Sales and use taxes: service tax: qualified business.
SB 993 is poised to significantly reshape state tax law by expanding the Sales and Use Tax Law to include services. It mandates that businesses will be required to collect and remit this new tax to the California Department of Tax and Fee Administration. Notably, certain essential services, including healthcare, education, and child care, will be exempt from this sales tax, protecting low- and middle-income Californians from additional burdens. This new tax revenue is earmarked to stabilize California's infrastructure and education funding, thereby directly impacting community welfare and economic growth.
Senate Bill 993, introduced by Senator Hertzberg, seeks to modernize California's tax system by imposing a sales tax on services consumed by businesses. This change addresses the fact that California's economy has shifted from agriculture and manufacturing to a more service-oriented model, yet the tax system has largely remained unchanged. The bill aims to create a more equitable tax structure and reduce reliance on income from top earners, which can be volatile. The proposed tax would be incrementally implemented, starting with a modest percentage on certain services in 2019, ultimately aiming for a collective reduction in sales tax on goods to accommodate this new tax framework.
The sentiment surrounding SB 993 is mixed, as proponents argue that updating the tax code is necessary for financial stability and fairness in the 21st century economy. They contend the bill will help fund vital public services and reduce tax burdens on individuals. Conversely, critics worry about the implications for businesses and the overall tax burden on California families. The debate underscores a broader discussion about fiscal priorities, economic fairness, and government responsibility in adjusting to changing economic landscapes.
A point of contention arises from the bill's requirement for a two-thirds legislative approval to enact changes that could result in a taxpayer paying a higher tax, as outlined in Article XIIIA of the California Constitution. This provision creates a hurdle for the bill's passage, raising concerns among legislators about potential backlash from constituents who may be adversely affected by the new service taxes. Furthermore, the balancing act of supporting public services while ensuring business growth and economic vibrancy will be a key issue lawmakers will need to navigate.