Independent Jewelers Fight for Their LIFO
By Rob Bates -- JCK Online, 6/1/2009 2:00:00 AM
President Barack Obama's proposed budget includes a section repealing the last in, first out (LIFO) accounting method that gives many jewelers a tax break, and some worry the repeal will hurt them significantly. (See box for explanation.)
Peggy Jo Donahue, director of public affairs for Jewelers of America, says LIFO has long been used by retail jewelers, particularly those with two or more stores.
According to Lee Berg, president of Lee Michaels Fine Jewelry, an eight-store chain based in Baton Rouge, La., jewelers are uniquely positioned to take advantage of LIFO, since they have low inventory turn as well as inventory that generally increases in value. "Losing it would be devastating for us," Berg says. "In this economy, it is not the time or place to be doing these kinds of things."
John Green, CEO of eight-store chain Lux, Bond and Green, with stores in Massachusetts and Connecticut, called LIFO's repeal an under-the-radar tax hike. "[LIFO] is something that jewelers have used to generate jobs, build inventories," says Green, who is also the chairman of JA. "[Repeal] could put people out of business."
JA chairman Matthew A. Runci notes that repealing LIFO will also hurt jewelry wholesalers. JA has joined and is on the steering committee for an anti-repeal group called the LIFO Coalition. (See box for ways to get involved.)
JA's campaign against repeal "has generated a lot of interest," says Donahue, who notes that even jewelers who don't use it are getting involved to help their comrades.
LIFO likely will be phased out anyway, as the United States becomes more compliant with international accounting standards. Still, that could be years in the future, Donahue said, and any change may be stalled by the soft economy.
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