Services Tax and Income Tax Passed to Balance Budget
While the business groups sponsoring this Web site worked all through the weekend and the night to avert a new services tax, in the end, lawmakers took the easy way out and looked to revenue as the primary means to balance the budget.
In the wee hours of the morning of Oct. 1, lawmakers concluded a deal to avoid a government shutdown by raising the income tax and expanding the sales tax to a number of services. The tax increases will bring in $1.48 billion a year in new revenue to the state. The deal also included a 30-day continuation budget in order to prevent the shutdown. The regular bills that make up the state's Fiscal Year 2008 Budget will be passed in the days to follow.
The legislation that expands the sales tax to selected services will raise $613.8 million in fiscal year 2008, but for an entire fiscal year the tax will raise $751 million. Increasing the income tax rate to 4.35 percent will raise $765 million for the state in fiscal year.
What Services Will Be Taxed?
The following services will be taxed at 6 percent; revenue raised by each is in parenthesis. This is a general list, scroll down for more detail:
- Business service centers ($9.5 million)
- Carpet/upholstery ($5.2 million)
- Couriers and messengers ($3.1 million)
- Document prep services ($4.8 million)
- Investigation guard/armored car ($27.0 million)
- Janitorial ($43.8 million)
- Investment advice ($16.8 million)
- Landscaping ($40.5 million)
- Mini-warehouse and self-storage ($3.9 million)
- Transit and ground passenger, limo and cab ($10.5 million)
- Office administration ($79.2 million)
- Other personal services ($48.2 million)
- Other travel and reservation ($6.7 million)
- Personal care, no haircuts ($14.1 million)
- Scenic transportation ($14.2 million)
- Security system services ($14.2 million)
- Service contracts ($23.5 million)
- Skiing ($2.2 million)
- Interior design ($27.8 million)
- Tour operators ($2.6 million)
- Consulting ($188.2 million)
- Packaging and labeling services ($20.8 million)
- Warehousing and storage ($21.0 million)
Specific Listing by NAIC Code
The legislation lists services to be taxed by NAIC code. The NAIC (North American Industry Classification) has replaced the old U.S. Standard Industrial Classification (SIC) system. To find out if your business activity is covered by the new services tax, determine your NAIC code and then look at the listing from the bill below. To find your NAIC code, visit www.census.gov/naics. Enter the code in question (for example 541330 is for engineering design services) or the key words for your industry if you do not know your code (e.g. engineering design services) in the box on the upper left of the Web page and click the "2007 NAIC Search" button.
Download the List of Services to Be Taxed
After you find your code, look in the list below to determine your status:
Proposed Services to be Taxed in HB 5198
56174 Carpet and Upholstery Cleaning Services
This industry comprises establishments primarily engaged in cleaning and dyeing used rugs, carpets, and upholstery.
56143 Business Service Centers
This industry comprises: (1) establishments primarily engaged in providing mailbox rental and other postal and mailing services (except direct mail advertising); (2) establishments, generally known as copy centers or shops, primarily engaged in providing photocopying, duplicating, blueprinting, and other document copying services without also providing printing services (i.e., offset printing, quick printing, digital printing, prepress services); and (3) establishments that provide a range of office support services (except printing services), such as mailing services, document copying services, facsimile services, word processing services, on-site PC rental services, and office product sales.
5416: Management, Scientific, and Technical Consulting Services
54161: This industry comprises establishments primarily engaged in providing advice and assistance to businesses and other organizations on management issues, such as strategic and organizational planning; financial planning and budgeting; marketing objectives and policies; human resource policies, practices, and planning; production scheduling; and control planning.
54162: This industry comprises establishments primarily engaged in providing advice and assistance to businesses and other organizations on environmental issues, such as the control of environmental contamination from pollutants, toxic substances, and hazardous materials. These establishments identify problems (e.g., inspect buildings for hazardous materials), measure and evaluate risks, and recommend solutions. They employ a multidisciplined staff of scientists, engineers, and other technicians with expertise in areas, such as air and water quality, asbestos contamination, remediation, and environmental law. Establishments providing sanitation or site remediation consulting services are included in this industry.
54169: This industry comprises establishments primarily engaged in providing advice and assistance to businesses and other organizations on scientific and technical issues (except environmental.)
56161: Investigation, Guard, and Armored Car Services
This industry comprises establishments primarily engaged in providing one or more of the following: (1) investigation and detective services; (2) guard and patrol services; and (3) picking up and delivering money, receipts, or other valuable items with personnel and equipment to protect such properties while in transit.
52393: Investment Advice
This industry comprises establishments primarily engaged in providing customized investment advice to clients on a fee basis that do not have the authority to execute trades. Primary activities performed by establishments in this industry are providing financial planning advice and investment counseling to meet the goals and needs of specific clients.
56172: Janitorial Services
This industry comprises establishments primarily engaged in cleaning building interiors, interiors of transportation equipment (e.g., aircraft, rail cars, ships), and/or windows.
