California proposes sales tax on auto repairs

California Gov. Arnold Schwarzenegger proposed a new plan to address the state’s $11.2-billion budget deficit that includes charging sales tax on automotive repairs, which will include taxing labor on collision repairs.

The California Autobody Association (CAA) partnered with other automotive associations to jointly respond to the proposed tax plan in a letter sent on November 4 to the governor. In addition to the CAA, California Automotive Business Coalition, California Automotive Wholesaler’s Association, Automotive Aftermarket Industry Association, Automotive Service Councils of California and California Service Station and Automotive Repair Association all signed the letter opposing the automotive repair tax.

The proposed sales tax is one of several items the governor is proposing to address the state’s budget crisis. He is proposing $4.5 billion in cost cuts and $4.7 billion in new revenues for the current-year budget, which will ensure the state can protect vital services, according to CAA. His proposal calls for a temporary, three-year increase in the state sales tax, from 5 percent to 6.5 percent, along with broadening the sales and use tax to include certain services like automotive repair.

The governor is proposing broadening the sales and use tax to the following services beginning Feb. 1, 2009: appliance and furniture repair, vehicle repair, golf and veterinarian services.

CAA said it will lobby against the automotive sales tax on labor.

“We feel that sales tax on labor on collision repairs could contribute to more vehicles being totaled and a financial burden on the consumer on deciding to repair their vehicle,” the association said. “Earlier this year the CAA and other groups were successful in stopping this tax, but we need to continue to aggressively oppose this tax.

CAA is asking its members to call the governor’s office (916) 445-2841 and their legislators to oppose the tax.