Maine retailers who figured that a recovering economy, lower gas prices and stronger tourism would add up to healthy businesses this year are finding that 2015 is producing some headwinds.

Those include the failure of the state Legislature and governor to roll back the sales tax rate and efforts by some communities to increase minimum wages, said Curtis Picard, executive director of the Retail Association of Maine.

Like retailers nationally, Maine shopkeepers got thrown a curve by the harsh weather this past winter. The National Retail Federation on Wednesday cut back its forecast for retail sales growth for 2015 to 3.5 percent from its earlier forecast of 4.1 percent, largely because of slower-than-expected sales in the first six months of the year.

The NRF said that the weather, a strike at West Coast ports and a stronger U.S. dollar resulted in sales for the first half of the year that lagged behind projections.

The pace of sales will pick up for the second half of the year, the NRF is forecasting, primarily because of stronger labor and housing markets. But the organization’s forecast for sales growth of 3.7 percent for the rest of the year won’t be strong enough to make up for the slow 2.9 percent increase experienced over the first half.

Picard said Maine retailers weren’t immune from those negative factors, although he said lower gasoline prices have helped sales in the state by freeing up a few more dollars in consumers’ pockets. The summer tourist season appears promising on the domestic side, he said, but a poor exchange rate with Canada seems to be cutting into the number of visitors from the north, which in turn hurts retail sales.

So far this year, sales of food and general merchandise come to $1.926 billion through April. Over the same four-month period in 2014, the total was $1.862 billion – a 3.3 percent increase.

SALES TAX

Picard said retailers were also disappointed when the state budget didn’t roll back Maine’s 5.5 percent sales tax to 5 percent. The rate was increased from 5 percent two years ago and was supposed to drop back again this year, but it’s staying in place. Picard said a bigger problem was averted when lawmakers rejected Gov. Paul LePage’s budget, which would have increased the sales tax rate to 6.5 percent and expanded its reach to more products and services.

Retailers can handle keeping the rate the same, he said, but increasing and broadening the sales tax significantly would have had a much greater negative impact.

MINIMUM WAGE

Likewise, he said, retailers aren’t necessarily opposed to seeing an increase in the minimum wage, but would rather see any increase adopted statewide or, even better, nationally rather than a scattered, city-based approach.

The Portland City Council has voted to raise the minimum wage in the city to $10.10 an hour on Jan. 1, although there’s confusion over the impact on tipped workers’ wages. Bangor is considering a proposal to increase the minimum wage in that city to $8.25 hour next year and by 75 cents an hour for each of the next two years. The minimum wage in Maine is currently $7.50 an hour.

“Certainly, we see those (increases) on the horizon and overall, we’re not opposed to an increase in the minimum wage, we just think it should happen at the state level,” Picard said.

But business owners are adamantly opposed to a $15 an hour minimum wage, a proposal that will be on the ballot for Portland voters this fall.

“We just think it’s unacceptable,” he said. “It’s way too high for Maine and would make Maine’s (minimum) the highest east of the Mississippi. Portland doesn’t have that kind of economy.”

ONLINE VERSUS IN STORE

Retailers are anxiously awaiting federal government to do something to require online retailers to pay sales taxes, Picard said.

Picard said the disparity between online and bricks-and-mortar retailers was driven home earlier this year, when he saw a U.S. Postal Service truck make a delivery from Amazon at a neighbor’s house on Easter, a day when Maine stores are required to be closed. The USPS has a contract with Amazon that allows deliveries 365 days a year, and no sales tax is collected in Maine.

Picard said retailing remains heavily dependent on the second half of the year, with back-to-school and holiday shopping holding the key to whether a year is successful or not. But he said increasing regulations and higher costs aren’t making the outlook any brighter.

“Ultimately, the money has to come from somewhere,” he said, “and what’s being done to lower the costs in other areas to offset those (increased costs)?”

 

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