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07/02/2015

Best aspect of new state budget: no sales tax on services

For engineering companies, the best feature of the new two-year state budget signed into law by Governor John Kasich last week is what it doesn't contain: his proposal to extend the state sales tax to engineering services.

Kasich signed the $71 billion general revenue fund budget into law Tuesday, just hours before it was to take effect on July 1, but not before using his line-item veto to eliminate 44 individual provisions from the spending plan.  None of those vetoes materially affect the engineering industry.

For the second time in two years, ACEC Ohio joined with a large coalition of other business organizations in successfully lobbying to defeat a proposal from the governor to extend the sales tax to a wide range of services. 

Two years ago, the plan was broad – tax all services.  This year, the proposal was more cleverly worded to tax a variety of services, including "management consulting services," which was so broadly defined that it surely would have been interpreted as covering most services offered by engineering companies.

ACEC Ohio testified against the plan several times as the budget wended its way through the General Assembly.  In addition, it participated in the lobbying effort coordinated by the Ohio Service Industry Coalition, a broad-based group that represents nearly 1.1 million employees, more than 57,000 establishments, annual payroll of $42 billion and $265 billion in sales.

While the proposal was knocked out of the budget bill passed by the Ohio House of Representatives, some members of the Ohio Senate expressed support for the governor's stated goal of increasing "consumption taxes" and cutting personal income taxes.  The administration has touted this strategy, claiming it leads to job creation, although there is scant economic evidence to support that claim.

There is every reason to believe that the governor will make a third attempt at extending the sales tax to engineering services when he introduces his final budget two years hence, meaning that continued vigilance will be required on the part of ACEC Ohio and the broader business community.

 

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