Florida to Repeal Controversial Tax on Services

Florida legislators agreed Thursday to kill an unpopular 5% tax on services that sparked an uproar in the advertising industry, angered voters and politically damaged many state leaders.

The tax will be repealed Jan. 1, after months of bitter, partisan infighting and three special legislative sessions.

But lawmakers also agreed to increase the state sales tax on goods from 5% to 6%. That increase would add $1.2 billion a year to state coffers beginning Feb. 1, about the same amount the services tax raised.

Popularity Plummeted

Gov. Bob Martinez, who watched his popularity plummet because of his early support of the levy and a later reversal, is likely to sign the bill into law today.

The tax was particularly unpopular with major corporations, which waged an advertising boycott and bitter television campaign condemning it.

State officials estimated that Florida lost $35 million in convention business and tens of millions of dollars in advertising as a result.

Legislators claimed the services tax was needed to broaden Florida’s narrow tax base and pay for needed programs. Florida, still considered a tax haven, is last in the nation in terms of social services spending. There is no state income tax and there is a constitutional cap on property taxes.

The sales tax on services, which includes advertising, pet grooming, pest control and lawn care as well as accounting, legal and engineering fees, took effect July 1.

10,000 Employee Hours

It was not immediately known how much the state spent creating and defending the tax. But the head of a state agency responsible for collecting the tax said more than 10,000 state employee hours were spent on writing administrative rules for paying and collecting the tax alone.