The Case for Taxing Services

Hellerstein's three concerns re taxing services: 1. Could lead to the taxation of business-to-business transactions, but not unlike what already occurs when taxing TPP; 2. The incentives for a business to vertically integrate arise for services, as with goods, but businesses are expected to be better able to bring services, such as legal and accounting, in-house, making vertical integration of services a bigger concern; and 3. Evasion associated with out-of-state purchases is a larger issue for services than for goods. Of course, a use tax is imposed on out-of-state service purchases, but it is difficult to enforce. C CDOR

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