AB 1963, the legislation to impose a sales tax on many services, including architectural services, has been amended by the author in response to overwhelming opposition into a study bill on a sales tax on services.
The AIACC was a part of the opposition coalition and is pleased with this outcome.
Every few years, there is a proposal to extend the sales tax to services, as that is seen as the remaining activity not taxed (this view overlooks income and business taxes paid by service providers and, for architects at least, the sales tax that is generated as a result of the services provided). The proposal usually is presented as an opportunity to tax an untaxed entity, to lower the overall sales tax rate, and to bring greater stability to the amount of tax revenues received (although architects will be first in line to say service providers are not immune to recessions).
AB 1963 now requires the Legislative Analyst’s Office to study a sales tax on services and report recommendations to the Legislature. Several similar studies have been conducted in the past, often recommending some type of a tax on services. The former opposition coalition is asking that the study also include a look at any negative impacts a sales tax on services would have on the economy.
The amendment to AB 1963 is a positive development, but it is certain that this issue will come up again another year.