A proposed expansion of California’s sales tax to include professional services may be a trial balloon but one that could adversely impact the travel, tourism and hospitality industry in California, John Severini, president and CEO of the California Travel Industry Association (CalTIA) reports.
Now being advanced by California’s Governor Schwarzenegger, the tax could impact service industries, including travel, Severini says and include professional services. “If this gains momentum it may well prove disastrous for travel jobs and revenues generated in the state.”
Severini, an industry veteran who joined CalTIA earlier this year, estimates that the state faces a $17 billion budget shortfall and is looking for new revenues.” This also could impact consultants and service providers who charge service fees including, attorneys, accountants and possibly the travel agency side of the business,” he said.
Industries that do not currently charge tax for services such as golf, attractions and museums could be impacted with a potential loss of visitors, according to Severini. “Obviously we need greater clarity on the tax proposals and a clearer idea of their economic impact,” he said. “To date the proposals were under the radar and we are at the ‘discovery’ phase. But our concerns are genuine.”
Severini said he wanted to alert the industry to the potential challenge the tax could impose to the travel, tourism and hospitality industry in the state and outside of California. “These may be rumblings but rumblings with consequences,” he said, adding that he estimated that 1 million jobs in the state are travel, tourism and hospitality related.
Any effort to increase the tax could face stiff opposition, including the California Taxpayers Association, that has already criticized the governor's proposal. The Orange County Register offered an opinion piece that said, “ A new tax on service businesses that previously paid no sales tax would be one more impediment to economic recovery.”
CalTIA plays a key role in advocacy and education in California and serves as the collective voice for travel, tourism and hospitality. The association will play a key role in opposing the tax, Severini says.