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Wyoming Market Profile: Food Tax Reinstatement Debate To Come In 2019

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by Lorrie Griffith/editor–West

Wyoming’s 20-day legislative session in 2018 brought out more tension than normal, with the highly conservative state looking for ways for its counties and municipalities to stop needing the state to kick in money for their survival. Discussion about reinstating its food tax, which went away in 2006, will be part of next year’s 40-day session, in fact.

Mark Larson
Mark Larson

That’s according to Mark Larson, who lobbies in Wyoming as the EVP of the Colorado Wyoming Petroleum Marketers Association (CWPMA). He works in tandem with Mary Lou Chapman, president of the Rocky Mountain Food Industry Association—which also covers Colorado and Wyoming—to keep tabs on bills of interest to the groups’ grocery and convenience store members.

This year’s 20-day session was a budget session, meaning that the focus was working out the state’s biennium budget. Non-budget bills are not introduced into the session for hearings unless a two-thirds majority of the legislators vote for them to be heard. The budget session often is a way to weed out “bad” bills before they can even be introduced, according to Larson. Two of these were increasing the tobacco tax and increasing the minimum wage.

A tobacco tax increase, which has over the years been proposed at as little as 30 cents to as much as $1 a pack, typically does not go forward in Wyoming for a couple of reasons. One of them is because more than 22 percent of the state’s tobacco taxes come from products that leave the state. In other words, because Wyoming’s tobacco tax is low, residents of other states cross the state lines to buy tobacco products. Raising the tax level might prevent some of those sales and thus lower tax revenue.

“When you look at even some of the smaller amounts of tobacco tax increase, when you look at parity with the other states, it becomes very clear that even a 30-cent rise in tobacco tax is going to jeopardize that 22.3 percent,” Larson said. “It doesn’t take long for them to do the math and say, ‘hey, this could be a problem.’”

Combine that with the fact that only about 14 percent of Americans currently are smoking, he said, and tobacco tax increases are not too appealing.

The legislature is, however, considering treating cigarettes like OTPs (other tobacco products) and having them taxed at the wholesale level, too. This is an issue because the state’s Northern Shoshone and Eastern Arapahoe tribes operate facilities that sell tax-free tobacco. The OTP products are taxed at 20 percent at the wholesale level before they get to retail, and the tribes can claim a credit for sales of these products to Native Americans. Cigarettes do not go through this same process, and while the tribes have been under a voluntary tax remission program for non-native American cigarette sales, the system is not audited, so there is no denying these retailers benefit from having non-taxed cigarettes, Larson said.

Wyoming is looking at joining the 12 other states that allow tobacco stamping at the wholesale level before it reaches the reservation, he added.

It would be similar to how Wyoming already treats gasoline sales on reservations. The gasoline tax on the reservation is the same as off the reservation, but then the tribes “basically get all of that tax back to use for programs or highways or whatever they want,” Larson said. “I think the tribes will agree and move forward because they recognize there is a substantial chunk of change sitting out there if they decide to pay the tax up front and get that tax back for them to use for whatever they want.”

Increasing the minimum wage continues to come up in Wyoming, but basically it’s a moot point, according to Larson, as the market already dictates wages that are higher than the $7.25 minimum wage.

Bills have been introduced to increase minimum wage in Wyoming to $9, $10 or even $15, he said. But entry-level cashiers in grocery and convenience stores make $10-$12 an hour, he said, because labor is scarce in Wyoming—the second most sparsely populated state in the U.S.

“The Wyoming legislature is pretty conservative, and they don’t think government should be meddling in the marketplace in terms of what the market will bear for employee salaries and wages,” he said. “Those bills are largely dying out, people are getting tired of hearing it; they recognize that no one in Wyoming is making $7.25 an hour because you can’t find employees in Wyoming right now. You look at the federal minimum wage that’s applicable to government contracts, and that’s still well below what the going rate is on the street.

“I don’t know anyone who’s making $7.25 an hour in Wyoming.”

Per capita personal income in Wyoming in 2017 was $56,724; the U.S. rate was $50,392.

Favorable outcomes for retailers

Larson said this year’s session also solved some issues related to food retailers.

One bill sought to change the threshold for which a felony can be charged on property offenses from $1,000 to $2,500, which later was amended to $1,500.

“It was passed in the House, but after a lot of work, Senate members began to understand that the judiciary already has the discretion regarding whether to sentence first or subsequent offenders to jail time, based on their contrition and restitution provided,” Larson said. “Thus, raising the cost level of offenses to property only hurts small businesses who have suffered the crime.”

