Tax Expansion Trend
Sales tax placed on goods is one of the largest sources of state revenue. However, in recent years state lawmakers have found residents spending more on services than they do on goods. This development has states rethinking their sales tax policies in an effort to combat revenue gaps. Vermont has found that services account for 70 percent of consumer activity and attests that it is Vermont’s failure to tax the fast-growing service economy that has led to state revenues failing to keep pace with growth in the state budget. Supporters of sales tax expansion say it will create an equal tax code that doesn’t favor one form of consumption over another.
The states of Delaware, Hawaii, New Mexico, South Dakota, and Washington already tax most services, and Texas, Minnesota, and Vermont are actively seeking to expand their service taxability.
Understandably, there are opponents to this trend who believe that service sales tax could suppress the activity that lawmakers are hoping to prosper from. In particular, there are concerns about how service sales tax will affect businesses on state lines, where one state collects service sales tax and the other does not, and whether consumers will take their business out of state or mobile businesses will relocate.
Service Sales Tax Examples
How would tax expansion affect service businesses in your home state? To answer that question, the complex nature of sales tax laws would have to be taken into account. As with traditional sales tax placed on goods, service sales tax would differ just as greatly between states and would have to be assessed on a local basis.
The following are examples of services currently being taxed in different states. This list was composed for exemplary purposes, is not all-inclusive, and should not be used to define service sales tax law.
- Admissions fees to some establishments
- Building cleaning and maintenance
- Delivery of whole materials
- Detective and security services
- Fabrication labor
- Data processing services
- Construction related services
- Information technology services
- Debt collection services
- Shoe shining repair
- Appliance repair
- Furniture refurbishing or upholstering
- Jewelry repair or cleaning
- Dog grooming
- And others
Staying up to date on changing sales tax laws has always been a challenge for busy business owners. If you own, or are financially responsible for, a service business in a state considering tax expansion Sales Tax DataLink has recourses available that can help you keep track of jurisdiction policies. We offer a free comprehensive evaluation for customers looking to test our sales tax software. Sales Tax DataLink also has an outsourcing program that is able to handle your sales tax worries for you and lets you get back to business.