This legislative session, the Ways and Means Committee of the Maryland House of Delegates considered House Bill 1051, a Bill entitled, “Sales and Use Tax – Services.”
Its purpose is to alter the definition of “taxable service” under the sales and use tax section of Maryland law in order to impose a tax on services which had not been taxed in the past.
If enacted, the bill would expand the definition of “taxable service” to include 29 additional services, requiring those 29 services to collect and remit sales tax for the first time. The full text of the proposed bill, including all 29 additional services can be found here.
Those additional services are varied and diverse in nature, and impact every level of the state economy, from individual households to businesses, and even entire industries. For example:
- Patrons would have to pay sales tax every time they get haircuts, manicures, and massages.
- Cable television service would carry a sales tax, in addition to the regulatory fees and taxes already collected.
- Individuals trying to better their lives through dating or dieting services would have to pay sales tax.
- Auto services, including towing, repairs, car washes, and even warranty contracts, would be subject to sales tax as well.
While individuals and families certainly would be impacted as a result of the expanded sales tax, the brunt of the burden would fall on businesses, particularly small businesses. Not only will their services become more expensive to consumers, businesses also will be tasked with collecting, accounting for and remitting sales tax to the State.
Most of the services which will be forced to collect sales taxes are organized as small or family owned businesses. In addition to the administrative burdens of handling the sales tax, businesses would have to pay sales tax for tasks such as engaging an employment agency, speaking with a public relations advisor or engaging a business consultant.
Tax preparation services would become more expensive for businesses as a result of collecting sales tax, and they too would carry a sales tax.
While several steps remain in order for this bill to become law, it is important for everyone to be aware of these proposed changes because of the breadth of the bill. If enacted, the Bill would take effect on January 1, 2013.
