A Hummel Report Investigation
The legislature rejected Gov. Chafee's proposal this past session to broaden Rhode Island's sales tax. This week, in a hidden camera investigation, Jim Hummel discovers you may already be paying an extra tax - without you or the state knowing it. We go undercover to find money going into the state's coffers that shouldn't be.
Click here for a list of grocery items that are taxable in Rhode Island.
Click here for the Division of Taxation's latest sales and use tax regulations.
The legislature rejected Gov. Chafee's proposal this last past session to broaden the state's sales tax. Well we found that you may already be paying an extra tax - without you or the state knowing it. This week we go undercover to find that there's extra money going into the state's coffers that shouldn't be.
When you go to a supermarket chain store like Shaw's or Stop and Shop, every item is bar coded with a price and designation of whether it should be taxed - all programmed out of the corporate office. The companies know what should and shouldn't be taxed in each state they operate.
But what about the smaller stores, the mom and pop convenience shops, where each cashier manually enters a purchase - and is responsible for sifting through in what Rhode Island is extensive list of what is taxable.
Dionne: ``I go into one of these convenience stores and always be assessed a tax.''
Bobby Dionne says for years he's been buying items - including his favorite, potato chips - that shouldn't be taxed - but are. And he's challenged more than a few cashiers.
Dionne: ``And I know there's no tax on certain food items, and a couple of times it would get personal with the store owners and they'd throw me out of the store. And the thing about it is, the store owners they don't make anything out of the whole deal, the money goes right to the state of Rhode island , so I can never understand why they're giving you the tax and they don't making anything out of it.''
So we decided to find out for ourselves at five Rhode Island convenience stores, going in first without a camera to buy items like potato chips, soda, chocolate milk, ice, cough drops and chap stick. The one constant: Utz potato chips, which were on sale throughout the state.
Every store charged us tax on at least one item that shouldn't have been taxed.
This store in Warren, improperly taxed us on the potato chips.
This brand new store in Riverside taxed chips and Chapstick - both are tax exempt.
This store, also in Riverside, on each of two visits charged us for a bag of ice, also tax exempt.
And this store in East Providence improperly taxed us on cough drops.
Even this Rite Aid in Riverside - part of a huge national chain - taxed us on this bottle of 100 percent orange juice, which according to the Rhode Island Division of Taxation is tax-exempt.
So we decided to take our undercover camera into three of the stores. First up: the store in Warren.
Hummel: ``There's tax on those?''
We were charged $3.08 - the receipt says it includes 20 cents tax for chips and soda. When we questioned it, the cashier told us to just pay $3 - but it the slip said the chips, in fact, were being taxed.
Next stop this store in Riverside, which opened just a few weeks ago.
Hummel: ``You guys just open?''
Cashier: ``Yeah. A few weeks ago.''
Hummel: ``How's it going?''
Cashier: ``Not bad. Want a bag for that?''
Hummel: ``Yes, if I could get a bag that would be great....so there's tax on this?''
Hummel: ``On all of this?''
Hummel: ``You know you're not supposed to tax that. You know that?''
Both times we visited, we were taxed on everything, including several non-taxable items. In fact the Chap stick had the words `plus tax' next to the price.
The cashier told our undercover producer after we left that his boss had instructed him to tax everything.
Third stop - this store in Riverside that advertises ice for $1.29 a bag. Both times we went in the cashier added tax, when he shouldn't have.
Hummel: ``Naw, I'll just carry the ice. I've got a cooler in the car. Can I get a receipt? What's the item the tax was on?''
Cashier: ``That was the ice.''
Hummel: ``Every single of them, all five plus a Rite Aid, charged me improperly for one item or another.''
Sullivan: ``That's troubling, in my opinion. and we need to actually improve our outreach.''
David Sullivan is the state's tax administrator.
Sullivan: But it is a problem and some of the small convenience store will default and tax everything when they shouldn't do that. We try to give them a list they can give the cashier working the register because they do not have those automated systems. They don't have computer systems were it reads a bar code. A lot of times someone typing in a price and hitting taxable versus non-taxable.''
Sullivan says stores that don't charge the proper sales tax face potential fines, interest and back payments. But what about those like we found charging tax when they shouldn't be?
Hummel: ``Has there ever been a fine for that?''
Sullivan: ``I don't believe there is statutorily a penalty for that.''
Hummel: ``Do you think there should be?''
Sullivan: ``I think it should be examined, yeah.''
Hummel: ``Shouldn't the message go out, quite frankly, that it's just as important to not charge the improper tax as it to not be giving the state the tax.?''
Sullivan: ``One of the mottos I use is we need to collect 100 percent of the taxes that are due to us - not a penny less not a penny more. We don't want to over collect from taxpayers. And your point is very valid on that - that there should some type of penalty to somebody who just defaults to taxing everything.''
Dionne: ``You figure out how many liquor stores, convenience stores, pizza parlors are in this state and how much the snack industry is, you figure 7 percent of millions of dollars - you do the math.''
Hummel: ``When I go out and do a sample of five stores and they all are charging me improperly; it wasn't 2 of 5 it wasn't 3 of 5 - it was all five, to me that equals a lot of revenue over the course of time, 'cause those companies today are still charging. The skeptic might say - if that's a lot of extra money coming in to the state, what incentive does the state have to stop that, because in effect it's millions dollars that you get?''
Sullivan: ``I believe it's my duty and my responsibility to... I don't think we should over collect taxes from anybody. I pay taxes just like anybody else - I don't want to overpay my taxes. If I overpay it I want the money refunded to me, and the citizens of the state should want that as well. And it's our duty to that and ensure of that.''
Sullivan says if you think you've been improperly taxed, call 401-574-8955 and his department will look into it.
Jim Hummel for the Hummel Report.