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California Considering Sales Tax Expansion to Services


UPDATE: 6/8/2012. Note: AB 2540 appears to have had all the sales tax on services language stricken from the existing version at this time.

Two sales tax bills lie before the California State Legislature that would affect the services industry: Assembly Bill 1963 (AB 1963) and Assembly Bill 2540 (AB 2540).

California AB 1963 would reduce the general retail sales tax rate from 7.25 percent to 4 percent and “…expand that tax’s range to almost all services sold in the state.” According to the bill, “…’services’ shall not include any of the following:

  1. Necessary medical services.
  2. Services related to education.
  3. Automotive repair services.
  4. Tax preparation and filing services.
  5. Licensed legal services.
  6. Services relating to agriculture and livestock.”

AB 2540 would “…impose a new tiered sales tax on a wide range of services, including pool maintenance.” Services that would be added to the list of taxable items include:

  • Yacht and boat repair.
  • Personal shopping.
  • Party planning.
  • Pool maintenance.
  • Spa services provided to pets.
  • Shoe shining.
  • Furniture repair.
  • Watch repair.
  • High net worth estate planning.

A complete list can be found in the bill itself in Section 2.

The response from the pool maintenance community indicates concerns about how this might affect competitiveness within the industry.  According to one owner, “These taxes would make the competition worse than it already is.” Competition and the burden would create, “…more under-the-table cash transactions if these bills are passed into law.”

It was noted by John Norwood, president of the California Swimming Pool & Spa Industry Education Council that “…even above-board pool service companies would feel pressure to absorb the taxes, rather than pass them on to customers, to compete effectively—and that companies unwilling to do so would likely lose customers who were already uncertain about the affordability of their pool service.”

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Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”