Tax change takes Orem businesses by surprise

OREM — Orem businesses are scrambling to adjust cash registers after a sales-tax increase of 1/10 of 1 percent went into effect on Saturday without a word from city officials to warn them about the change.

"How are we supposed to know?" asked Susan Christensen, credits manager for Good Earth Natural Foods, 500 S. State, after being contacted Monday by the Deseret Morning News. "We have to get on this but, in the meantime, (Orem) is costing the stores a lot of money. We would have preferred to be notified at least a few weeks in advance."

Orem officials said the confusion over the tax implementation for the voter-approved Cultural Arts Recreation Enrichment (CARE) tax was a matter of miscommunication and assumptions — and is something they seriously regret.

"We're going to be sending a letter out to all of our businesses about what's going on," said Jeffery Pedersen, Orem city finance director. "We never found out it was our responsibility to do anything other than notify the state. But we certainly owe an apology and will be sending a letter to (businesses)."

The CARE tax takes a small percentage of every dollar spent at Orem businesses to support cultural-arts and recreation programs in the city.

Pedersen said the city was under the impression that the state was responsible for notifying the businesses because the state handles the tax-related paperwork, collects the tax funds and then allocates the funds back to Orem.

The city notified the State Tax Commission more than 120 days ago that the tax would start April 1. Pedersen said they assumed the state would use those 120 days to take care of logistical matters — such as informing businesses about the new tax rate.

"We certainly made some very bad assumptions," he said. "We really do regret the position we've just placed our businesses in. We dropped the ball there."

The law requires the 120-day notification period to allow businesses time to change their systems, said Charlie Roberts, spokesman for the State Tax Commission. However, the state agency does not contact each business individually. Roberts also said that many businesses followed the issue during the election and were aware of the changes.

"Because it is a sales-tax issue people are watching it," Roberts said, referencing the debate about tax before the election. "There's no surprises — it isn't something done in a late-night city council meeting."