NEW "SERVICE FEE" TAX

There is a lot of discussion and question about what will and what will not be taxed under the new tax proposed by Governor Riley on 'services and repairs.' It is so unclear that a provision was added in the legislation directing the department of revenue to issue regulations on or before October 1, 2003 providing guidance for the services tax - after the vote. Most of what you hear is about automobile repairs. No one has been able to clearly define what will be subject to the new tax but generally here is my best guess.

A tax on services, repairs, and installation will be due on any tangible property where you paid sales tax on the purchase of the property. That means that if you paid sales tax on the purchase you will pay sales tax for any subsequent service, repair, or installation costs for/to that purchased item. This will include but not be limited to:

Vehicle repairs of every kind - tune ups, air conditioners, transmissions, oil changes, radiator flushes, wheel balancing and rotation, brakes, or just about any kind of service or repair to an automobile;

Motorcycles - similar repairs and services to automobiles;

Farmers; repairs to farm implements used in the farming business - (this is a gray area and might be at a lower rate and could mean that on some of the larger equipment where the repair bill can be tremendous, the farmer will probably attempt to make the repairs in-house instead of taking to the regular repair provider);

Household equipment - lawnmowers, riding mowers, chain saws, trimmers, brush cutters, pressure washers, etc.

Appliances - cook stoves, ovens, window air conditioners, bathroom and kitchen plumbing fixtures - maybe?; washing machines, dryers;

Electronic Equipment - TVs, Video players and recorders, computers and all related computer equipment, stereos, telephones, etc.;

...and the list can go on and on.

The state portion of the tax will be 4%. There will be a windfall to cities and counties because they will be authorized to collect this new tax at the local level. In many cities a total of 8% to 10% will be charged. Local governments will also see a windfall in property taxes. So not all of the new taxes will go to state government. Could this be why you see elected officials endorsing the plan? And - that money will go unearmarked to city and county budgets to be spent as the local politicians want!

In addition, there will be an increase in state tax on the purchase of automobiles, trucks, motorcycles, mobile homes...

There will be an increase in the state tax when you purchase your tag each year...

There will be an increase on all tobacco products...

There will be a new tax on all lubricating oils...

And have you noticed that many of the business organizations supporting this measure are the same ones who were proponents of constitutional reform? When is the last time you heard anything about constitutional reform? It appears that it just turned into "tax" reform in the form of tax increases. These are the same people who talk about the negatives of the "regressive" sales tax, and now an additional "regressive" tax is being proposed in the form of this "services" tax? Whatever ones view is on constitutional reform, and I for one like the fact that the present constitution at least forces a vote on many tax increases, well

...either way be sure to vote NO on this tax increase - AND REMEMBER EVERY VOTE IS IMPORTANT!