Processors in Pennsylvania finally can lay to rest a mold tax that inflamed the industry but died without even a whimper. The Pennsylvania House of Representatives unanimously approved a bill May 16 that kills the controversial tax. The Senate already had approved the bill, and Gov. Tom Ridge is expected to sign it this week, according to industry officials. Once that happens, the law would take effect July 1.
The mold-tax issue became a rallying point during the past year for hundreds of Pennsylvania processors and mold makers. They voiced concerns that the tax — revived by the state Department of Revenue after years of dormancy — would cause work to shift to companies outside Pennsylvania.
"When you consider how the plastics industry banded together for a common purpose, an awakening occurred in the Legislature," said Ralph Cook, president of Denver, Pa.-based Integrity Plastics Inc. "They had to realize that this industry does depend on the forgiving of certain taxes."
Under the state group Plastics Pennsylvania and with the help of the American Plastics Council, companies formed a grass-roots effort to repeal the 6 percent sales and use tax on plastic molds made in the state.
Arlington, Va.-based APC contacted about 600 processors and mold makers, said Shari Jackson, APC director of the mid-Atlantic region. Industry officials subsequently sent letters, called or visited more than 400 state legislators, she said.
Jackson termed the campaign the largest grass-roots effort by APC in that region.
"We got the permanent resolution we were looking for," Jackson said.
The issue raised its head last June when the Revenue Department billed Erie, Pa.-based injection molder Plastek Industries Inc. $2.8 million for using molds. The state law had been passed in 1971 but had not been levied on a company for years.
Plastek became a grudging guinea pig to repeal the legislation. The company paid $30,000-$40,000 in legal fees to fight the case, said President and Chief Executive Officer Joseph Prischak.
"[The Revenue Department] did an injustice to me and to the molding industry in general," he said. "It was a dumb move that caused a lot of headaches and problems."
In September, the Revenue Department's appeals board found in favor of Plastek and relieved the company of its tax burden.
But the group decided to ask the Legislature to exempt molds permanently from the state's tax on manufacturing equipment. State Rep. Karl Boyes, R-Erie, chair of the House Finance Committee, was a key supporter.
The exemption covers the sale or use of molds and related mold equipment used to make products. The provision was part of a major, $774 million tax-reduction bill.
APC, using 1996 figures, estimates that about 1,200 processing and resin suppliers work in Pennsylvania and generate more than $12 billion in annual shipments.
"It shows you that the [tax] numbers work against the entire commonwealth of Pennsylvania," Boyes said in a May 17 telephone interview. "I don't see legislation coming along in the future that would overturn it."
Several Southern states are fighting the same battle. Georgia recently adopted legislation that would phase out its mold tax during the next five years, said Rudy Underwood, APC southern regional director.
Processors still can be hit with the tax until then, even though it will be reduced by 20 percent each year. The Georgia Revenue Department estimates that it collects $8 million to $12 million each year from the tax, Underwood said.
Florida also has a mold-tax bill that the Legislature will consider for exemption in 2001, Underwood said. And California has a mold tax on its books, although it is not enforced readily.
In Pennsylvania, the victory has another side benefit, Cook said. The plastics industry forged stronger ties with legislators.
"It's always nice to maintain a working relationship," said Cook, who testified before the House Finance Committee on repealing the tax. "You never know when another issue comes along that needs our attention."
