Candy, direct mail bills head to full Senate

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DENVER (AP) – A Senate committee on Wednesday backed a proposal to start charging sales tax on soft drinks and candy but wants the tax repealed after three years.

Sen. Paula Sandoval, D-Denver, voted with Republicans to repeal the 2.9 percent sales tax on soft drinks and soda after three years.

It’s one of 13 tax credits and sales tax exemptions that Democrats want to roll back to raise about $145 million starting next month to balance the state’s budget.

Gov. Bill Ritter has proposed making the soft drink and candy tax permanent. Some other tax hikes in the package, such as a tax on energy used in manufacturing, would be repealed after three years when the economy presumably has recovered.

The full Senate must now vote on that proposal and decide if it wants to go along with limiting the tax to three years. The House voted to make it permanent.

Coca Cola and Pepsi bottlers, as well as Enstrom’s Candies and one of the state’s largest vending machine operators, urged lawmakers to reject the tax.

Chris Harr of the Pepsi Bottling Group said the 2.9 percent price increase would lead to a 1.9 percent to 2.8 percent drop in sales based on the company’s experience with previous increases. He said that could lead to the loss of 370 to 800 jobs, mostly at stores and vending machine companies.

Others, including the Colorado Education Association, urged lawmakers to back the tax increases to prevent deeper cuts to public schools and programs to help the developmentally disabled.

The committee also backed bills to tax the materials used to produce direct mail coupons and napkins and plastic utensils used for takeout food. They also voted to back eliminating a tax credit for hybrid cars that get between 30 and 40 miles a gallon.

Businesses throughout Colorado have protested the tax package — saying that passing the bills would place heavy burdens on small businesses already struggling.

“These bills could provide an impediment to hiring,” said Dan Malinaric, managing director and site manager of Atmel’s Colorado Springs location. Malinaric said that nearly every bill will effect a company the size of Atmel, and could lead to workers being laid-off.

“It’s just another added cost,” he said. “And someone has to pay for it. We don’t have the pricing power to pass it along to customers — our price is set by the global marketplace. So we will have to lookat other places to reduce costs. Even though we’re a large corporation, we can’t always absorb these huge additional costs.”

Small businesses, too, say they will feel the pinch of the tax increases. Dave Hollenbach, owner of DSoft Technology Inc., said his company will reduce or slow expansion.

“I spend all my time dealing with these costs,” he said. “We do business in five states, and I am constantly dealing with the tax burden. Why go into business if you’re not going to make money? If you’re just going to send it to the state?”

Hollenbach has 70 employees — grown in a company that started in his basement. He says his company is an invesment in Colorado, because his employees pay taxes and spend money in the state. He also expressed surprise and how fast the bills are moving through the legislature.

“I didn’t even hear about these until last week,” he said. “You have to wonder if they’ve taken time to consider the unintended consequences.

The bills will next be considered in the full Senate.

For more analysis of these bills and how they will affect businesses, see Friday’s edition of the Colorado Springs Business Journal.

Amy Gillentine contributed to this story.

3 Responses to Candy, direct mail bills head to full Senate

  1. We have a \sin\ tax on alcohol and cigarettes, why shouldn’t we on soft drinks and candy. Both can have cause health and behavioral problems.

    February 4, 2010 at 1:16 pm

  2. A drop in Sales of “sugar water” can only portend good things in the fight against fat kids! While they are at it … “Why don’t they remove pop machines from schools?”

    February 5, 2010 at 8:00 am

  3. Please delete my first post, I accidentally pasted information that was supposed to be for another post.

    My post should read:

    First and foremost, sales taxes do not go away. Only the naive will believe this.

    To tax the materials for direct mail is like taxing any product at the wholesale cost. You end up with double taxation. Tax increases only prolongs poor money management by the government. It will also affect peoples jobs in the direct mail industry. If you want to learn how much direct mail contributes to the workforce and economy you can read the Power of Direct Marketing:

    John Schulte
    February 23, 2010 at 8:45 pm