AIA
Sales Tax on Services- HB 95
ISSUE
In his budget message to the General
Assembly, Governor Taft proposed to extend the state sales tax to interior design and landscape design services.
His goal was to raise sufficient funds to offset the decline in both the
state income and sales taxes brought about by the current economic decline and
the attendant increase in the cost of both Medicaid and education.
BACKGROUND
AIA Ohio has a problem both with the concept
and the manner in which the proposed bill has been drafted.
The conceptual
problem relates to the way in which architect’s charge their fees. In many instances architects include interior
design work in the fee for a given project.
Architecture is architecture whether inside or outside a given
structure. Breaking out interior design
may well be impossible in many, if not most instances.
The drafting
problem relates to the language used in drafting the new tax. The language intended to tax “aesthetic services” and the only
reference we can find in the current statutes is for “Landscape Architects” in
Revised Code: 4703.30. However, Taft’s
proposed bill went on to define the newly covered “aesthetic services” in this
way:
·
“Interior
design service: providing aesthetic services associated with interior
spaces, and includes the planning, designing, and administering of projects in
interior spaces to meet the physical and aesthetic needs of individuals using
them, taking into consideration building codes, health and safety regulations,
traffic patterns and floor planning, mechanical and electrical needs and
interior fittings and furniture.”
·
“Exterior
design services: providing
aesthetic services associated with exterior spaces, and includes the planning,
designing, and administering of projects involving land or buildings, to meet
the physical and aesthetic needs of individuals using them.”
Some believe this language comes dangerously
close to defining architecture and,
unless Governor Taft (who has said he only means to tax those service providers
whose service cannot easily be purchased out of state) means to tax
architectural services, should be clarified.
Instead of clarifying the language, the Ohio
House eliminated all reference to taxing
either interior or exterior design services it when it passed HB 95. However, architects need to be vigilant
to assure it won’t be added back by the Senate which has talked increasingly
about expanding the sales tax to entities not included in the House bill.
For additional information
contact: David W. Field, CAE,
Executive Vice President, AIA Ohio,