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COLUMBUS, Ohio – When Gov. Bob Taft signed an amended state budget bill here that would require Ohio credit unions to assess a sales tax on safe deposit boxes, the news came out of the blue and without much notice. So says Barbara Latz, information and compliance manager at the Ohio Credit Union League, who said there was “probably a few weeks or so” between the bill signing and when credit unions would start charging members the tax effective Aug. 1. “Ohio, like several other states, is looking for money,” Latz said. “With the revised tax issue, the number of places the state could go to get more taxes increased” and credit unions were among them. Latz is not sure how many of the state’s 550 credit unions actually offer safe deposit boxes, but she did say that the sales tax typically ranges between 6.75% to 8% in some counties. Credit unions will be responsible for collecting sales tax based on the tax rate for the county where the business is located. In order to remit the sales tax, the credit union must pay $25 to the county auditor for a vendor’s license, if they don’t currently have one. The new tax came as a result of Taft’s attempts to bolster the state’s revenue coffers but some new taxes have left business owners confused, Latz said. “For instance, if you go to a beauty salon to get you eyebrows arched, the customer has to pay a sales tax but not if you get your hair styled,” Latz said. While the league is assured that this is the only new tax credit unions have to charge members, some to be expected will not relish having to pay it. “This is something new and different for credit unions and as always, they will find a way to deal with it,” Latz said. Credit Union Times contacted a number of sources, including CUNA, CUNA Mutual and NASCUS, to pinpoint the number of states that assess a sales tax on safe deposit boxes, but no data was available. At least half a dozen leagues were also called and the majority said members do not pay taxes on safe deposit boxes. For instance, Texas and Illinois do not charge their members and neither do California and Nevada for two related reasons. Members in California are not assessed a sales tax because they lease the safe deposit box and financial institutions do not give up control of the property, said Greg Badovinac, regulatory analyst at the California Credit Union League. In Nevada, the boxes are considered a service and therefore are not taxed, he said. “There aren’t many credit unions in California that have boxes for their members unless they’ve bought a former bank branch that already has the storage facility in place,” Badovinac said. Florida has “hundreds of exemptions for the sales tax” and it always seems to be a “political issue for legislators each year,” said Mark Ivester, Florida Credit Union League vice president of communications. “All transactions with a bank or credit union are exempt and as a credit union member with a safe deposit box, I don’t pay a sales tax.” In New York, the boxes are taxed because “the credit union is not buying the service, the member is,” said Bonnie Sklar, public relations coordinator. “Individuals are not tax-exempt,” Sklar explained. “Since they are buying the service, they have to pay the tax. The tax has been in place for awhile.” The South Carolina Credit Union League will conduct its first safe deposit box workshop in November in response to requests from credit unions needing additional help with the legalities and fundamentals surrounding the property, said Barbara Lehew, the league’s director of conferences and training. “Surprisingly, a number of large credit unions have asked for additional training for employees, especially in the area of death claims,” Lehew said. South Carolina does not require members of the state’s 94 credit unions to pay a tax on the boxes. Whether more states will look to the assessment of sales tax on safe deposit boxes to generate more income, remains to be seen but any attempts will be met with “great consumer and financial adversity,” said David McGuinn, president of Safe Deposit Specialists, a consultant who’s trained more than 100,000 managers and employees nationwide. “If they’re going to tax this service, why not tax the apartment renter who keeps valuable inside their apartments. It’s the same thing in every state,” McGuinn said. McGuinn recalls how Chicago’s banks started assessing a sales tax on boxes a few years ago and customers moved their accounts to banks outside of the city. Despite letters from angry customers and McGuinn’s efforts to overturn the tax, the city didn’t budge. “It’s a small thing but it can create an enormous ripple effect,” he warned. -

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