The Senate Judiciary Committee held the bill without hearing it, so it died at the end of the session.

Another was a bill that reconfirmed that lottery sales are cash only; debit card purchases are not allowed. The Wyoming Lottery staff had come to the arbitrary conclusion that they had the right to allow debit cards to be used in lottery purchases, Larson said.

“Those of us representing independent retailers have long expressed that the cost for the use of debit cards for lottery sales would impact retailers with larger fees and other potential complications and could lead to electronic sales down the road,” he said.

The bill also provided further instruction to the Lottery Board of Directors to ensure that they knew their responsibility was to maximize revenue for cities and counties, rather than self-promotion of the lottery agency, Larson added. Gov. Matt Meade signed the bill on March 12.

“We were delighted with this support for our lottery retailers,” Larson said.

Another issue related to the lottery is on the horizon, as the commission is proposing adding Keno. Keno games last only about eight minutes, adding at least 165 new games a day.

Keno will create some issues from an operational standpoint, although Larson acknowledges that lottery sales likely would increase.

One anticipated issue is that because there are winners announced every eight minutes, players may want to hang around service desks or checkout counters to see if they won, causing congestion in stores.

In addition, CWPMA members are concerned about the accounting side with Keno.

Grocers, c-stores and liquor stores that sell lottery tickets have multiple IDs that allow cashiers to enter the machine and make sales.

“Unfortunately, the terminal at the end of the shift does not break down those individual IDs; it just lump-sums the sales into one total,” Larson said.

It’s not such a big issue now because lottery sales are not too fast-paced, but adding 165 new games a day with Keno will mean “we need to have a lot more accountability and be able to track those sales back,” he said.

“Moving into Keno, they’re exposing us to risk that could negate and in fact reverse our 6 percent commission. So we are working with the lottery now to come up with a solution.”

One CWPMA member in Rock Springs is doing a beta project to determine the feasibility of getting those sales “broken down by ID at the end of the shift to compare and balance with our POS systems,” he said. “We have to have some accountability tied back to the lottery terminal machine.”

Food tax reinstatement under discussion

Wyoming repealed its sales tax on food in 2006, during a period of budget surplus.

But the tax is back on the table, Larson noted, as the state looks to find ways to erase the effects of the severance tax, which hit Wyoming’s budget hard two years ago. Severance tax is imposed on the extraction of non-renewable natural resources that are intended for consumption in other states, such as crude oil, condensate and natural gas, coalbed methane, timber, uranium and carbon dioxide.

Sixty percent of the state’s budget is severance tax, “so when that has problems, everything else has problems,” Larson said.

Wyoming cities and counties had to come to the state for money in order to “keep their doors open, keep their roads paved, keep their service delivered,” he said, adding that $105 million was put into the budget in the last session for these costs.

The state wants to find a way for municipalities and counties to fund their own operations and not rely on the state, and a sales tax on food is one of the things that could make that happen.

Wyoming has a 4 percent sales tax, and most communities also collect an additional 1-cent tax (approved by voters) that can be used for general purposes.

Then there’s what’s called the sixth penny, Larson said.

“That can be, through resolution, put on the ballot for economic development or other stated purposes,” he said. “The state does not believe they should continue the $105 million commitment to share back to the counties, and they’re looking for other options in order to allow them to be self-sustainable.”

In a Joint Revenue Committee meeting in September, the Wyoming Association of Municipalities (WAM) “made a presentation and delivered a sales tax comment on repealing the food tax, just put it out there. They didn’t say you should do it or shouldn’t do it,” he said.

But Larson doesn’t see the food tax coming back even though cities and counties are the direct beneficiaries of the food tax. For one, several candidates for state office ran on “no new taxes” platforms and, two, Wyoming is just a very conservative state, and legislators are always “wont to do any more tax increases,” he said.

How fiscally conservative is Wyoming? It could survive 366 days on its rainy day fund; Colorado, 21.

Larson, who was a Colorado truck stop owner for 25 years before serving eight years in the Colorado House and then joining CWPMA, said, “If I had to label this session with one attribute, I would say that many times debate was extended significantly because some members simply were not willing to bend on those core values.”


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About the author

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Lorrie Griffith

An observer of the grocery industry since 1988. Away from her editor job, she's a wife and mother of two grown sons and thinks cooking is (usually) relaxing.

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