Gov. Gina M. Raimondo has recommended an expansion of the state sales tax to include professional services associated with commercial buildings, such as landscaping, carpet cleaning, janitorial services, pest control and interior design.
Other proposed sales tax applications in the fiscal 2020 budget proposal include in-state lobbying services for businesses and digital-download and streaming services, such as Netflix.
The new additions were identified in the proposal as “sales tax modifications” intended to align Rhode Island with neighboring states and help resolve a $99 million budget deficit projected for the coming fiscal year. Altogether, the sales tax additions will generate about $10 million in additional revenue for the state.
The cluster of services affecting commercial properties has already sparked strong opposition among business and building owners.
The Greater Providence Chamber of Commerce will oppose the expansion, said lobbyist Elizabeth Suever, an attorney with Roberts, Carroll, Feldstein & Peirce Inc. in Providence. Businesses basically say it’s an unexpected and unwelcome expense that could be multiplied for one office or building space, depending on how many professional services are needed.
“Any entity that owns or exists in any kind of commercial building is going to be hit with these taxes,” Suever said. “And in many cases, probably multiples. If you have a campus, like some of these banks do, you’re probably going to have extermination, carpet cleaning, janitorial, multiples of these.”
Businesses want predictability, and this tax expansion was not anticipated, she said. The current proposal would take effect in October. She would not identify specific businesses. Presumably, service businesses will pass on the 7 percent tax to building owners, she said.
‘For us to absorb … a 7 percent hit, that’s not good.’
TONY DEJESUS, Big Blue Bug Solutions vice president
Republican leaders, speaking at the Feb. 13 Chamber luncheon, identified the sales tax expansion as a problem area in the proposed budget.
Sen. Dennis Algiere, R-Westerly, the Senate minority leader, said small businesses need capital to expand. “Businesses aren’t going to be able to expand with more taxes and fees,” he said.
Rep. Blake Filippi, R-Westerly, the House minority leader, said the administration has falsely said it is not raising taxes, when it is expanding the sales taxes to services and even downloads. “They say they’re not raising your taxes, but who goes to Blockbuster these days? This is a tax expansion.”
One business whose work would be affected is Big Blue Bug Solutions, based in Providence.
Its pest-control services would be taxed for work on commercial properties, under the proposal. The commercial work is probably half of the company’s sales, said Tony DeJesus, company vice president. “And it’s an area we’re looking to grow. For us to absorb it as part of our business, to take a 7 percent hit, that’s not good either.”
Mary MacDonald is a staff writer for the PBN. Contact her at Macdonald@PBN.com.
Correction: The proposed sales-tax expansion is currently planned to take effect in October.