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Michigan Tax Ruling Makes School Officials Boil

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A tasty new factor has entered Michigan's school-finance debate: the hot dog.

For years, local parent-teacher groups have sold hot dogs, Christmas-tree ornaments, and a variety of other items to raise money for schools. Until recently, most people never bothered with collecting the state's 4 percent sales tax on the purchases.

In May, however, State Treasurer Robert A. Bowman sent school principals a letter explaining that items schools buy and sell for fund-raising purposes are not exempt4from state taxes.

The law, which has been on the books since 1933, also prohibits pta's and other unofficial school groups from buying any items tax-exempt. But the state never enforced the rule until an audit uncovered the problem last spring.

The letter and the law have created a boiling kettle of controversy. The Senate last month passed a bill exempting all nonprofit and charitable groups from paying any sales taxes, and supporters of the measure are pressing for House action.

Advocates of a tax exemption say the levy could make much-needed fund drives unworkable.

"As it stands now, we have to pay a sales tax on all our fund raisers," said Barbara Canto, president of the Burton Elementary School p.t.a. in Berkley. The paperwork involved, she maintained, is often too much for volunteers to handle.

"We would like to become a tax-exempt organization and not have to worry about this," she added.

But Representative H. Lynn Jondahl, chairman of the House Taxation Committee, has ordered the state treasury department to conduct a study to see how much revenue would be lost as a result of the bill.

Mr. Jondahl has said he will not let the bill out of committee until that study is completed. During hearings on the issue last month, estimates of lost revenue ranged from $2 million to $100 million.

In the meantime, p.t.a. members such as Ms. Canto are sharpening their pencils. She noted that figuring the tax on irregularly priced items is not always easy.

"If we sell 800 hot dogs, it gets to be sort of a mess," she mused.--mn

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