Area businesses feeling the pinch after losing sales tax immunity
Prices at local nail and pet salons recently went up 6.35 percent, and business owners are not pleased. When the new fiscal year began July 1, many services previously exempt from Connecticut sales tax, including manicures and pet grooming, became taxable.
Rhonda Marie’s Nail Lounge on Church Street in Naugatuck was open just one day before it had to start charging sales tax a month ago.
“When people come and they don’t realize they have to pay sales tax, they’re put off,” said Ryan Stacey, co-owner of the business.
Stacey said his wife Rhonda, who owns and operates the business, makes less in tips because people bring just enough money for the service and tip, not taking into account the sales tax.
Stacey said the slew of new taxes, including a hike in income taxes for individuals making over $50,000, make it hard for medium-income families to find extra cash in their budget for things like manicures.
“If you’re poor, you do alright, but if you make just enough to get by, they slam you with taxes,” Stacey said. “It’s ruinous to the people who are getting by month-to-month.”
He said small businesses like his do the majority of the work in the country, but many business owners can’t invest in their businesses because much of their profits go to ever-increasing taxes.
Rhonda said she never had to collect sales tax before in her 16 years of experience working at other day spas. She said many people bought gift certificates to her nail salon before the sales tax and now the recipients of those certificates have to pay the tax when they come in to use it.
“It takes the enjoyment out of the relaxation part of it,” Rhonda said.
Kyungsook Suh, owner of Rose’s Nails on New Haven Road in Naugatuck agreed that the new tax introduces stress into what is supposed to be a relaxing environment.
She said all of her customers are surprised and complain when she explains they now have to pay sales tax.
“It’s pain,” she said.
She said customers don’t like to dig in their purses to find the exact change the tax requires. She says she’ll probably change her pricing soon to make the amounts even when the tax is included.
Linh Yi, an employee at VIP nails just down the street on New Haven Road said customers complain that the services cost too much with the sales tax. Now, she says, some customers will just get a manicure and forego the pedicure to save on costs.
The tax can add a few dollars to the total cost, but that can add up when big groups come in, Yi said.
For example, a $12 manicure becomes $12.77 with tax.
In Beacon Falls, Kim Perez, has been a hairdresser since 1977 and has owned her own salon, New You Salon, on Main Street for the past eight years. In addition to hair cuts, Perez offers manicures and facial waxing.
She’s not a fan of losing her sales tax exemption.
“I don’t think it’s fair to the customers. I don’t think it’s fair to me,” Perez said.
Perez said she was considering expanding her business to include pedicures and facials, but now she’s not sure if she will keep her manicure and waxing services.
“It’s more work for us,” she said, noting that now she has to figure out how to file quarterly tax returns.
Even though she has a retail license, Perez said she never sold retail items because she didn’t want to deal with the paperwork. Now, she doesn’t have a choice.
Because of the tax, Perez has to make sure there’s always change on hand, whereas before, amounts were even. Unlike some other nail salons, Perez said she wouldn’t be changing her prices to even things out.
She said a lot of her customers now go to the store to buy wax strips instead of coming to the salon because they don’t want to pay the tax.
“Even though it’s $1, still it’s an extra $1,” Perez said.
Even though hair cuts are still tax-exempt, Perez said other salons have started charging tax for them because they are confused by the new rules.
She said lawmakers are making things harder and harder for small businesses.
“They’re not helping small businesses, they’re hurting them,” Perez said.
Like many of her peers, Susan Reinhard, owner of Naugatuck Pet Salon on Rubber Avenue, is not happy her business is no longer exempt from the sales tax.
Even though she put a sign up to let customers know about the new tax, she said it’s still a “shocker.” She said the new tax adds $2 to $6 to her services, depending on the breed of dog.
Reinhard said she has to spend more money for an accountant to file quarterly taxes.
“Who’s hurting? Me. That’s who it’s hurting,” Reinhard said.
So far, Reinhard said, her customers haven’t changed their spending habits. However, Reinhard had hoped to raise her prices in the near future, but that will be harder now.
Not all small business owners who saw their sales tax exempt status vanish this year are noticing residual effects.
Janet Barbieri of Prospect Boarding and Grooming, which also sells pet supplies, said she hasn’t had any ill effects from the sales tax and customers haven’t complained about it.
She said people are scared due to the economic state and want to save their money, but she didn’t think the additional sales tax had an impact on whether they use her services.
“I think [customers] have cut back on grooming services period, because of the economy,” Barbieri said.
No longer exempt:
- Pet grooming, boarding, and obedience
- Manicures, pedicures, and other nail services
- Spa services
- Clothing and footwear under $50
- Nonprescription medicine, smoking cessation products
- Cosmetic medical procedures
- Yoga instruction at a yoga studio
- Motor vehicle storage services
- Packing and crating services
- Motor vehicle towing and road services
- Intrastate transportation services provided by livery services
- Valet parking at airports
- Removal of hazardous waste
- Hair cuts and styling
- Makeup application
- Bicycle helmets
- Car seats
- College textbooks
- Compact fluorescent lightbulbs
- Firearm safety devices
- United States and Connecticut flags
- Food products
- Home weatherization products
- Internet access services
- Magazines and newspapers
- Medical goods and equipment
- Personal property used in burial or cremation
- Rare or antique coins
- Shoe repair services
- Services for disabled people