Connecticut shoppers might need to bring cheat sheets with them for the rest of the summer as they struggle to adjust to nearly two dozen changes in state sales tax law that took effect this month.
And while some of those sales tax changes – such as raising the base rate from 6 to 6.35 percent – are relatively simple, others require consumers to read the fine print.
For example, sales tax now is imposed on yoga instruction provided at yoga studios. But that doesn’t apply to yoga classes offered at a local YMCA or community college. Therapeutic massage services remain exempt, while other spa services, such as body waxing and facials, are taxed.
The longstanding exemption on clothing and footwear costing less than $50 was canceled. But for just one week next month – from Aug. 21 to 27 – consumers still can buy clothing costing less than $300 per item without paying any sales tax. That’s because the legislature opted to retain the popular sales-tax-free week, a shopping holiday planned to coincide with back-to-school preparations.
And what about paying taxes on car washes and haircuts? State officials talked about ending longstanding exemptions in these areas as well, but then changed their minds at the last minute. That hasn’t stopped a few businesses from getting confused and collecting taxes anyway.
“We have worked hard to get accurate information out there in terms of those items and services previously exempt that are now taxable, as well as newly taxable items and services,” Department of Revenue Services Commissioner Kevin B. Sullivan said. “Unfortunately there still appears to be some confusion.”
In the weeks immediately after the regular 2011 General Assembly session ended, the department’s taxpayer information services staff fielded about 60 calls per day, Sullivan said, adding that while it has dropped somewhat in recent weeks, it still average close to 40 calls daily.
“I think people are still reflecting on what they heard during the last legislative session,” Sullivan said, calling a degree of confusion understandable given the scope of this year’s budget debate. Gov. Dannel P. Malloy and the legislature ordered more than $1.5 billion in tax hikes this fiscal year – including nearly $326 million from the sales tax – as they closed a deficit projected as high as $3.67 billion for 2011-12.
Last year state fiscal analysts identified more than 50 sales tax exemptions or special rates on the books valued at more than $3 billion annually.
That led state officials to examine dozens of those tax breaks as they tried to decide which ones Connecticut no longer could afford to retain.
For example, haircuts and other hair salon services remain sales-tax-free, but that exemption had been under consideration at one point.
Not surprisingly, Hartford salon owner Israel Alverez said customers at Hair by Israel are still somewhat unsure. “I think they were following all of this very closely,” he said, adding that some ask whether sales tax is due.
And even after being told that cuts remain tax-free, many are dismayed to hear that other sales tax changes are impacting prices. “They still have to pay more on shampoos and conditioners” since the base sales tax rate rose to 6.35 percent, he said. “It’s a burden on them and it’s a burden on small businesses.”
Though Alverez did not charge sales tax on haircuts, some other salons did, though Sullivan said he believes it was unintentional and due to misunderstanding. In those cases businesses are advised to “make the best effort they can to return (the sales tax) to their customers,” he said, adding that what can’t be returned still must be reported to the state.
“We will keep working to ensure merchants and consumers know what goods and services are and are not newly subject to sales and use tax,” Sullivan said, adding consumers and businesses can visit the DRS website at www.ct.gov/drs or call the Taxpayer Services Unit for help at 860-297-5962.
Yoga studio patrons and owners don’t understand why a service that promotes physical, emotional and spiritual health is being taxed at private studios, said Jennifer Brosious, co-owner of Your Community Yoga Center LLC in Hamden.
“Most of us are small businesses trying to stay afloat in this economy,” she said. “They are coming down on small businesses that are promoting people’s health. Do we have any sense of priority about what is important in this world?”
The House chairwoman of the legislature’s Finance, Revenue and Bonding Committee, Rep. Patricia Widlitz, D-Guilford, said she wouldn’t be surprised if lawmakers want to revisit several of the sales tax changes during the regular 2012 session, which starts next February.
“I think we tried to be as consistent as possible with our decisions but we’ll have to see what the experience is,” she said, adding that it is understandable that both businesses and consumers dislike the tax, but state government faced a deficit of historic proportions. For those businesses that provide a service that had long been tax-exempt until this month, simply having to follow proper procedures to remit the tax to the state can be a confusing process, she said.
“I’m sure we’ll have a lot of feedback.”