate. NRF members are being asked to complete the survey by March 30.

The Task Force, made up of senior corporate benefit and human resources executives acting at the direction of their CEOs, is working on a four-stage, two-year plan to address the cost, quality and access issues challenging the nation's health care system. Information gathered in the study will be used by the Task Force and for NRF's lobbying of Congress and federal agencies.

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Links

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RMA Government Links

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