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California May Start Taxing Auto Repair

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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.

Add a Comment (2) Comments
  • Starter1, November 12, 2008, 14:01
     Rookie

    Wow, first an auto bailout is proposed, now California wants to tax auto repair services. What's next in the crippling of the American auto industry? Like you mentioned Rob, Californians will simply travel outside their state to access cheaper services, and America as a country will likely increase their reliance upon inexpensive, foreign car manufacturing. What kind of effect will the proposed higher taxes have upon the stability of the auto industry? Will people avoid driving or seek repair help less often? Are there any serious foreseeable repercussions?

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  • Rob Sturtz, November 12, 2008, 15:28
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     Enthusiast

    Given the spotty public transportation in California, I think people will continue driving as their primary way of getting around. Taking care of your car by following the manufacturer's recommended service schedule is probably the best thing anyone can do. This is even more true now since people are likely to hold onto their cars longer. As for the state of the industry, that's really up in the air. The government will not let the US auto industry did. The bailout may end up looking a lot like Chrysler's last bailout in 1980, only much much larger!

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