As Service Economy Means Lower Sales Tax Revenue, States Look Elsewhere

It appears that the proposed aviation excise tax in Washington State is not the only juicy target for taxation by states struggling to balance their budgets. The wall Street Journal reports that some states are considering sales taxes on a number of services, including aviation.

With high unemployment and people simply not spending as much money, states, particularly those that rely almost exclusively on property and sales taxes rather than income taxes, are seeking new revenue streams to bring their budgets into balance. Many, like Florida, have a balanced budget mandate in their state constitutions. But in many of those states, a broad array of services are exempt from sales taxes, and some in the aviation community fear that everything from hot-air balloon rides to charter aircraft services might soon prove too tempting a target for lawmakers.

In La Grange, KY, hot-air balloon operator Stuart Crawford is attempting to bring together people offering aviation services to oppose that state's attempt to levy sales taxes on many "high-end" services, such as landscaping, greens fees, and transportation in charter aircraft. Democrat Jim Wayne, the proposals' sponsor, said it would simply make the tax code reflect a more service-oriented economy, and spread the tax burden over a broader base in times of financial difficulty. "We know that the economy has shifted away from the purchase of goods to services," he said.

The Wall Street Journal says that tax experts have long looked to services as a way to broaden the tax base, but more so now in that companies selling across state lines on the Internet can sometimes avoid sales taxes. "You can't get your plumbing fixed over the Internet," said Michael Mazerov, former research director of the Multistate Tax Commission.

The same would be true of your airplane.

FMI: http://revenue.ky.gov , www.mtc.gov