Veterinarians in Kentucky would charge the state’s 6 percent sales tax when they spay your dog or cat.
Auto repair shops would add the tax to their bill for fixing your car. Taking a suit or dress to the cleaners? Get ready to pay the sales tax for that care and several others.
State lawmakers this week approved a revenue plan that includes adding the state’s sales tax to 17 services that currently are not taxed. They say more money is needed to meet the state’s needs like education and social services.
Businesses that will see the 6 percent sales tax applied to their services for the first time are not too happy with the state legislature’s decision.
“I’m very disappointed that the state budget has been balanced on the backs of small businesses,” Tom Underwood, state director of the National Federation of Independent Business, said Tuesday in calling upon Gov. Matt Bevin to veto the revenue bill.
“We’re hopeful the General Assembly will take this opportunity to reconsider the small business burden of this tax bill and find a solution to Kentucky’s financial problems that doesn’t crush our Main Street family businesses.”
Businesses will pass along the sales tax to consumers, which could lead to loss of sales, especially for those discretionary services like dry cleaning and pet grooming, said Underwood.
“This is not good,” said Pamela Brown, who has been operating Pam’s Dry Cleaners on Richmond Road in Lexington for almost 40 years.
“I’ve built up good clientele but you can’t blame customers for complaining,” she said. “I just hope they don’t decide to bring in less items to be cleaned because of it.”
Underwood said the tax plan would have been more fair if it had been “across the board with more services included.”
“It looks to me like a picking-and-choosing kind of thing by the legislature,” said Joe Schlich, practice manager for the Nicholasville Road Animal Hospital. “Why just taxing services on small animals? What about horses?”
Lawmakers didn’t provide details on why they selected the services they did.
Kentucky officials have talked about a sales tax on services for decades.
The Kentucky sales tax was enacted in 1960 under Democrat Bert T. Combs as a 3 percent retail tax on a wide range of tangibles. In 1968, the tax was increased to 5 percent under Republican Gov. Louie Nunn and to 6 percent in in 1990, under Democrat Wallace Wilkinson.
In the 1990 Kentucky General Assembly, Wilkinson presented a budget proposal to lawmakers that contained measures increasing taxes on cigarettes and corporations and eliminating sales tax exemptions on legal, engineering, and advertising services. Legislators favored raising the sales tax to 6 percent instead.
In 2017, a blue ribbon commission set up by then-Gov. Steve Beshear proposed broadening the sales tax to “limited” services, including auto repair, certain recreational activities like golf courses and fitness centers and certain commercial and personal services like landscaping and cleaning companies.
Beshear said he tried to avoid taxing “mobile” services such as legal and accounting that easily move their work across the state’s borders.
Senate President Robert Stivers, R-Manchester, said this week that Bevin “wanted to increase the sales tax in a more comprehensive plan” and “go further for tax relief on the corporate level” but “there was not the ability to get the votes for that so I believe what we have done is a step in the right direction.”
Bevin, however, said he was concerned that the legislature’s tax changes may not meet “basic standards of fiscal responsibility.”
He has the power to veto legislation but Stivers said the Senate is poised to override a veto.
Lawmakers left the Capitol Monday night and will not return until April 13 and April 14 to consider any gubernatorial vetoes.
The legislature’s revenue measure is designed to raise about $500 million over the next two years. Taxes on services would generate $436 million.
Besides taxing selected services, it increases the cigarette tax by 50 cents per pack, which is expected to generate $245 million, and cuts the individual and corporate tax code to a flat 5 percent tax.
Kentucky’s 6 percent sales tax would apply to these services
- Landscaping services, including but not limited to: lawn care and maintenance services; tree trimming, pruning, or removal services; landscape design and installation services; landscape care and maintenance services; and snow plowing or removal services.
- Janitorial services, including but not limited to residential and commercial cleaning services, and carpet, upholstery, and window-cleaning services.
- Small animal veterinary services, excluding veterinary services for equine, cattle, swine, sheep, goats, llamas, alpacas, flightless birds, buffalo, and hoofed animals like deer.
- Pet care services, including but not limited to grooming and boarding services, pet-sitting services, and pet obedience training services.
- Fitness and recreational sports centers.
- Golf courses and country clubs.
- Overnight trailer campgrounds.
- Bowling centers.
- Industrial laundry services, including but not limited to industrial uniform supply services, protective apparel supply services, and industrial mat and rug supply services.
- Non-coin-operated laundry and dry cleaning services.
- Linen supply services, including but not limited to table and bed linen supply services and non-industrial uniform supply services.
- Indoor skin tanning services, including but not limited to tanning booth or tanning bed services and spray-tanning services.
- Non-medical diet and weight-reducing services.
- Labor and services for certain repair, installation and maintenance of personal property, such as cars.
- Pollution-control facilities.
- Limousine services, if a driver is provided.
- Extended warranty services.