Indiana’s Proposed Plastic Bag Tax
Posted by Ted Duboise
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Currently, many cities and states in the U. S. are proposing, passing and enforcing plastic bag ordinances. Some ordinances prohibit retailers from giving free plastic bags. Some ordinances prohibit the free distribution of paper or plastic bags.
There are other ordinances that levy a fee to the customer if they require a bag at check-out. Well, now there is a new kind of law being proposed: a plastic bag tax.
Indiana HB 1521 was introduced by Representative VanDenburgh and the first reading occurred on January 20, 2011. The preamble to the bill calls it a ‘fee’ on plastic bags. The title states: “A BILL FOR AN ACT to amend the Indiana Code concerning taxation and to make an appropriation”.
Call it what you will (a rose by any other name) but the fee is a tax. In fact, all other plastic bag bans reported on PBBR states an environmental purpose for the ordinance. H.B. 1521 does not state any environmental purpose for the law. Read the title again: “concerning taxation and to make an appropriation”.
Section 3 of HB1521 states: A person who accepts a disposable carryout bag furnished by a retail merchant for use in carrying property acquired in a retail transaction shall pay to the retail merchant a fee of ten cents ($0.10) for each disposable carryout bag accepted. The retail merchant shall collect the fee as an agent for the state.
Sec. 6 states: A retail merchant shall file returns and remit the fee imposed by this chapter electronically through the department’s online tax filing system at the times the retail merchant is required to file returns and make remittances under IC 6-2.5-6.
Sec 7 states: (a) In order to compensate retail merchants for collecting and timely remitting the fee imposed by this chapter, every retail merchant that timely remits the fees imposed by this chapter is entitled to deduct and retain a collection allowance from the amount of those fees otherwise required to be remitted under this chapter.
(b) The allowance equals: (1) the retail merchant’s liability for the fees imposed by this chapter determined under section 5 of this chapter; multiplied by (2) the collection allowance percentage applicable to the retail merchant under IC 6-2.5-6-10(b).
Now IC 6-2.5-6-10(b) states that the collection allowance percentage varies. It is determined by sales volume of the business. A small business will keep 0.76% of the fee. This means the merchant will get 3/4 of a penny for every 10 cent plastic bag fee. A medium business will get 0.53% of the fee. So for collecting and remitting the fee for the state, the business will keep about a half cent of each plastic bag fee paid.
As opposed to most bans in California, nowhere does the bill state that the retailer is entitled to any part of the fee – only the collection allowance percentage. This is the same as if collecting sales tax on any other item.
Furthermore, the fee is remitted to the state through the state’s electronic tax remittance system. This is a tax – not a fee. This fee is simply a way to raise revenues for the state. I don’t see anything ‘green’ about it. Well, you might say it is got a ‘green’ tint.
The funds collected through the fees are to be distributed to the State of Indiana Economic Development Corporation (25%) and to the Department of Education (75%).
75% will be appropriated to run the public schools. 25% will go to fund the ‘Green Industries fund’. The Green Industries Fund provides grants and loans to Indiana Manufacturing companies for the following purpose:
1. To strengthen Indiana’s economy by focusing investment in advanced manufacturing clusters focused on more energy efficient and environmentally sustainable technologies, processes, and products.
2. To accelerate job creation through training and education initiatives to enhance the skills and employment prospects of Indiana’s workforce in green industries.
3. To facilitate the redevelopment of Indiana manufacturing sites, facilities, and processes to operate in a more energy efficient and environmentally sustainable manner.
4. To stimulate the development of technologies, processes and products that reduce energy consumption or lower emissions in the market of their intended use.
5. To encourage public-private partnerships focused on development of green industries among Indiana manufacturing companies, public or private educational institutions, nonprofit organizations and charitable foundations, research and development organizations, and state agencies.
Can the bill be passed? Well, I have no political savvy, especially in Indiana. However, Shawn Bell works for a legislative/bill tracking firm in Washington, DC. Shawn’s expertise lies in the legislative and political process in state legislatures. This is what Shawn had to say:
“While Indiana has introduced several meaningful pieces of “Green” legislation this session, Republicans control both Legislative chambers, as well as, the Governor’s office. H.B. 1521 is sponsored by a Democrat, so unless she can garner support from across the aisle, it could prove difficult to move this measure through the process.”
Shawn says also that it is being reported that H.B. 1521 is already receiving substantial opposition.
More can be learned at the State of Indiana’s website.