Kmart settles flag tax case with N.Y.

The major retailer will pay $8,500 to two veterans groups to distribute the manuals on how to display and handle the flag and to provide flags on graves of veterans.

Although thousands of flag sales have apparently included state and local taxes at Kmart stores across the state, returning as little as 7 cents to thousands of customers was considered impractical, said Assistant Attorney General Matthew Barbaro, a Vietn am veteran. Flags sold there range in price from $1 to $30.

Many stores in addition to Kmart probably charged sales tax on flags, said Al Carpenter of the American Legion Department of New York. "It's just a policy they were ignorant of."

New York is one of seven states in which there is no sales tax on flags and three other states exempt tax from some sales, according to the National Flag Foundation in Pittsburgh, Pa.

Kmart, which launched a national campaign in September to improve its image, had no immediate comment on the agreement announced by the state attorney general's office. Kmart, based in Troy, Mich., stopped charging the tax as soon as possible after the st ate contacted the company, said Christine Von Dohlen-Pritchard, a spokesperson for Attorney General Eliot Spitzer.

Spitzer's investigation began in June with a call from Patricia Barnett, a former Vietnam War protester from Kingston who took on a new cause.

Barnett said she was outraged when she tried to buy a small flag for the grave of her childhood friend who died from a sniper's bullet to his head in Vietnam. She informed the clerk at the Kingston Kmart that the sale shouldn't be taxed. She was passed to a customer service clerk who disputed the point. Barnett then demanded to talk to the manager, who she said refused to talk to her, and instead told a cashier to give Barnett back her 7 cents.

"I told them to tell the manager he's going to regret he didn't take three minutes to come over to see me," said Barnett, a retired financial systems director.

"It's not the money ... it's the principle," she said. "I was appalled thinking of all those flags on all those thousands of graves. You shouldn't pay tax on an American flag. Period."

After numerous letters and e-mail messages to Kmart that she said still haven't been answered, she went to the state attorney general.

She told them the story of her friend, Wayne Myers, who was killed driving a jeep in Vietnam seven months after he graduated from Hudson Valley Community College in Troy. He was 22 years old.

At that time Barnett studied history at Brooklyn College and protested the war, until another friend came home a year later from Vietnam alive, but "destroyed."

He told her about the horrors servicemen and women endured without even knowing why they were at war, and that being called baby killers in protests back home made it worse.

After that conversation, she still hated the war, but not the warriors. Thirty years later when she realized the flags were being taxed, she said she was determined to fight the retailer so that no one would ignore the special status of the American flag.

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