New Sales Tax Laws in California

CALIFORNIA- State Senator Bob Hertzberg formally introduced his first bill, Senate Bill 8, as 2014 came to a close.  The bill, also known as The Upward Mobility Act, will impose sales and use tax to additional specific services provided in the state to increase state revenue.

The economy of California has changed radically since the current tax structure was established in the 1950s; when much of the economy was agriculture and manufacturing.  Now 80% of all State economy activities are information and services based.

“The underlying problem is, while California’s economy has evolved, its tax system failed to keep up with the times,” Senator Hertzberg said. “Taxing only goods and not services when our economy has been so fundamentally transformed makes no sense and is manifestly unfair. This has to change.”

This tax on services includes:
  • Professional services, such as accounting, architecture, and law.
  • Financial services, such as insurance services, investment counseling, and property sales agents.
  • Construction services such as carpentry, painting, and plumbing.
  • Agricultural services, such as landscaping.
Those exempt are:
  • Health care.
  • Educational services.
  • Small businesses with less than $100,000 gross sales.
Unlike the sales tax on goods, local jurisdictions would not be allowed to collect the newly proposed sales tax on services. The State would collect the revenue and allocate to local government similar to current traditional measures of allocation. These proposed changes could set at precedent for other states to follow and result in a sharp increase sales tax audits to ensure compliance.
The first hearing on State Bill 8 has not yet been set.

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