Last week, D.C. published regulations interpreting the district’s recent expansion of its sales tax base to include previously nontaxable services. Beginning Oct. 1, the district extended its sales tax to a motley assortment of services: bottled water delivery, bowling alley and billiard parlor services, car washing, carpet and upholstery cleaning, rug repair, health club services, self-storage and tanning.
In clarifying which services are now taxable, the regulations devote the greatest portion of their text to health club services. Before being overridden by the district council, Mayor Gray vetoed the tax on these particular services last July, calling it a “tax on wellness.” The regulations, which emphasize that only charges related to physical exercise are taxable as health club services, appear to agree. For example, charges for lounge pool memberships (by contrast with those related to physical exercise) are not taxable under the regulations. Those who instead choose to get that sun-kissed look at a tanning salon will be subject to tax.
In order to preserve their tax base, states have increasingly looked to extend their sales tax to previously nontaxable services. In addition to those now taxed by D.C., popular targets have included such services as tattooing, waste removal, and pet grooming. While the relationship between these services may not be immediately obvious, they are likely selected for taxation as services typically purchased by households. According to Michael Mazerov of the Center on Budget and Policy Priorities, economists generally agree that jurisdictions expanding their sales tax on services should focus on services purchased by households and shy away from taxing those primarily purchased by businesses. Among other reasons, this is believed to avoid the “pyramiding” of tax that might otherwise occur if taxes on services purchased by businesses result in higher prices of taxable goods and services produced by those businesses.
Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Prior to the district expanding its sales tax on services, the DC Fiscal Policy Institute proposed that pet grooming and performing arts (excluding opera) be included in the expanded list of taxable services. What other services typically purchased by households might have made the final list, but didn’t?
Take a free trial to Premier State Tax Library , a comprehensive research service that delivers deep, unique analysis, and time-saving practice tools to help practitioners make well-informed decisions.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)