It ‘s Time to Tell Your Legislators Why That’s a Bad Idea!
Governor Kasich’s proposed Budget Bill (HB 59) would extend the sales tax to most services, including architectural services. Legislators have begun hearings on this bill and ne ed to know how this new tax would affect architecture.
AIA Ohio surveyed a select group of AIA leaders who expressed these concerns:
Competitive Disadvantage: To remain in business during a construction recession Ohio’s design professionals have relied upon out-of-state projects for which they’ve competed with firms from around the country. Only three states – none of them east of the Mississippi – impose a sales tax on an architect’s service, so, depending upon how it’s implemented, extending Ohio’s sales tax to architectural services could put Ohio architects at a 6.5 to 7% disadvantage (5% state tax plus up to another 1.5%-2% county piggyback tax) when competing for future projects. The administration says that the tax would only apply when the design project is to be “enjoyed” within Ohio and that out-of-state architects would have to pay the same tax as Ohio architects. Inasmuch as our state can’t seem to collect sales tax from out-of-state Internet retailers, it’s hard to believe Ohio would be able to collect the tax from a California firm, a firm in Calcutta… or one in Beijing!
Pyramiding: The actual disadvantage could be even greater than 7% since architects would be paying an additional 7% for each subcontract– to engineers, surveyors, soil testers, interior designers, lawyers, accountants etc.
Border City Firms: Especially hard hit might be architectural firms close to Ohio’s borders.
Ohio’s Multi-State Firms Could Move Business: Ohio’s large multi-state firms understandably could look for ways to do their work through their out-of-state affiliates–driving Ohio jobs to other states.
Costly Tax Collection: Most Ohio firms are small (under 10 person) offices for which administering a complex sales tax would be a daunting task. (Billing, receiving, reporting, record-keeping.)
Ohio Design Community Still in Recession: Ohio’s fragile architecture community has yet to emerge from recession. Unemployment is as high as 35%. Recently one of Ohio’s leading firms, Karlsberger, closed its doors (150 jobs reportedly lost). Architectural firms need more time to recover from this recession.
Other States Experiences:Florida and Connecticut imposed a sales tax on professional services in the 1980s only to end up repealing them because “they were an administrative nightmare.” Just a few years ago, Michigan passed a sales tax on these services and repealed it less than 24 hours later due to a huge outcry from the business community.
Now is the time to speak up: If you’re concerned about the effects of taxing architectural services, now’s the time to communicate that concern to your state representative and state senator.