New Mexico Pet Food Tax Bill Advances
A New Mexico bill that aims to increase pet food distribution fees in an effort to help control the state’s dog and cat population passed the House Consumers and Public Affairs Committee on Jan. 30.
The bill’s advancement has raised alarms for pet specialty retailers and industry pundits who say, if passed, the legislation will further corrode already-thin margins and create more hurdles for independent specialty retailers already struggling to compete with big-box and online retailers.
House Bill 64 would impose a $100 fee (added to the current $2 fee) on each pet food label that is distributed in New Mexico every year.
If passed, the fee would help animal shelters in the state with the costs associated with spaying and neutering dogs and cats in New Mexico.
In a fiscal impact report, the bill’s sponsors—Carl Trujillo (D), Debbie A. Rodella (D) and Joanne J. Ferrary (D)—cited a 2012 Animal Sheltering Board (ASB) feasibility study on a statewide spay and neuter program, which found ASB lacked adequate funding and staff to address animal shelter overpopulation issues in New Mexico.
The study also found that in 2011, animal shelters and other euthanasia agencies took in 118,000 cats and dogs, and 55,000 of them were euthanized, primarily because there were too many dogs and cats and not enough homes. This issue cost the state $27 million annually—the total budget for shelters and euthanasia agencies.
However, opponents of the bill said the proposed fee would inflict a 5,000 percent tax increase on dog and cat food, which will “undoubtedly be passed onto retailers and consumers,” said Robert Likins, vice president of government affairs for the Pet Industry Joint Advisory Council (PIJAC).
“Smaller retailers would be more adversely affected than larger ones, as they need to carry smaller, unique brands to differentiate themselves,” Likins said. “Larger retailers would be more affected than online sellers, as this is one additional overhead cost that only brick-and-mortar businesses would be subject to.”
Mike Bachicha, president of Bone-a-fide Dog!, an independent pet specialty store in Albuquerque, N.M., said his biggest qualm with the bill is the huge percentage increase the tax would impose.
“It’s another hurdle that a brick-and-mortar business has to overcome versus big-box and online,” Bachicha said.
Food comprises about 70 percent of Bone-a-fide Dog!’s inventory, and Bachicha said he believes that if the bill passes as it is currently written, it will have a huge impact on his business.
“Pet food has a very low profit margin as it is,” he said. “Anything that is going to impact that profit margin on it, which is already slim, is going to have a major impact on our bottom line. The taxes would get passed on to suppliers, the suppliers then pass it on to vendors, and we, in turn, have to pass it on to customers.”
Bachicha added that most of his customers are not yet aware of the bill.
“That’s another problem,” he said. “It’s being slid in through the back door without a lot of public input.”
Another issue with the legislation, Likins said, is the impact it could have nationwide.
“While this fee may be something that, in isolation, can be absorbed as a cost of doing business in a single state, we have already seen this same language proposed in other jurisdictions,” Likins said. “Since legislatures have never seen a revenue stream that they didn’t like, and never end a tax once they impose it, House Bill 64, if successful, will provide model language for other states and localities.
“Pet food manufacturers could soon find themselves having to navigate a myriad of different fees and annual registrations in each state, or even town or county, that they do business in,” Likins added.
The bill will next move to the House Business and Industry Committee.