Bookstore closes rather than collect CAPC tax

Wednesday, April 7, 2004

EUREKA SPRINGS - Gazebo Books, owned by Alderman Karen Lindblad and her sister, Virginia, remains closed after the city revoked its business license last week for not collecting the 2 percent City Advertising and Promotion Commission (CAPC) tax. Virginia Lindblad said she is consulting with an attorney and weighing her options.

Rogene Paskins, owner of Tummy Ticklers, a kitchen gadget and gourmet store in downtown Eureka Springs, is also looking at her options as she will lose her license April 19, also for failure to collect the tax.

Both Lindblad and Paskins believe they do not sell merchandise that falls within the CAPC purview of taxable items.

Virginia Lindblad told the Citizen she believes the CAPC is extending the tax beyond what is allowed under the state enabling statute. While the statute leaves the definition of shops required to collect the tax up to the city, the local definition must still fit within the state's language of "items commonly referred to as gifts or souvenirs," she said. She does not consider the books she sells gifts or souvenirs.

Lindblad said the gift shop section of the city CAPC code is vague and open to interpretation and should be scrapped. "I don't see how it can ever be evenly applied to everyone," she said.

Regarding the pulling of her license, Lindblad contends, "they completely ignored due process. They keep saying we've known all this time we're supposed to be tax collectors."

In fact, Lindblad said the CAPC called her in 1998 to say bookstores would be removed from the list of businesses required by the city to collect the tax. Minutes of the July 29, 1998 CAPC meeting reflect that the body did vote to request that city council pass an ordinance which would include clothing and antique shops as collectors, and remove bookstores. The changes caused such an uproar among antique and clothing dealers that the proposed ordinance was pulled from the council's agenda, including the exemption for bookstores.

"Somebody needed to stand up," Lindblad said. "We plan on taking this as far as we have to. Many merchants are afraid to speak out, they're afraid of losing their licenses."

Lindblad also takes issue with the tying of business licenses to collection of the CAPC tax, which she remembers as being passed in a closed door council meeting in three readings with an emergency clause and no public input in 1995. Ordinance 1682 made business licenses conditional on businesses adhering to all city codes. "I've questioned that since its inception," she said. "I didn't see any emergency."

There are other places in the CAPC code where the city exceeds the state statute, Lindblad noted. Bakeries and candy stores are required by city code to collect the tax, though the state statute states businesses that serve prepared food "for consumption on premises" may be taxed.

While CAPC commissioners and staff claim they have been receiving complaints from tax collecting merchants about non-collectors, Lindblad said no one has ever complained to her, and she believes one or two merchants are complaining about her store not collecting the tax for political reasons.

Lindblad noted that while her store is closed, the city is losing out on the 2.25 percent city sales tax.

"The majority of retail stores in town are not gift or souvenir shops," Lindblad said. "With the quality of stores here, to call them gift and souvenir shops is insulting. It's denigrating to try to turn Eureka Springs into a theme park filled with souvenir shops. We're the only store that's been open year-round for the past 28 years. Gift shops close down when it's not tourist season.

"The definition is willy-nilly, depending on who's on the CAPC and how they interpret it. They say items vital to life are not taxed. Food is vital but kitchen tools are not. Drugs and medicine are vital, but books that explain about them are not considered vital. It's all vague and misleading."

Lindblad does not hold the CAPC in high regard. "I ask people why they come here and I've never heard them say it's because of advertising. They hear about it from others or have been here before. It's not CAPC advertising.

"People need to understand 2 percent is a big tax. No one gets to vote on it, we have no say in how it's spent. There is no control over it."

Paskins said she recently received a letter from the CAPC giving her 10 days to comply with the tax or lose her license. "It's strange they said they were not going to revoke other licenses until this was settled," she said, "but they are revoking ours. There is an incredible lack of due process."

Paskins said she collected the tax for a few months last year and wrote "under protest" on her tax forms. She stopped collecting in December, claiming her store's merchandise does not qualify as taxable under the code.

"I don't think it's a legal tax," Paskins said. "Kitchen tools are as necessary as hardware equipment [which is exempted]. Saws are no more useful than eggbeaters. I don't think we qualify under the current tax law."

Paskins noted that grocery stores and liquor stores are exempt from the tax, and that more than half her sales are food products or wine, which should automatically exempt her shop.

The argument that she should collect the tax because she benefits from tourism is weak, Paskins said. "Every person in town benefits from the tourist trade, including doctors and dentists. I think the original plan of collecting in restaurants, hotels and possibly true souvenir shops is right. That's what it looks like the law says."

Paskins, too, is consulting with an attorney.

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