SB 993 – The “Sales Tax” for Services

Today, the Senate’s Governance and Finance Committee will make a decision on whether or not to impose a sales tax on services provided to California businesses. Contained within Senate Bill 993 (SB 993), this sales tax on services is an idea championed by Sen. Bob Hertzberg, D-Van Nuys. He introduced the idea for SB 993 in early February of this year and believes that this tax will offset the impact that the Tax Cuts & Job Act will undoubtedly have on middle-class families, especially in California. Hertzberg’s bill would impose a three percent sales tax on services that are purchased by California businesses, like legal services and accounting services. The revenue collected under this new tax would be used to provide tax relief for middle-class and low-income families in California, as well as fund further development of California’s infrastructure, workforce, and educational support.

The Way You Do Business Can Be Affected Drastically

If the services tax is ultimately passed, California businesses will be affected in a major way. For instance, because of the additional tax on services like financial audits or legal consultation, many smaller businesses will either increase prices on their services or products or neglect to be as selective in choosing their legal and accounting professionals. After all, if the cost to enlist any accountant will be increasing in the wake of this new sales tax – why not pick the lower priced accounting service? Since accounting and legal services often assist businesses with preventing compliance and legal issues, this may also cause non-compliance in businesses who would otherwise be compliant with current regulations. Should the services tax be implemented, these types of situation will be plaguing small and medium-sized businesses throughout California and may cause another wave of business move-outs from California.

Questions? We’re here to help.

If you have any other questions about the services tax, contact MBS Accountancy and our team of tax law experts and accountants will answer any of your questions! We proudly provide excellent accounting and tax assistance for California businesses and keep you updated on the current events related to your business operations and taxes.