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The state estimates that the average family of four will end up paying $260 more in sales taxes annually for the new items and the 1 percent sales tax increase. That number reflects national figures indicating that households spend about 1.5 percent of their incomes on taxable goods and is based on an income of $108,000, according to Vincz. The average household in Passaic County, which earned $49,210 in 2000, will end up paying about $120 in additional taxes.
Fixing To Be Taxed
~ By Northjersey.com
Monday, 7/17/2006
Carlos Eugenio of Landscape Perceptions totes retaining blocks for a porch at a home in Wayne. Beginning Oct. 1, such renovations and landscaping projects, along with a host of other services, will be subject to the state's sales tax.
Valerie Timko is bracing herself for a possible pile of wet leaves coming down on her landscaping business this October, when the state will begin charging sales tax on a host of new services.
"I think it will severely impact small business," says Timko, who runs Timko Landscape and Construction in Little Falls with her husband.
Timko and other local landscapers worry that their clients will balk at the prospect of paying $350 in sales tax on a $5,000 flower-planting job.
"This is going to add a lot of money to people's projects," says Lenny Di Tomaso of Di Tomaso Design, a landscaping company in Wayne.
Under the 2007 state budget, sales tax will be applied to landscaping and lawn care and a host of other new goods and services beginning on Oct. 1. The list includes home renovations -- like floor installation, carpet cleaning, and tree pruning -- and discretionary items like massages, limos, digital downloads, magazines, gym memberships and private investigation services.
Fur coats will be taxed starting on Saturday.
Tom Vincz, a spokesman for the state Division of Taxation, says the increased tax reflects a modernization of the tax code, which hasn't been updated for 40 years. New Jersey sales tax has remained at 6 percent since 1992, compared with a 7.48 percent national state average. The governor has authorized a 1 percent sales tax increase, which will take effect on Saturday. The new items to be taxed in New Jersey will account for approximately $200 million in the state's 2007 budget. New Jersey does not tax food, clothing and prescription drugs.
The state estimates that the average family of four will end up paying $260 more in sales taxes annually for the new items and the 1 percent sales tax increase. That number reflects national figures indicating that households spend about 1.5 percent of their incomes on taxable goods and is based on an income of $108,000, according to Vincz. The average household in Passaic County, which earned $49,210 in 2000, will end up paying about $120 in additional taxes.
Many of the items are already taxed in surrounding states. Mary Forsberg of New Jersey Policy Perspective, a state research group, said New Jersey is about average in the scope of its sales tax. She argues that the current expansion largely targets those who can afford to pay.
"I think (Gov. Jon S.) Corzine did the right thing," Forsberg says. "The services are the ones the wealthier people use."
That may be true, but it's the small floor-repair or carpet-cleaning businesses that might feel the tax pinch. "It's definitely going to put a damper on business," says Di Tomaso.
The cost of landscaping jobs ranges from $35 to mow a lawn once a week to $500,000 to remake an entire yard. These jobs in October will include sales taxes of $2.45 and $35,000, respectively. Timko says most of her company's jobs involve flower and shrub plantings for between $2,000 and $10,000. Many of her clients are seniors. "They can't go out and dig holes," she says.
Taxes were previously waived from these services because they were regarded as capital improvements to increase home values. Landscaping is a $3 billion industry in New Jersey, according to Carl Nordstrom of the New Jersey Nursery and Landscape Association, a trade group in Burlington County.
Nordstrom anticipates difficulties in collecting the taxes because the services aren't usually itemized. Some services that landscapers provide, like installing swimming pools, still won't be subjected to sales tax.
Nordstrom also worries about who will end up footing the tax bill.
"If you have a $10,000 number in your head, you are not going to spend $10,700," he says. "Either the job will be diminished or the contractor will end up eating the tax."
James Hughes, an economist at Rutgers University, says he understands business-owners' concerns, but didn't expect a huge fallout from the new taxes. "Any change like this produces uncertainly," he says. "But the purchasers of those services have the ability to pay a higher price."
Jo Anne Hunt, a Clifton resident, says she has no intention of forgoing the lawn care services she's grown to rely on for the last five years.
"My time is worth more than my money," she says.
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