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Committee Hears from Car Wash Owners About Bill to Repeal Sales Tax on Their Industry

by | Feb 24, 2017 4:52pm () Comments | Commenting has expired | Share
Posted to: Business, The Economy, State Budget, Taxes

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HARTFORD, CT — Car wash owners at a public hearing Friday asked that the sales tax on their work be repealed, stating that their businesses are one of the first things people go without during tough financial times.

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Their plea, in front of the Finance, Revenue and Bonding Committee, seemed to elicit sympathy from the committee members, who are considering a bill (S.B. 187) proposed by Sen. Majority Leader Bob Duff, D-Norwalk, to repeal the tax.

“As a small business owner, I can full appreciate the stress that you are under as you work to balance the state budget during this time of deficits,” said Paul Ferruolo, the owner of Mr. Sparkle Car Wash, which operates several franchises in the state.

Ferruolo told the committee the sales tax is particularly a burden for car wash owners, such as himself, because they rely on coin-operated machines.

“The sales tax on the coin-operated car wash industry has created an extraordinary burden on many small, family-run businesses throughout the state,” Ferruolo said. “This is due to the fact that we are forced to pay a sales tax when we have no mechanism to collect it. In most cases we have to simply pay the tax out of sale with no price increase because it is impossible to collect the tax.”

Committee member Fred Camillo, R-Greenwich, was empathetic.

“In a time of fiscal challenge, small businesses are particularly hit hardest,” Camillo said, “and in the case of the car wash business, the challenges are even more so. First, they are weather dependent and that means no business many days of the year.

“Second,” Camillo continued, “when things are rough on family budgets, a car wash expenditure is a small luxury that most people will choose to eliminate. So, when a tax was imposed a few years back, the result has been drastic declines in revenue for these businesses.”

Camillo said the result has been that the car wash business is suffering and that “at the end of the day, this tax has hurt revenues for the state, not increased them,” based on the overall decline in the business as a whole.

Also testifying before the committee Friday was Mark Curtis, who operates more than a dozen car washes in the Greater New Haven area.

When legislators asked Curtis how much his business had declined since the tax was put into effect, he said “5 to 10 percent.”

But he added, “We’ve gone two years without raising rates,” when factoring in not only sales tax, but also minimum wage increases, affordable care, utility increases.

Curtis, in answer to questions from the committee, also said the decrease in revenues has cost jobs, saying he recently had to do a round of layoffs.

“We employ a lot of entry level, but a lot of those people work their way up and run their own sites, and become incredibly productive people,” Curtis said.

Committee member Sen. Scott Frantz, R-Greenwich, said, like Camillo, he doesn’t like the tax, saying the small amount of revenues it brings in “aren’t going to make a difference” considering the overall state financial deficit projected at $1.7 billion.

“I can actually say the car wash industry is the most heavily hit small business industry in the state subject to the sale tax,” Frantz said, who told the car wash owners: “You make a very good case for the cause of eliminating the sales tax on car washes and in particular the boxes don’t make it easy to collect sales taxes and therefore it is even a more compelling argument.”

“But I’d like to see it (tax) go for the entire industry in the state,” Frantz added.

The car wash tax was put into effect in 2015. The state previously taxed car washes from 1989 to 1993.

Todd Whitehouse, owner of Connecticut Car Wash, reminded the committee on Friday that the first iteration of the tax from 1989 to 1993 was found by legislators to be so unworkable — creating disparate treatment within the industry, costing too much to track and collect, and failing to raise the anticipated revenue — that it was repealed.”

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