Thursday, July 25, 2013

Sales and Use Taxes on Services - A Scientific Survey (sort of)

I did a survey!  I'm so proud.  It's been a while since I've done one, and this particular question has been bugging me, so I thought I'd check it out.

When I do seminars, I generally talk about the percentage of states that tax services vs. the states that don't tax services.  I've been ball-parking it, but I decided to actually get harder numbers. 

So, what is the distribution of the taxing of services among the 46 states (including DC)?

First of all, there are some services that are generally taxed - not in every state necessarily, but in the majority:

Rental of tangible personal property

Then there is a mixed bag of other services.  For each of the 46 states, I surveyed four specific categories that I thought would give me a snapshot of the amount of services a state taxes:

Repair labor

I assigned each state one point for each category that is taxable. 

Alabama  0
Arizona 0
Arkansas 4
California 0
Colorado 4
Connecticut 4
DC 3
Florida 3
Georgia 0
Hawaii 4
Idaho 0
Illinois 0
Indiana 0
Iowa 4
Kansas 1
Kentucky 0
Louisiana 1
Maine 0
Maryland 2
Massachusetts 0
Michigan 0
Minnesota 3
Mississippi 1
Missouri 0
Nebraska 3
Nevada 0
New Jersey 4
New Mexico 4
New York 3
North Carolina 0
North Dakota 0
Ohio 4
Oklahoma 0
Pennsylvania 2
Rhode Island 0
South Carolina 0
South Dakota 4
Tennessee 1
Texas 4
Utah 1
Vermont 0
Virginia 0
Washington 3
West Virginia 4
Wisconsin 1
Wyoming 0

I found that my ballpark guesses were pretty close:

21 states tax none of the items in my basket of services 45%
6 states tax only one of the items in my basket (usually repair labor) 13%
19 states tax tax two or more items from my basket (what I would call a health mix)  41%

So what does this mean?  Well, for one thing, I'm right.  Yay!  Which explains the picture at the top.

If you're in one of those states that taxes a lot of services, then, well, YELL at your politicians.  It won't help, but you might feel better.

 If you're in one of those states that don't tax a lot of services, then count your blessings.  And if you're in one of those states that got a ZERO, don't be surprised at the sales tax when your car breaks down in West Virginia!

See, we got all sciency there.

The Sales Tax Guy

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Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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