Tax on services causes uproar

By Katy Stech, The Post and Courier

Published October 12, 2010

Bill aims to clear up confusion small businesses face.

Top state business leaders, lawmakers and small-business owners from a hodgepodge of industries are fuming over the S.C. Department of Revenue’s efforts to charge a tax on services.

A report in Saturday’s Post and Courier of a North Charleston business that waters plants and now faces a hefty tax bill for its services raised concern among other small business owners who service and repair items — heating and air-conditioning systems, computers, cars — prompting them to call on state lawmakers and trade associations for help.

“We’re just flabbergasted,” said S.C. Small Business Chamber of Commerce President Frank Knapp. “I didn’t know this existed.”

Labor-based services are thought to be tax-free in South Carolina. But Greenery Gallery Inc. owner B.J. Rodgers was told by tax collectors that she should have been paying taxes on the money she charges for watering plants in office buildings, hospitals and hotels.

Rodgers fought the charges in court, but an administrative law judge ruled in favor of the Revenue Department in July — a ruling that Sen. Larry Grooms, R-Bonneau, characterized as dangerous.

“We can’t have courts writing tax law in this state, and that’s what we’ve got,” he said.

Grooms said he plans to prefile a bill next week for when the legislative session resumes in January that would make it clear the Revenue Department shouldn’t charge a tax on services. He said the misunderstanding stems from a 2005 law change that meant to tax big components — car engines, refrigerator parts, technological gadgets — that could be replaced through a warranty.

Rep. Mac Toole, R-Lexington, said he’d also sponsor a bill to clarify the confusion.

“This is wrong, as far as I’m concerned, and I’m going to do what I can to get it stopped,” he said.

The Revenue Department is one of 15 agencies under Gov. Mark Sanford’s direction through his Cabinet. Sanford spokesman Ben Fox said his office was aware of Greenery Gallery’s lawsuit but declined to comment because it’s still pending. He also declined to say whether Sanford supports a tax on services.

Previous coverage

S.C. tax policy tweak slams small businesses, published 10/09/10
Meanwhile, S.C. Chamber of Commerce President Otis Rawl said he intends to ask Revenue Department officials to suspend collections and audits involving the service contract legislation until state lawmakers can address the issue.

But the help won’t come fast enough for Rodgers, who watched her 4 p.m. payment deadline pass Monday. Borrowing money to pay the nearly $42,000 bill wasn’t an option.

“Nobody will loan a business money right now,” she said.

She’s unsure of the consequences of her now-delinquent bill. “I’m just hanging on the edge of a cliff right now,” she said.

Reach Katy Stech at 937-5549.

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