California Governor Schwarzenegger has proposed increasing state sales tax 1.5% from 7.25% to 8.75% for 3 years to make up for the $11.2 billion budget shortfall. Included in the governor's proposal is levying sales taxes on auto repair services, which currently are not taxed. Up until this point, only auto parts have been taxed.
Such efforts to tax auto repair services in Florida have met strong opposition and have failed. Schwarzenegger is now going to face a similar backlash. The governor says the increases are needed to stabilize the state budget.
These increases may lead people to make more purchases online from out of state retailers to avoid the high sales tax or even move to other states with lower sales tax. Also, this may convince people to do more preventative maintenance on their vehicles to avoid costly future repairs.