Published on: Thursday, January 12, 2012

By Christa Puccio

The new Montgomery County Bag Tax has stirred controversy after just one week of implementation.

By Friday, only 60 retailers in the county had registered online with the county government to collect the new 5 cent bag tax, according to the Montgomery County chief of finance.  Retailers say that abiding by the tax is based on the “honor system” and county representatives say the county’s enforcement of the law relies on residents and businesses “ratting” on one another.

The bag tax law requires certain retail establishments to collect a tax of 5 cents per plastic bag given to a customer and remit the tax to the County.  The retail establishment must indicate on the customer's transaction receipt the number of carryout bags the retail establishment provided to the customer and the total amount of tax collected.   To help defray the costs of tracking, reporting and submitting bag charges to the county, retailers retain 1 out of every 5 cents collected per bag, according to the county.

If a bag were to stick to another bag at a retail establishment when handing a customer his or her purchased items, or if a cashier simply chooses not to record issuing a bag to customer, there’d be no way for the county to know, explained Pat Keller, a manager at the Safeway in Rockville. “It’s the honesty system,” said Keller.  “That’s what it’s all about, unless someone is standing right next to that person and monitoring the cashier.”

There’s also a loop hole in the law that allows small retailers to refrain from even reporting to the county until a threshold has been reached – which could take weeks or months for some smaller retailers.  According to the law retailers are not required to report bag sales or remit payment to the county until a threshold of $100 in bags, or 2,500 has been reached. 

 “To some retailers that may be four or five months, maybe even more, before they reach 2,500 bags,” said Robert Hagedoorn, Division Chief of Treasury, Montgomery County Department of Finance.

Bonnie Ayers, spokeswoman for the County, said the County’s enforcement of the bag tax relies on leads from persons calling the county and ratting on retail establishing for not charging the tax.  “That’s basically it right now,” she said.  “Through this first cycle at least, that’s what we’re relying on.  So far, it seems that information is coming in that way and that’s what we’re relying on to give everyone a shot to do what they’re supposed to do, which is comply.”

Ayers said until the first cycle of the tax runs its course (February 25), the county will concentrate on making the system work without worrying about fines.  “We know who the major retailers are and, after February 25, if we find that some of those have not reported, then there are plans to follow up with them and find out what the problem is,” said Ayers.  “As far as the other businesses are concerned, we’re in an educational mode to make sure they understand the law, find out what we can do to explain it to them better if they don’t to help them comply.  It is a big adjustment for some companies.”

Hagedoorn said the tax returns are filed by retailers when they register through the county’s secure website.  “When they file their tax return they will enter the number of bags that were provided to customers in their retail establishments for a reporting period.  The system generates the tax, they provide their bank information and that information is submitted to us and on the day selected, we submit that file electronically to their bank for collection purposes.  So it’s done all online in order to make sure it’s done at the lowest cost to the county,” said Hagedoorn.  

The tax revenue collected from this law “automatically is deposited into the Water Quality Protection Fund,” according to Hagedoorn,  “It doesn’t go into the general fund.  This is how we do all of our business, whether it’s property tax or bag taxes.  In this case it’s very specific: the law says all money collected goes to that fund.”

The county has yet to say what happens if the tax collects more money than the Water Quality Protection Fund needs.

The Water Quality Protection Charge (WQPC) fund is aimed at improving damaged streams and waterways by maintaining and updating storm water management facilities and monitoring water quality. “The revenues go to the Water Quality Protection Fund to help counter the $3 million spent by the County each year to clean up litter from local waterways,” said Ayers.

Ayers said the county does not know how much money the tax has generated thus far.  “The tax has barely begun, and the first deadline for payment isn’t until February 25,” said Ayers.  “It’s just way too early to be able to provide any meaningful data and feedback.” The law states that any violation is a Class A civil violation, each violation is a separate offense and a conviction of violating this law does not relieve a retail establishment from paying remittance owed to the County.  County representatives did not respond by deadline to clarify how the county can determine if a retail establishment violates the bag tax law.

Safeway is one of the 60 retailers registered for the tax online.  “Our system works fine,” said Keller.  “We have a code that we put in when a customer needs a bag and we type in the quantity.  Customers have been bucking at this, but it’s the decision of the county and we have to abide by it, so what can you do?”

Magruder’s Supermarkets also registered online.  “It has been a hassle for some customers,” said Pam Douglas, assistant manager at Margruder’s.  “Some have been upset and we tell them that we buy and pay for the bags and then when you buy them, the money goes to the county and not to us.” Douglas said the grocery store notified customers in advance of the bag tax, which went into effect at the beginning of the year. Magruder’s continues to sell reusable bags and offer a three cent store credit to those who bring in their own bags when they shop. 

Catherine Reuhl, communication manager for Harris Teeter, Inc., said the company has always believed in the importance of protecting the environment and continues to implement sound environmental practices in both its stores and corporate office. 

“We’ve placed both plastic and paper recycling bins in the lobbies of our stores for decades and sell our green reusable bag for 99 cents,” said Reuhl. “Because we believe in giving our shoppers a choice at check-out, we train our associates how to efficiently bag groceries in all three types of bags to maximize space.  If our shoppers choose to use paper or plastic bags, we do ask they return them to our store for recycling.”

Douglas said she’s uncertain how many bags Magruder’s Supermarkets distributes in a day.  “We’ve never had to pay attention before,” she said.  “We put bags out and then cashiers go and add more when they need to.”