“Conservative” Group Pushes for Sales Tax on Services

The Thomas Jefferson Institute for Public Policy, a supposedly center-right public policy foundation, is pushing for sales taxes to be collected on most services in Virginia.  The law would include services provided to the public but not business-to-business services.  This would include tax preparation, legal services, transportation, shipping services, insurance, private education, auto repair, hair services, dry cleaning, landscaping services, apartments, bowling, and the list goes on and on.  The new law would be “revenue-neutral” (what they always say) and would eliminate the Business and Professional Occupational Tax (Business License), Business Personal Property Tax and Business Inventory Tax.

Although I like the idea of getting rid of Business License fees and Property and Inventory Taxes, I don’t like the idea of charging sales taxes on services.  Charging a sales tax on services is the same as charging sales taxes on labor.  As we all well know, labor is already taxed extensively through the Federal Income Tax, State Income Tax, Social Security Tax, Medicare Tax, State Unemployment Tax and Federal Unemployment Tax.  Now, they want us to collect and remit sales tax to the state for services?

This also creates burdensome accounting.   For example, if you pay someone to mow your lawn as an independent contractor then under this new law they would also be required to collect sales tax from you and remit it to the State.  That seems to me like a paperwork nightmare, especially for small operators.  And, it increases the potential for fraud.  How much of this new tax will never get remitted to the State?

Although this tax is paid by the public, it will eat into the pockets of service providers.  There are certain price points that people will pay, tax included.  Thus, service providers will have to lower their prices to accommodate the new tax.  Also, it will give an unfair advantage to those small operators who skirt the law and don’t collect or report the tax at all.  I say, “Two Thumbs Down” on this idea!