Purportedly to help “provide tax relief to middle-income and low-income Californians,” SB 993 (Hertzberg; D-Van Nuys), would impose a 3-percent tax on services purchased by businesses.  This policy would have a major impact on commercial real estate as everything from accounting to landscaping could see a cost increase under the measure.

A press release from Hertzberg’s office, notes that the services targeted for the tax include “high-end business services, such as those provided by lawyers, consultants, and accountants for corporations and other high-income businesses.”

But the bill would also tax day-to-day operational needs like janitorial services.  While some of our largest companies can avoid paying the taxes by bringing some of those functions in house, smaller businesses won’t have that luxury.

We joined a large coalition of allies and worked hard to defeat the bill.  It was heard in committee this week “without a vote,” meaning they listened to testimony but didn’t actually vote on the measure.  That is a good sign.  Because the bill is a tax increase, it requires a 2/3 vote majority and while normal legislative deadlines technically apply to the bill, if it “has the votes” can move by waiving the rules.

We will continue to follow this issue closely and keep pressure on the Legislature to abandon this ill-conceived tax increase.

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