5-16-15 – Legislature Exploring Sales Tax Expansion to Services

Posted by Rob Roper

Vermont Digger reports that Sen. Tim Ashe (D/P-Chittenden), chairman of the Senate Finance Committee, is considering expanding Vermont’s 6% sales tax to include services beginning in 2017, lowering the overall rate to 5% over two years. (VT Digger, 5/16/15)

If Ashe is successful in getting this change to the House tax bill through the Senate, he may have an ally in the Speaker of the House, Shap Smith (D-Morristown). Back in 2012 the Speaker made a similar proposal based on a report by the Blue Ribbon Tax Commission. (Note: EAI Board member Bill Sayre was a member of that commission and filed a minority report opposing the expansion of the sales tax.)

However, the Blue Ribbon Tax Commission’s recommendation was for a “revenue neutral” expansion, lowering the overall sales tax rate to somewhere in the neighborhood of 2%. Ashe is not proposing a revenue neutral policy, and would only lower the overall rate to 5%.

This would exacerbate Vermont’s New Hampshire problem as our neighbor to the ease has no sales tax on goods or services. Vermont’s service sector would face the same disadvantage our retail sector now faces – which has been devastating for business and jobs.

The damage from a sales tax on services would be particularly hard on small businesses. Many small businesses contract out services such as payroll, advertising, etc., which they would have to pay tax on. Large businesses that can afford to produce those services “in-house” by full or part time employees would not pay the tax.  The compliance hassles will also be a negative factor as service businesses would now have to collect, keep track of, and remit taxes to the state.

A few examples of services that would be affected by the tax include:

  • Health Care*
  • Education/Tuition*
  • Child Care
  • Automotive repair labor
  • Information Technology
  • Web/Graphic design
  • Payroll services
  • Home Maintenance
  • Plow services
  • Construction/Carpentry
  • Barbers/Hairdressers
  • Real Estate
  • Architectural services
  • Advertising
  • Accounting
  • Legal services
  • Cleaning services
  • Landscaping
  • Electricians
  • Plumbing & Heating
  • And many more…

* Some proposals would exempt these services.

 

 

{ 1 comment… read it below or add one }

jim bulmer April 18, 2015 at 5:38 pm

Watch out!!! First we drop to 5% and add a whole bunch of new taxable items, then we wait a year or two and guess what? The rate goes back to 6% with all those additional items. Who do these idiots think they’re kidding. ENOUGH, I’m tappsd out.

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