The Georgia House on Feb. 24 unanimously adopted a tax package that includes a sales-tax exemption for molds — a key step toward eliminating a tax targeted by plastics industry lobbyists. The exemption is part of a tax-incentive bill sponsored by the House majority floor leader. The legislation now goes to the Senate and is expected to pass, according to Rudy Underwood, southern region director for the American Plastics Council.
"I'm pretty ecstatic," Underwood said. "It would have been extremely difficult to get our bill as a stand-alone. Tax exemptions are getting extremely difficult to get."
The legislation has the support of Gov. Roy Barnes, industry officials said. It passed the House 166-0.
"In our business it's very competitive, and when you tack on an extra 6 or 7 percent, that can be the difference between getting a contract and not," said Malcolm Kidd, general manager of Nypro Inc.'s Albany, Ga., plant
"There is no question we've lost some business" to states that do not have the tax, he said.
Nypro hosted Lt. Gov. Mark Taylor at its plant in November to talk about the issue, Kidd said.
While industry lobbyists claimed victory, the legislation would not provide the direct elimination sought by plastics companies. Rather, it would eliminate the tax over five years. The tax averages 5 percent, but some local governments raise it to 7 percent.
The bill would limit the exemption to the first $150,000 of a mold's value, although many molds can cost $250,000. It also would expand the definition of molds to include dies, tooling and replacement parts.
Georgia has a unique mold-tax structure, exempting the original mold but not replacements. Georgia also exempts a mold if it meets the tax-code definition of a machine. The legislation would simplify the rules significantly, Underwood said.
Opponents of the tax say it causes Georgia companies to lose business to firms in states without mold taxes.
Processors in Pennsylvania launched a lobbying campaign last fall that convinced a state tax board to rule in industry's favor in a case involving Plastek Industries Inc. A permanent repeal of the tax is expected in Gov. Tom Ridge's budget proposal in the spring, and is likely to become law, APC said.
The industry also is trying to repeal a similar tax in Florida, but the effort is moving more slowly, Underwood said.
"Right now, there is a big discussion about overall tax reform in Florida, and tax exemptions are not being looked on very favorably," Underwood said.
Regional attitudes could explain the different approaches among the states.
"The environment's a little more pro-business in Georgia," said Rick Sturgis, director of the southern regional office for the Society of the Plastics Industry Inc. "They're less willing in Florida to make these changes."
In Georgia, eliminating the tax would cost the state $1.6 million in lost revenue, APC said.
But the tax limits the growth of Georgia's plastics industry, said Robert Marshall, general manager of Commerce Plastics Inc.'s molding plant in Commerce, Ga.
Commerce, a unit of Manar Corp. of Edinburgh, Ind., built the Georgia plant five years ago to serve a specific customer that then moved offshore, he said.
"We are competing with the North, mainly the Ohio Valley, where molders and toolshops have us 20-1," Marshall said. "The tooling issue is big money — it's extremely big money."