State budget passes sans sales tax on services expansion

Late last week, the Ohio legislature gave its final approval of the new state biennial budget bill, signed on Sunday by the governor. The 5,300-plus-page bill covering more than $60 billion in state expenditures makes numerous changes, including ones in state tax policy. Notably the tax changes do not include an expansion in the state sales tax to a variety of professional services, including those for veterinary medicine. When introduced this spring, House Bill 59 included a call by the Gov. Kasich to expand the application of the state sales tax on dozens of services currently exempt, including those for veterinary exams and procedures on all animal patients except those in food animal production. Sustained opposition to the proposal by a long list of organizations including the OVMA, as well as concerns expressed by numerous individual business owners and consumers, helped bring about the removal of the sales tax expansion provisions before the bill passed the House. Efforts continued and the proposal remained sidelined as the bill passed the Senate and then finally through the Conference Committee process. Tax changes which did make it into the final version of the bill and of interest to veterinary medicine include:

• The state sales tax rate will increase by a quarter of a percent on Jan. 1, 2014, going from 5.5 percent to 5.75 percent. For those products on which you do either pay or charge sales/use tax, the tariff will go up slightly.
• Small business owners can deduct one half of the taxpayerÕs net business income for state income tax purposes on the first $250,000 in income.
• Provisions in the stateÕs Commercial Activities Tax were changed for businesses grossing more than $1 million in revenue. An earlier version would have dropped the minimum tax threshold of $150 on the first $1 million to $150 on the first $500,000 in gross revenue, resulting in an additional tax liability of $1300 for many small businesses.
• State income tax rates will begin dropping this year and continue for the next two, resulting in a 10 percent income tax cut when fully implemented.

Despite the success in keeping the sales tax expansion on services out of this budget, it is known that the issue will not disappear, particularly as tax policy changes focus more on the sales tax versus personal income tax. OVMA is part of a broad coalition of organizations that have supported recent independent economic study of the impact of such a change should it sought to be implemented again.