Extending sales tax is a move often utilized by legislators when it comes to increasing tax revenue. However, the presence of automated machinery, such as those at car washes that accept payment in 25-cent increments, has Connecticutians scratching their head about how to charge the newly implemented sales tax. Lifting Sales Tax Exemption. When Connecticut legislators passed the new budget on June 3rd, coin-operated car wash services remained exempt from the sales tax, and all other car wash services were subject to it. However, When they met again on June 29th for a special session to finalize the budget, the exemption for coin-operated services disappeared.
Gov. Dannel Malloy was the one to propose changes to the June 12th budget, but he advocated maintaining the sales tax exemption on all car wash services. “It seems like something that happened overnight, to be honest with you,” said Rep. Chris Davis, R-Ellington, and the ranking Republican on the finance committee. Jeff Berger, a Democrat co-chairman of the finance committee, said he was also surprised to see the tax imposed on coin-operated washers. Opposition To The New Rules, Todd Whitehouse, a former president of the Connecticut Carwash Association points out the unexpected hardship. According to Whitehouse, 5 minutes on a machine would cost 3 dollars. If sales tax were added the total would come to $3.19. A sum that the automated systems are simply incapable of processing. This leaves carwash owners with a difficult decision. Comply with the tax by paying out of pocket or by raising prices, a move that could discourage business owners aren’t the only ones voicing concerns over the new tax either.
Customers have begun expressing their displeasure with the increased costs. Some even go as far as to claim that owners are raising prices beyond what the sales tax would cost and are pocketing the excess funds. A Possible Solution Is A Long Way Off. This is not the first time that sales tax for car washes has been on the table. In 2009 and 2011, legislators considered a 6.35% tax on the industry but were defeated by lobbyists. However, it would seem this time they were successful. Business owners only received a few hours’ notice that the tax would be implemented and had to scramble to comply with the new 11th-hour ruling. While lawmakers do agree that the exemption should still be in place, it does not seem that they will address the issue until this coming February.
This delay could be due to the fact that the tax is expected to bring in $13.6 million over the next two years and that some believe that a 25-50 cent price increase is of little consequence. Whether or not we agree with every sales tax rule, we must comply to stay out of trouble with auditors. If your business is having trouble complying with confusing or new laws Sales Tax DataLink is here to help. We offer a wide range of products to ensure our consumers are getting the best results possible. Try it for yourself with our free evaluation or let us do the work for you by choosing an outsourcing option.