Impact of Proposed Minn. Service Tax on Household Budget

Updated: 01/23/2013 7:36 AM By: Tim Sherno

Governor Dayton's proposed budget includes a 5.5 percent tax on common services like hair styling and auto-care. The tax would be calculated on the cost of labor.

Ali Derhy works at Signal Garage Auto Care in St. Paul; he says any addition costs will impact his business, "People don't really care for auto repairs as it is." 

Take for example a customer needs a new water pump for their vehicle. The price of the water pump would not be changed by the proposed new tax, but the labor would be subject to the tax.  If the installation costs $90 an hour and takes two hours, the $180 dollar labor charge would be taxed at 5.5 percent, or $9.90.

Mai Thao works at LA Nails in St. Paul, she discussed the tax with co-workers, "We're not that happy about. No one wants things to go up."

For example, if a regular customer who visits every two weeks pays $35 for each visit, the total tax for the year would be $50 dollars.

Thao says even a small increase will make a difference, "During the winter we struggle with business. If it's going to be pricier we're going to struggle more."

Ali Darhy from Signal Garage and Auto Care says even a small tax services will impact the average consumers budget, "Sounds like everyday life is going to cost a little more now."