Local News

N.C. Residents May Pay More In Taxes For Everyday Services

Posted January 23, 2003 10:20 a.m. EST

— When you have your car repaired, you pay sales tax on the parts your mechanic uses, but you do not pay taxes on the labor. However, that may change under the advice of a state commission that studied new ways to raise money.

The state commission recommends extending the 4.5 percent state sales tax to services like car repairs, hair cuts and health care.

Business owners say they would have to pass the cost on to their customers.

"Unfortunately, I would because it's a tax I'd have to collect and send to the state once a month just like the sales tax, so everybody's bill would go up a certain percentage," business owner Chet Nedwidek said.

Critics said extending the sales tax could put entire industries in North Carolina at a competitive disadvantage. Law and accounting firms and advertising and public relations agencies said the proposal would cripple their ability to compete for national accounts.

"It would be a tremendous burden. Ultimately, if the agency is serious about pursing that business, they're probably going to have to move to another state," advertising executive Frank Manson said.

A wide-ranging coalition of business leaders is poised to fight the new tax proposal. A spokesman for Gov. Mike Easley said the governor has not taken a position on it yet.

The state collected $74 billion last year by taxing the products people buy.