United States

California: Board of Equalization Estimates Sales Tax on Services Could Raise $122 Billion

Apr 20, 2015
From KPMG TaxWatch

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On April 14, 2015, the California Board of Equalization released a report estimating that approximately $122.6 billion in new revenue could be generated if California imposed sales and use tax on currently non-taxable services. The report, which assumes a statewide average sales tax rate of 8.42 percent, was produced at the request of the California State Senate Governance and Finance Committee. The estimate was based on an analysis of 15 categories of service industries, including health care, agriculture, construction, real estate, finance, transportation and warehousing, and various professional services, such as attorneys, accountants, hairstylists, car washes, and auto and shoe repair. Recall earlier this year Senate Bill 8, the proposed Upward Mobility Act, was introduced in the Legislature and is currently pending in the Senate Governance and Finance Committee. If enacted, this bill would broaden the tax base by imposing a tax on services, exempting health care and education. Businesses with under $100,000 in sales would also be exempt from the sales tax on services. Senate Bill 8 would also direct the legislature to examine―and possibly make changes―to the state’s corporate income tax and personal income tax regimes. The Board also released a four-page fact sheet outlining a series of administrative issues that would need to be addressed if the sales tax was imposed on a wide range of services. Please stay tuned to TWIST for future updates on California’s proposed sales tax on services.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.