Professional services tax considered

Wednesday, May 7th 2003, 12:00 am
By: News On 6

OKLAHOMA CITY (AP) _ Most of the sales tax on groceries would eventually be eliminated in favor of a 4.5 percent sales tax on professional services under a proposal circulating at the state Capitol.

The goal of the plan is to shift some of the sales tax burden away from the state's poorest residents.

``The truth is, that if we can put some extra money in the pockets of our poorest people, then that will help the economy in the long run,'' said Rep. Jim Wilson, D-Tahlequah, who heads a panel working on the proposal.

The plan would cut the sales tax on groceries to a half-cent by July 2005. Earlier plans called for the cut to be made by July of next year.

Officials anticipate litigation over removing the exemption that keeps professional services from being taxed. By delaying the implementation of the cut in the grocery sales tax, lawmakers would ensure the state would not lose this revenue stream before the new professional tax kicks in.

``My fear is, if it goes to court, we might have to give up the sales tax on groceries before we have the money from the exemptions,'' Wilson said.

Over the long run, the plan would be revenue neutral, with the professional tax replacing revenue lost through the grocery tax reduction.

There is a split in the Legislature over whether removal of sales tax exemptions would fall under provisions of a law that requires a vote of the people on any revenue measure that doesn't achieve a three-fourths majority in both houses.

Democratic leaders say this wouldn't fall under that law. Their Republican counterparts disagree. The Oklahoma Supreme Court could ultimately decide the issue.

Some of the professional services that could be taxed include attorneys, notaries, title and abstract services, accounting, tax preparation and payroll services.

Other services that could lose their tax exemption could include administrative and support services, automotive repair and maintenance and personal and household goods repair and maintenance.