Columnist Erin Neff: Business group’s sales tax on services is a bust

Erin Neff

Friday, April 11, 2003 | 4:33 a.m.

CARSON CITY -- For more than a year, business has been attacking the gross receipts tax with a promise that it would come to the legislative session with its own alternative.

And so on the 65th day, business created a plan.

Well, sort of.

The "Business Representative Group," which does not represent the businesses of gaming or mining, came to the Legislature finally on Tuesday with a list of the services to which a 5 percent sales tax should be applied.

The group, led by the state's chambers of commerce, had been talking about a sales tax on services for months, but waited until the day of a hearing on someone else's bill to finally list the services.

Child care, health care, movies, newspapers and amusements would be exempt -- leading the Las Vegas Chamber's Kara Kelley to exhort: "The business community pays the difference."

Really?

Taxable services include: adult cabarets and brothels (guess business is counting businessmen); landscaping; legal and accounting services, plane and train tickets, car washes, commercial sports, golf and country clubs and "non-residential" watch repair (whatever that is).

Non-taxable services include business' biggest expenses, such as advertising, communications, and radio and TV broadcasting. Thankfully, the expense most residents use daily -- construction of new mineral extraction facilities -- is also exempt.

The plan everyone was waiting for is nothing more than a list of things, that if approved, would leave businesses with less to pay than they would under a gross receipts tax.

Businesses purchase the majority of all services in the state. But under the plan, they'd be taxed on only some of those services.

In fact, business won't be paying more at all. In any tax plan, businesses can pass taxes along to their customers.

With sales tax, there's the nice little collection allowance businesses get. They actually get to retain 1.25 percent of the total amount of tax they owe as a thank-you for paying!

And they can write the taxes off, getting a nice reduction in federal taxes to boot.

At the end of the 2001 session the chamber promised to be part of a broad-based solution to Nevada's fiscal crisis.

A sales tax on services is not going to broaden Nevada's tax base. If anyone in the business community in Nevada read even part of the 1,100-page Task Force on Tax Policy report, they would know the state needs to move away from sales and gaming, not fall back on those wobbly legs.

The plan is not broad-based and is not from a broad-based business coalition.

After you subtract all of the gaming and mining companies from chamber membership, and take away the 60 percent of small businesses that won't be paying under the gross receipts tax, who's really left?

Business group lobbyist Sam McMullen mentioned Tuesday that the group has been working tirelessly on taxes for 15 months and has "testified incrementally through the Legislature."

Here's what the group has said so far: NO to cigarette hikes; NO to alcohol hikes; NO to the proposed tripling of the business license fee; NO to the gross receipts tax; NO to the slot route operators tax; and NO to the governor's proposed emergency tax plan.

Now we hear a big YES to a sales tax on services.

Sounds like it's something the business group really wants, and something the state doesn't need.