Auto Repair: No Friend Of State Lawmakers

June 2, 2011

The auto repair industry finds itself under assault on a number of fronts. In no fewer than three states, there are legislative efforts being made to earmark auto repair sales as taxable, while in another there is a law that would require repair shops to perform a free service.

The reason why politicians consider auto repair as low-hanging fruit is anybody’s guess.  But you get the sense that there is a piling on effect going on – that the lawmakers see an unpopular industry and don’t mind tacking on some negative baggage because they know that the shops will deflect the heat, as their customer base sees the tax as just part of another excessively high repair bill.

As states scramble to balance budgets at least three states--Rhode Island, Georgia and Maryland--are viewing auto repair shops as easy targets. In New England, Governor Chafee has submitted amendments to his budget that would require each type of auto repair facility, from the largest dealership to the mom and pop gas station doing repairs, to collect the state’s six-percent sales tax. The Chafee administration says that the changes are a clarification and that the repair shops, “ had always been intended to be subject to a six-percent tax.”

In Georgia the plan on the table is to assess a tax on service or labor charges (parts used are already taxed). It is estimated that this change will generate $19 to $22 million in revenue for the Georgia treasury. The Automotive Service Association (ASA), as you might guess, came out strongly in opposition to the bill. It looks as though this matter may be tabled until a later session.   

And recently the Washington Post reported that Governor Martin O’Malley of Maryland has begun talking about applying the state’s six-percent sales tax to auto repair services. The additional revenue would help bolster the state’s Transportation Fund, which a blue-ribbon commission looked into and offered a number of solutions, including the auto repair tax and a significant bump in gasoline taxes.

If the “tax the wrenches” movement were not bad enough, out west there is an effort to require businesses to provide free services. Since September California auto repair shops have been required to check the tire air pressure of any vehicle that comes in for repairs, regardless of what has been requested by the owner. The intention is to stop the 3.3 percent-loss of fuel mileage resulting from improper inflation.

In a neighboring state there is a similar bill that has passed Nevada’s Senate and has been referred to the Assembly Transportation Committee. While the failure to check tires under this law would become a misdemeanor, the Department of Motor Vehicles would be authorized to suspend or refuse to renew a shop that did not comply.   

In these cases the onus that legislators are putting on auto repair shops is peculiar to this industry because the requirement being legislated is not a safety issue. Are any other business types subject to a similar mandate--to perform free services that many would argue are the responsibility of the consumer?

[Nevada Senate & Washington Post]
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