Article published July 30, 2003
OHIO STATE TAX
Cleaners, cabbies, salons affected as new law hits home for service providers
COLUMBUS - In need of a manicure? Does that white shirt need cleaning? Better get to the beauty shop or dry cleaners before Friday because the price tag is about to climb at least 6 percent courtesy of Ohio state government.
The satellite TV industry has filed suit, but that won't stop the state from extending the sales tax to that service and a handful of others to raise about $70 million more a year for state and local coffers.
As of July 1, the state sales tax "temporarily" climbed from 5 cents on the dollar to 6 through June 30, 2005. In Lucas County, with the local tax add-on, consumers will pay 7.25 percent on services that were previously exempt from taxation, ranging from self-storage facilities to large snow-removal jobs.
Because the bill that increased the sales tax and expanded the number of businesses affected by it was passed so close to July 1, those businesses will not be affected until Friday so they can have time to prepare.
| New income |
Expected state and local revenue from newly taxed services*
Satellite TV ($22.3 million)
Dry-cleaning/noncoin-operated laundries ($20.6 million)
Vehicle towing ($8.9 million)
Delivery charges ($7.8 million)
Intrastate transportation: taxis, limousines ($6 million)
Self-storage service ($4.1 million)
Personal services: skin care, cosmetic application, manicure, pedicure, hair removal, tattooing, body piercing, tanning, massage ($2.1 million)
Snow removal ($100,000)
(*) For 2005
SOURCE: Ohio Department of Taxation |
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Dry cleaners, salons, tattoo parlors, and other service merchants are scrambling to update computer software, reprogram cash registers, and print tax cheat-sheets in preparation for the start-up date.
"After they get beyond the `Why are you doing this to me?,' then the bulk of the questions relate to `How am I supposed to implement the tax?,'" said Gary Gudmundson, spokesman for the Ohio Department of Taxation.
For a flat fare of $35 charged by Yellow Cab of Toledo to take a passenger from downtown to the airport, the tax will add $2.52. Some drivers are concerned that the tax will come out of their tips when passengers hand over bills and tell them to keep the change.
"Why should we pay $25 to get a vendors' license so that we can collect their sales taxes?" asked a driver who asked not to be identified. "It's a double-dip."
The expanded sales tax base, pared greatly by lawmakers from what Gov. Bob Taft originally proposed, was included in the $49 billion, two-year budget that took effect July 1. At that time, the sales tax was "temporarily" hiked for two years from 5 cents on the dollar to 6.
The satellite TV industry, worth about $22 million a year in sales taxes, has sued the state over its decision not to also tax its chief competitor, cable. The cable industry convinced lawmakers it should remain exempt from the sales tax because it is subject to a local franchise fee that satellite is not.
But even if satellite convinces the courts that the state is discriminating, that would do nothing for other services.
Mazen Hakki, owner of A-Mazin Salon of 4739 Monroe St., Toledo, has been collecting sales taxes on beauty products. Now he must expand that to manicures, pedicures, tanning, massage therapy, and nearly every other service the salon provides. Hair-cutting, styling, and coloring remain exempt.
He posted signs warning customers that the tax is coming.
"They understand that it's going up for everybody and that it's not going to be any different somewhere else," he said.
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