Late one afternoon in early June, a chain-smoking, dark-haired man in his mid-forties idly watched an Austin convenience store cashier violate the law. Not until the man got home did he discover that the cashier had illegally charged him sales tax on his sack of groceries—on the milk, onions, and bread; on every single item, in fact, all of which happened to be exempt under the Texas sales tax law.
It was not the los of the 25 cents that chagrined him; it was the firm suspicion that the store had a deliberate policy of tacking a phony “tax” onto every ticket, unless challenged by the customer. He suspected that, by his absentmindedness, he’d fallen victim to one of the countless petty sales tax rip-offs the State Comptroller has been trying to stamp out. He resolved to do something about it on his next visit. And that’s bad news for the store. Because the customer’s name was Bob Bullock, and he is the Comptroller.
The sales tax is Texas’ most prolific source of government revenue; 38 percent ($1.3 billion) of last year’s state tax collections were derived from what the law books officially call the “Limited Sales, Excise, and Use Tax.” The closest contender—oil and natural gas production taxes—brought in almost exactly half as much ($664 million), and the principal “business tax—corporation franchise taxes-was far down the list with just $167 million.
If the adjective “limited” sounds like wishful thinking to describe a levy that seems to sprout like a weed at the foot of practically every sales receipt, keep in mind that the sales tax statute is an intricate tangle of exemptions. These are at best chaotic, often whimsical, at worst nonsensical—nothing so simple and clear-cut as the popular labels of “food” and “drugs” would make them appear. For the average Texan, the sales tax is the sole everyday rendezvous with the tax collector; and, because of its exemptions, it is also the tax you are most likely to overpay.
That danger has worsened lately—an unintended side effect of Comptroller Bullock’s energetic campaign to crack down on retail stores that charge the tax to their customers and then fail to pass the money along to the state treasury. When the colorful Bullock—who has had several previous incarnations in Texas politics, including four years as a state legislator, five as a savvy, freewheeling lobbyist, one as an assistant attorney general in charge of antitrust, and three more as Governor Preston Smith’s controversial secretary of state—arrived at the Comptroller’s office in January 1975 he discovered that the collection procedures were dismayingly lackadaisical. Under departing Comptroller Robert Calvert, each bureaucratic section operated as an independent fiefdom, often issuing its own tax rulings without even consulting the department’s legal division. Serious audits were a now-and-then/maybe affair; many retail establishments openly and with impunity refused to give the state the sales taxes their customers had already paid. Asked what his official priorities had been concerning the sales tax when he took office, Bullock explained: “Collect it. Just plain collect it.” Thus began the hard-line policy against retail tax cheats—who, Bullock found, were disproportionately concentrated in certain types of highly competitive businesses like carpet stores, restaurants, appliance stores, tire companies, and lumber yards, though there was hardly any line of retail sales in which some merchant somewhere had not been tempted to convert his 5 percent tax collections into 5 percent extra “profit.” Unscrupulous businesses skimmed off money belonging to the public, then put the illegal money to work against law-abiding competitors. “Give those people a five percent advantage,” says Bullock, “and they’ll run their competition right out of business. A few dollars can make the difference in a tire sale or a TV sale.”
Bullock’s Raiders have already paid surprise visits to 285 delinquent businesses owing a total of $2.7 million in tax liabilities. Some have forked over their debt on the spot; others have been padlocked until their owners could produce the missing money. Bullock’s sales tax division collected $993,000 in court judgments during the first sixteen months of his tenure—considerably more than Calvert had collected in his final eight years. His field auditors will, at their present brisk pace, bring in $33 million in otherwise uncollected sales taxes this year, compared to $9 million during the last full year under Calvert.
All of this has flustered retail businesses accustomed to the casual indifference of the Calvert era. For years they were willing to resolve ambiguous tax questions in a good customer’s favor; even though stores are liable for tax on all taxable sales whether or not they collect it from purchasers, full-fledged audits were rare, so they got by comfortably. Now there is a discernible tendency to insist that customers pay the “tax” whenever there is the slightest possibility it could be due. Result: Texas consumers are paying more and more “taxes” they don’t owe. And the pennies add up. “If even one-half of one percent of the sales tax revenue has been erroneously collected,” says Garry Mauro, assistant comptroller for field operations, “that is still a hell of a lot of money”—more than $6.5 million last year.
Most of the confusion in sales tax collections results from the almost indecipherable glut of exceptions. Bullock has begun to eliminate some of the more spectacular absurdities that he inherited from Calvert. He has, for example, abolished the ruling under which tax was due on baling wire used to bale hay for one’s own farm, but not due on baling wire used to bale hay for sale; he has discarded the ruling that made hand-held posthole diggers taxable and tractor-mounted posthole diggers untaxable. But others remain, either built into the statute by the Legislature or engrafted onto it by administrative fiat: the infamous Six Doughnut Rule, the Sliced Barbecue Test, the Complete Funeral Principle, and the Fudgsicle Savings Clause, to mention a few (see page 116).
The Comptroller has been called upon to decide such weighty questions as whether tax is due on candy