A perennial issue in state legislatures is whether the sales tax base should be broadly extended to services. Most economists support the notion of taxing all sales, whether sales of goods or services. Most of those same economists also support exempting all business inputs from sales taxes. Unfortunately, legislators interested in this issue are frequently aware of the former but not the latter. COST's study demonstrated that proposals to extend the sales tax to services are, for the most part, simply proposals to impose new taxes on business. Such proposals routinely exempt the largest categories of consumer services (e.g., health care and education) and raise most of the new revenue from taxes on services that are primarily or exclusively purchased by businesses (e.g., advertising and legal services).
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