Fireworks law change adds some pop to tax receipts

FOURTH OF JULY FIREWORKS. / BLOOMBERG FILE PHOTO/GABE PALACIO
FOURTH OF JULY FIREWORKS. / BLOOMBERG FILE PHOTO/GABE PALACIO

In 2010, the General Assembly and Gov. Donald L. Carcieri approved the sale of ground-based fireworks that sparkle. The rationale was that the state was losing sales tax revenue to Connecticut and New Hampshire, nearby states that sell fireworks that are illegal in Rhode Island.
Has the change been worth it? We might never know for sure. That’s because revenue from established stores include the fireworks tax revenue as part of their overall sales tax owed to the state.
“Walmart, Benny’s, other taxable sales would be mixed in with the sales tax collected from the sale of fireworks, and we have no way that I am aware of to tease out the fireworks sales from all other taxable sales,” said Paul L. Dion, chief of the R.I. Office of Revenue Analysis. “The sale of fireworks is subject to the sales tax and all sales tax receipts are deposited into the general fund.”
The one thing the state can determine is the revenue submitted by the individual stands that sprout along the roadsides in June and July, because their sales taxes are generated from fireworks exclusively.
“In fiscal 2011, total sales tax collected from these roadside booths was $54,085. In fiscal 2012, the total sales tax collected from these roadside booths was $72,811,” Dion said. You can also consider it a growth industry of sorts. In 2011, there were 29 roadside booths in operation. In 2012, there were 50 roadside booths. “The sales tax collections for 2012 are likely conservative, as one of the operators of the roadside booths has not filed their sales tax returns for 2012 yet,” he added.
Based on these figures, $772, 542 was spent on fireworks in fiscal 2011. In fiscal 2012, $1.04 million of fireworks were purchased. And these figures do not include large chains or stores that sell fireworks as only part of their inventory. For every $1 million in fireworks sales, Rhode Island will bring in $70,000 of tax revenue. “Actually, sales were a little off this year,” said Edwud “Three Finger” Twyer, owner of Three Finger Eddie’s Fireworks of New Hampshire. “The Fourth of July was on a Wednesday, a weekday, and that means sales are usually 20 percent less. That rang true this year.”
He is a veteran of the industry, having been in business since 1960. In 2012, he ran four locations in the Ocean State, three in Connecticut, two in New Hampshire and one in Pennsylvania. The Rhode Island stores are portable tents set up along the road.
“TNT Fireworks, which is the largest in the world, sets up so many stands in the local market it makes it difficult,” he said.
According to the American Pyrotechnics Association, backyard fireworks, also called consumer fireworks, have enjoyed a resurgence in their popularity. Over the last decade there has been a movement of state legislation to relax consumer fireworks laws and lift prohibitions. The APA credits the movement to safety improvements and a reduction in injuries, but also admits the slow economy and need for states to find alternative ways to increase revenue has played an important role.
The changes have been national. In 2010, both Arizona and Rhode Island passed new legislation allowing their sale, leaving just Massachusetts, New Jersey, New York and Delaware as states that forbid the selling of fireworks. According to the association, in 2011 U.S. fireworks industry sales totaled $649 million, an all-time high. Ten years ago, that figure was $433 million. The relaxing of the regulation, however, has not been without its detractors, who point to the fact that a study from the Hasbro Children’s Hospital in June 2012 revealed that about 3,400 children across the country are injured by fireworks every summer. The study said that approximately 40 percent of people injured by fireworks are under the age of 15. Fifty-three percent of those injured are less than 20 years old.
Since many of the pyrotechnics will be bought by residents from Massachusetts, where fireworks of any sort are not allowed, the Bay State loses out on tax revenue to Rhode Island. In the other direction, since fireworks sales in Connecticut include those that can become airborne (unlike in the Ocean State), some Rhode Islanders who buy across the border may make purchases of illegal products.
According to the R.I. Fire Marshal’s Office, permissible ground and hand-held sparkling devices include: dipped sticks; flitter sparklers; fountains; glow worms; ground spinners; illuminating torches; paper caps; party poppers; snakes; snappers; sparkers; toy smoke devices; wheels; wire sparklers; and model rockets and model rocket engines, designed, sold and used for the purpose of propelling recoverable aero models. M80s, cherry bombs and quarter sticks are still illegal.
Legislators did not estimate how much tax revenue Rhode Island could generate from the law, which took effect on June 14, 2010, but some state officials have theorized sales could reach into the millions of dollars annually, all subject to the state’s 7 percent sales tax. •

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