Expanded sales tax riles small-business owners

SHORTER LEASH: Maria Toro, Guardian Angel Pet Sitting owner, says that neither she nor her customers can afford the expanded sales tax. / PBN PHOTO/DAVID LEVESQUE
SHORTER LEASH: Maria Toro, Guardian Angel Pet Sitting owner, says that neither she nor her customers can afford the expanded sales tax. / PBN PHOTO/DAVID LEVESQUE

Some small-business owners are insisting they can’t afford new laws requiring them to charge sales tax for the first time.
In creating the $8.1 billion state budget for fiscal 2013, legislation was passed forcing some merchants who had been exempt from charging sales tax in the past to begin the practice. The exemptions included pet care services, clothing over $250, taxi cabs, limousines and other assorted services. The tax changes are projected to generate $10.4 million a year, according to the state.
An Aug. 23 public hearing on the changes generated more than 300 written comments, most from opponents.
Before the hearing, Michael F. Canole, the R.I. Division of Taxation’s chief of examinations, said the department had “determined that the proposed regulation, in and of itself, will not result in a significant economic impact on small businesses or any city or town.”
Maria Toro, owner of Guardian Angel Pet Sitting in Warwick, was among affected business owners at the hearing who disagree.
“These changes right now, I am not able to afford them,” she said. “My customers can’t afford them. I am a one-person show. I’m not set with changing my accounting. I feel the [total tax revenue] generated by this group would not be significant to plug the deficit yet it would severely impact us,” she said. “I feel like this group [of businesses] is being unfairly targeted because we’re not organized and don’t have lobbyists.”
Toro has been in the business for 15 years, after leaving a manufacturing job. She is proud to be self-employed.
“I’ve sacrificed, I’ve always played by the book and I’ve always paid my taxes,” she told tax-division officials at the hearing. The last two years, however, have been a nightmare, she said. Business is slow because people can no longer afford to go on vacation and board their pets; other customers have been laid off. Add in high gasoline prices and car taxes and it’s been a struggle. She also said some competitors are working without declaring their earnings and undercutting her pricing. Anne Dupree, owner of Sakonnet Pet Grooming and Supplies of Tiverton, said her shop is only five minutes from three other similar facilities, all located in Massachusetts. She expects to lose about 40 percent of her business to competitors in the Bay State, which does not tax such services. She has canceled plans to add boarding facilities and pet training in the fall because she fears not being able to pay them.
Dupree also believes the state is overestimating how much the new taxes will generate.
“The $10.4 million this tax is supposed to generate is hysterical,” she said. It takes two groomers an entire day to do $400 worth of grooming, $28 of which would be tax, she said.
Canole said the taxation division now has four options: allow the law to go into effect as is; make minor changes; keep the existing law or make additional amendments and post a new hearing.
“I would not be surprised that based on some of [the comments] there could be some adjustment to the language. Whether we can address all their comments, I don’t know,” he said after the hearing. “Our job is to promulgate the regulations, not to change them after they’ve been passed by the General Assembly.”
A spokesman for the division of taxation last week told Providence Business News the regulations will be finalized by mid-September and become effective Oct. 1.
Rhode Island is not the only state looking to expand taxes to previously exempt services.
In Connecticut, new taxes for a variety of services were approved in July 2011, including manicure and pedicure services, vehicle towing and road services, spa services, pet supplies and a host of others. Notably, grooming and sitting services are not subject to sales tax, while waste removal and the sale of collars, brushes and leashes are subject to tax. •

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