Connecticut car wash owners are revved up about state lawmakers suddenly imposing a new sales tax on their services, including coin-operated washes and vacuums, saying their machines can't collect the 6.35 percent levy.
The association that represents about 100 family-owned car washes across state wants the General Assembly to revisit the matter, concerned its members will have to absorb the cost.
If they increase the price to help cover the new tax, car wash owners argue the higher price won't necessarily cover the full cost and might drive away price-sensitive customers who could choose to clean their vehicles at home.
"You put everything you own on the line to run a business," said Todd Whitehouse, a past president of the Connecticut Car Wash Association and owner of car washes in Manchester, Norwich, Willimantic and Stafford. "And for someone to come in and say, `We're going to tax you on something you can't collect, just raise your price,' is not the answer. We're a discretionary purchase. People need gas in their vehicle to get to work, but they don't need a clean car to get to work."
The car wash tax first came to light late in the legislative session. Unlike four years ago, when Democratic Gov. Dannel P. Malloy proposed it, there was no public hearing where the owners could make their case. Connecticut previously taxed car washes from 1989 to 1993.
A tax on non-coin-operated car washes, often called "tunnel" washes, was ultimately included in the two-year, $40.3 billion Democratic budget that narrowly cleared the General Assembly on June 3. Malloy, however, later called for stripping that tax and others following an outcry from businesses. But on June 29, lawmakers approved a budget-related bill that ended up taxing all car washes, including coin-operated. The tax took effect on July 1.
"We got 12 hours' notice," said Whitehouse, adding how operators already pay tax on many of the products they use at their businesses.
The Department of Revenue Services has since determined the tax also pertains to other car wash services, including vacuuming, waxing, detailing and shampooing. DRS Commissioner Kevin Sullivan said the car wash owners recently met with him.
"We understand their concerns. I think they were taken aback," he said. "At this point, we feel their pain, we hear their pain, but the law is pretty clear and their recourse really is with the legislature and not with us."
Sullivan contends a variety of vending machines are currently taxed.
"At the end of the day, they can build it into the cost," he said.
Standing outside his Auto Shine Car Wash in Manchester, Whitehouse pointed to rows of automatic vacuums and vending machines that dispense Armor All cloths and other products. He said those devices, along with the automatic touchless car wash and the self-service bays, cannot be retrofitted to charge the 6.35 percent tax.
"There is nothing that is invented that can collect the sales tax in these bays," he said. The self-service equipment is not designed to accept nickels, dimes or pennies and many of the car operations across the state do not have an attendant, according to the association.
Eric Wulf, chief executive officer of the Chicago-based International Car Wash Association, said the majority of states do not tax car washes. Wulf said he'd be surprised if he could count on one hand the number of states that charge tax on coin-operated car washes.
Wulf said most of the self-service car wash bays in the U.S. were built with devices that provide wash time in 25-cent increments. He said "no one foresaw collecting to the penny."
While car wash owners could install credit card machines that impose the tax, that could mean an end to dollar and quarter purchases. Also, Wulf estimated it can cost about $2,000 to $4,000 to install such devices in each bay, in addition to the credit card company fees the owners must pay.
"There's a very real likelihood you'll lose customers that use good old quarters for years and years and no longer can," he said.