6 percent sales tax expansion on services
Business service centers
Carpet and upholstery service
Couriers and messengers
Document preparation services
Investigation guard and armored services
Investment advice
Janitorial services
Mini-warehouse and self-storage
Warehousing and storage
Transit and ground passenger
Office administration
Personal services, such as astrology services
Travel and reservation services
Personal care, excluding haircuts
Scenic transportation
Security system services
Service contracts
Skiing
Specialized or interior design
Tour operators
Consulting
Packaging and labeling services
Source: The Associated Press
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Sales tax expansion has little effect on prices overall
The state passed a sales tax expansion on some services Monday morning in an effort to reduce Michigan’s $1.75 billion budget shortfall.
The 6 percent sales tax expansion would affect carpet and upholstery services, tour operators, janitorial services, investment advice and other services.
“The effect on most people will be fairly minor,” said Charles Ballard, MSU professor of economics. “A lot of the items that are on the list are items that not everyone buys. If you are the average skier and ski tickets are taxed then it would have an effect, but the majority of Michigan citizens don’t ski and it won’t have an effect on them.”
Like skiing, which is on the service list, travel and reservation services also will tax customers.
However, at STA Travel, 207 E. Grand River Ave., travel adviser Tamara Olton doesn’t think students booking trips will be fazed by the new tax.
“It’s a very small amount in the grand scheme of a vacation,” she said. “For spring breakers and study abroad, it might make them grumble but it won’t affect if they purchase the product or not.”
The tax on services would begin Dec. 1 and is estimated to bring in about $614 million for the remainder of the fiscal year or about $750 million annually, according to The Associated Press.
Gov. Jennifer Granholm told reporters Monday that the Legislature chose the services because they were considered discretionary services, or extras. But for some people and businesses, the services are a necessity.
“Is it a luxury when a homeowner wants to purchase a security system to protect their family? Does the state consider that a luxury? Because that is what they are saying,” said Tricia Kinley, director of tax policy and economic development for the Michigan Chamber of Commerce
Items like security system services, service contracts, warehousing, storage and consulting can be necessities for people.
“A lot of other states have (taxed services) and we didn’t have a choice,” said Michelle Scott, a no-preference freshman. “We’ve got to get the money from somewhere, but they could have done more cut backs in other areas.”
Published on Tuesday, October 2, 2007
Comments
PJ
10/03/07 @ 9:19am
The sales tax was not expanded, a service tax was created on certain categories of services. The sales tax remained steady at 6%.
This small increase will go a long way in saving this state from a much larger problem.
C. Parran
10/03/07 @ 9:34am
It’s interesting that these new taxes mostly affect smaller businesses and the little guy (or girl). Skiing will be taxed but not golf. I suppose the legislators all play golf and to them it’s a necessity. I, for one, will not be sending any new sales tax from my document preparation business. I had to shut down 2 years ago because ink, toner and printer repairs became too costly. Also, the business was just hit and miss and didn’t provide a regular income. I don’t think taxing the smallest businesses is the answer to the State budget crisis. We’ll just shut down if we’re earning next to nothing.
C. Parran
10/03/07 @ 9:39am
Pardon me, I meant to say service tax, but the headline says “Sales tax expansion…”.
Rick
10/03/07 @ 12:08pm
PJ: This new tax will do nothing for Michigan’s problems. It does not even address the budget deficit that we already have. Our elected non-representatives will just spend even more money on wasteful things.
John
10/04/07 @ 2:01pm
This is just another affirmation of how out of touch our state government has become. Now Michigan small business has another hurtle to over come. To compete in Michigan with out of state internet companies. I might as well close my six small companies and move another state. How can there be justification in the fact that lawyers who make huge profits are not taxed. Where does Jeffery Figer stand on this issue?