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Earlier today, the D.C. Council voted to amend the Fiscal Year 2021 Local Budget Act of 2020 (“LBA”) and effectively eliminate the proposed sales tax expansion to advertising services and personal information.
On July 21st, the Council first attempted to vote on the LBA (which sets the District’s expenditures), but the Council was unable to agree on: (1) whether to retain the sales tax expansion in full; (2) whether to amend the advertising tax to impact only the placement of advertising; and (3) how to account for the $18.4 million that the advertising tax was expected to generate, if they chose to eliminate the tax. Chairman Mendelson then recessed the meeting until today to attempt to reduce the budget by the $18.4 million. Late on July 22nd, the Council’s and Chairman Mendelson’s offices distributed documents detailing his proposal.
At today’s Legislative Meeting, numerous councilmembers commented that they disagreed with the advertising tax and were glad to come to a compromise that eliminated it. However, Councilmember Grosso noted that he still supports the advertising tax. He wants to broaden the sales tax base and ultimately decrease the tax rate. The Council then approved the revised budget by a vote of 11-2. On July 28th, the Council will formally eliminate the proposed taxes by amending the Fiscal Year 2021 Budget Support Act of 2020.
While today was a victory against the advertising service and personal information sales taxes, the Council expects that they will revisit the budget in approximately two months after the District government understands the full impact of the COVID-19 pandemic. In a recent press release, Chairman Mendelson also announced that he is scheduling a hearing on the Tax Revision Commission Reestablishment Amendment Act of 2019, which would re-establish the Tax Revision Commission and require it to submit tax recommendations to the Mayor and Council. The Tax Revision Commission last released a Final Report in May 2014 that made numerous recommendations, including: (1) reducing the business franchise tax from 9.975% to 8.25%; (2) raising the sales tax rate from 5.75% to 6%; and (3) creating separate income tax brackets for single and married people. If re-established, the Tax Revision Commission may address advertising service and personal information sales taxes, among numerous other issues affecting multistate taxpayers. Eversheds Sutherland SALT will closely monitor any developments of the re-established Commission.