When Crugar Tuttle and his company, Davie, Fla.-based Gemini Plastics Services Inc., got hit in 1993 with an $843,000 bill for back sales taxes on molds, it nearly put the $7.5 million-a-year firm out of business.
Now, the aftermath has prompted the Florida Legislature to consider repealing the tax.
Florida and neighboring Georgia are unique, industry officials claim, in charging sales and use taxes on molds. The 5-7 percent tax on molds puts companies in those states at a sizable price disadvantage, industry lobbyists argue.
While tax agencies in those states are staying neutral, those involved said it remains to be seen whether legislators will go along with an industry push for a tax break and whether the states can do without the money.
Gemini has been among the more outspoken firms in the low-profile debate. It eventually settled for ``significantly less,'' but not before nearly going bankrupt, Tuttle said. Its largest customer, AMP Inc., pulled its business because of the taxes, he said.
At first, Gemini sued AMP to obtain back taxes. But Gemini wound up dropping the suit and paying the taxes, Tuttle said.
Tuttle said customers like Motorola sent him purchase orders that said they were exempt from the tax because that was the practice of most other states.
``The way the law is written, the molder is the tax collector for the customer,'' Tuttle said. ``It put us in a situation of going to our customers and saying, `You owe us hundreds of thousands of dollars.'''
Tuttle was so angry about the tax that he went to the state capital and met with legislators, including the state Senate's president.
A few weeks later, Tuttle said he got a call from the Department of Revenue that asked why he went to legislators and told him another official would take over his case. They said they wanted to negotiate, Tuttle said.
Now Tuttle said he is being audited again, this time for not paying the tax while his first audit was conducted. Gemini was purchased last year by Moll Industries Inc.
A Florida Department of Revenue spokesman said the agency cannot comment on specific cases.
But Florida Revenue Department spokesman David Bruns said: ``This is the not the first month or year or decade that the Legislature in the state of Florida has put sales taxes on manufacturing equipment.''
Repealing the tax has become a priority for industry lobbyists in Georgia and Florida.
For the first time, Florida will consider a bill in this year's legislative session to specifically exempt molds. Georgia's Legislature is considering a bill that would exempt plastics molds as part of a much broader exemption.
In Florida, the 6 percent tax applies to any mold built for use in the state. In Georgia, the tax is 5-7 percent of all replacement molds, but not the original mold. In both states, the taxes are not plastics-specific but part of larger manufacturing taxes.
None of the other 20 largest plastics manufacturing states have a sales and use tax for molds, while Alabama and Mississippi have greatly reduced rates, according to a survey by the Washington-based joint state government arm of the Society of the Plastics Industry Inc. and the American Plastics Council.
``The issue is a huge problem for the industry,'' said Rudy Underwood, southern region director for the SPI/APC unit.
``It's going to be a dollars and cents issue,'' said Phil Embry, director of the sales tax division with the Georgia Department of Revenue. ``It will be determined by whether they can afford it.''
Neither state had cost estimatest, but a smaller, Florida exemption that covers molds for contact lens making costs the state about $2.9 million a year, Bruns said.
The boating industry, which uses molds, also has an exemption, Tuttle said.
SPI/APC estimated that Florida gets $6 million a year from mold taxes. Molders who responded to an SPI/APC survey said they lost $66 million in business a year to states without the tax.
``They think it is significant tax dollars, but all they have to do is stop a few companies from coming into the state and they've lost millions of dollars,'' said Peter Blyth, chairman of the Florida Plastics Industry Council.
Tax collectors in Florida have focused on the plastics industry, Blyth said.``They have a very strong program of concentrating on our industry and going after them for hundreds of thousands of dollars.''
But Bruns said the agency does not focus enforcement on the plastics industry; the tax applies to all manufacturing equipment.
Florida's state economic development arm, a quasi-public agency called Enterprise Florida, wants the tax to be repealed; but industry officials said it is hard to predict whether that will happen.
``My best political sense is it is probably 50-50 — it could take two years,'' Underwood said. ``We've been working on this two years, but this is the first year we've gotten a bill introduced.''
Florida's lack of a personal income tax will hurt chances of the mold bill passing, Tuttle said.