56173: Landscaping Services
This industry comprises (1) establishments primarily engaged in providing landscape care and maintenance services and/or installing trees, shrubs, plants, lawns, or gardens and (2) establishments primarily engaged in providing these services along with the design of landscape plans and/or the construction (i.e., installation) of walkways, retaining walls, decks, fences, ponds, and similar structures.
5611: Office Administrative Services
Firms that provide day-to-day office administration such as financial planning, billing, recordkeeping, personnel, physical distribution, and logistics.
56159: Other Travel Arrangement and Reservation Services
This industry comprises establishments (except travel agencies and tour operators) primarily engaged in providing travel arrangement and reservation services.
487: Scenic and Sightseeing Transportation
Industries in the Scenic and Sightseeing Transportation subsector utilize transportation equipment to provide recreation and entertainment. These activities have a production process distinct from passenger transportation carried out for the purpose of other types of for-hire transportation. This process does not emphasize efficient transportation; in fact, such activities often use obsolete vehicles, such as steam trains, to provide some extra ambience. The activity is local in nature, usually involving a same-day return to the point of departure. The Scenic and Sightseeing Transportation subsector is separated into three industries based on the mode: land, water, and other.
71392: Skiing Facilities
This industry comprises establishments engaged in (1) operating downhill, cross-country, or related skiing areas and/or (2) operating equipment, such as ski lifts and tows. These establishments often provide food and beverage services, equipment rental services, and ski instruction services. Four season resorts without accommodations are included in this industry.
56152: Tour Operators
This industry comprises establishments primarily engaged in arranging and assembling tours. The tours are sold through travel agencies or tour operators. Travel or wholesale tour operators are included in this industry
4931: Warehousing and Storage
This industry group includes establishments classified in the following NAICS industries: 49311, General Warehousing and Storage; 49312, Refrigerated Warehousing and Storage; 49313, Farm Product Warehousing and Storage; and 49319, Other Warehousing and Storage. General Warehousing and Storage This industry comprises establishments primarily engaged in operating merchandise warehousing and storage facilities. These establishments generally handle goods in containers, such as boxes, barrels, and/or drums, using equipment, such as forklifts, pallets, and racks. They are not specialized in handling bulk products of any particular type, size, or quantity of goods or products.
49312: Refrigerated Warehousing and Storage
This industry comprises establishments primarily engaged in operating refrigerated warehousing and storage facilities. Establishments primarily engaged in the storage of furs for the trade are included in this industry. The services provided by these establishments include blast freezing, tempering, and modified atmosphere storage services.
49313: Farm Product Warehousing and Storage
This industry comprises establishments primarily engaged in operating bulk farm product warehousing and storage facilities (except refrigerated). Grain elevators primarily engaged in storage are included in this industry.
49319: Other Warehousing and Storage
This industry comprises establishments primarily engaged in operating warehousing and storage facilities (except general merchandise, refrigerated, and farm product warehousing and storage).
56191: Packaging and Labeling Services
This industry comprises establishments primarily engaged in packaging client owned materials. The services may include labeling and/or imprinting the package.
5414: Specialized Design Services
This industry group comprises establishments providing specialized design services (except architectural, engineering, and computer systems design).
4853: Taxi and Limousine Service
This industry group includes establishments classified in the following NAICS industries: 48531, Taxi Service, and 48532, Limousine Service.
492: Couriers and Messengers
Industries in the Couriers and Messengers subsector provide intercity and/or local delivery of parcels. These articles can be described as those that may be handled by one person without using special equipment. This allows the collection, pick-up, and delivery operations to be done with limited labor costs and minimal equipment. Sorting and transportation activities, where necessary, are generally mechanized. The restriction to small parcels partly distinguishes these establishments from those in the transportation industries. The complete network of courier services establishments also distinguishes these transportation services from local messenger and delivery establishments in this subsector. This includes the establishments that perform intercity transportation as well as establishments that, under contract to them, perform local pick-up and delivery. Messengers, which usually deliver within a metropolitan or single urban area, may use bicycle, foot, small truck, or van.
8121: Personal Care Services
This industry group comprises establishments, such as barber and beauty shops, that provide appearance care services to individual consumers.
56162: Security Systems Services
This industry comprises establishments engaged in (1) selling security systems, such as burglar and fire alarms and locking devices, along with installation, repair, or monitoring services or (2) remote monitoring of electronic security alarm systems.
56141: Document Preparation Services
This industry comprises establishments primarily engaged in one or more of the following: (1) letter or resume writing; (2) document editing or proofreading; (3) typing, word processing, or desktop publishing; and (4) stenographic (except court reporting or stenotype recording), transcription, and other secretarial services.
53113: Lessors of Miniwarehouses and Self-Storage Units
This industry comprises establishments primarily engaged in renting or leasing space for self- storage. These establishments provide secure space (i.e., rooms, compartments, lockers, containers, or outdoor space) where clients can store and retrieve their goods.
