California state Sen. Robert Hertzberg is ready to push for a statewide business-to-business tax, a measure NFIB California opposes.
Senate Bill 993 would create a new 3 percent tax on services, such as legal representation, accounting, design work, and consulting that are delivered to businesses in California by 2022, according to the Sacramento Business Journal.
The new tax would bring about $14 billion per year. The bill includes a 2 percent decrease in the state’s sales tax by 2022. According to Hertzberg, the bill would generate increased business for companies that sell goods in California, according to the Sacramento Business Journal.
The state senator proposed the bill again this year in part because of the passage of the federal Tax Cuts and Jobs Act. Citing the tax reform’s reduced corporate tax rate, Hertzberg assumed that lawmakers would be more open to passing the service tax bill in the new tax climate.
NFIB opposes the bill because it would create an added burden on small businesses in California.
“We think this bill would be a severe tax burden on small businesses,” Shawn Lewis, spokesman and lobbyist for the NFIB, said to the Sacramento Business Journal. “It would make California even more unfriendly to small business owners.”
Lewis continued that California seems to have an endless appetite for taxes.
“But we also have a surplus. Why are we trying to raise taxes wherever we can?” he is quoted as saying.
Business interest groups believe that the bill would disproportionately impact small businesses in California.
“A lot of small businesses depend on services to stay in businesses,” Sarah Boot, a policy advocate for CalChamber, is quoted as saying. “Larger businesses can bring those services in-house, but not small businesses.”
The Senate Governance and Finance Committee has already heard testimony on the bill, and is expected to vote on the legislation on June 13.
