Rep. Tommy Pope, plans to introduce a bill that would revise our state sales tax by taxing services.
Based on SCR’s review of the initial draft language this will include a sales tax on real estate commissions. Although due to its controversial nature, this bill is unlikely to move this session, we need to send a strong message that REALTORS® will not support taxation of real estate commissions. SCR will be on top of this issue and will continue to update you.
A summary of the current bill is below:
Income Tax:
- Sets a single, flat tax rate of 4.85%
- Changes the state’s individual income tax base from federal taxable income to federal adjusted gross income
- Provides modifications to standard deductions, personal exemptions, and dependent exemptions
- Applies for taxable years beginning after 2017
Sales Tax:
- Sets the new sales tax rate at 3% (from 6%)
- Applies to tangible property and services
- Removes almost all exemptions (except for those constitutionally and federally required)
- Sunsets sales tax exemptions after 2022 and remains in effect until the exemptions to the contrary are authorized by the General Assembly.
- The elimination of exemptions must be phased-in by five equal installments of 20% (exemptions would be eliminated in 2028)
- The rate must be reduced during each year by an amount to be determined by the State Revenue and Fiscal Affairs Office. The amount of the reduction must be determined by estimating the amount of sales and use tax that would be collected in the upcoming year if the provisions of this section did not exist and then reducing the rate to an amount that will produce the same sales and use tax revenue.
Stay tuned to your emails as we keep you up-to-date on this important issue.