Bill to expand sales tax to selected services and to cover nicotine products draws concerns about prepayment and public‑health carve‑outs

Senate Bill 5814 would extend retail sales tax and the retailing B&O classification to a range of services, broaden the tobacco tax to include products containing nicotine regardless of source, and require a one‑time prepayment of sales tax collections by large monthly filers, Ways & Means staff said at an April 16 briefing.

Alia Kennedy, committee staff, explained the bill’s components: add selected services — custom software and web design, certain security and investigation services, temporary staffing, advertising services, and other specified digital automated services — to the retail sales tax base; expand the tobacco‑related excise tax to cover nicotine products whether derived from tobacco or synthetically produced; and require certain monthly filers with more than $3 million in prior calendar taxable retail sales to remit an 80% prepayment of June 2026 state sales tax by June 25, 2027 (deductible on the next return; DOR penalty authority for noncompliance with waiver language for reduced June 2027 sales).

Supporters and opponents focused heavily on the prepayment provision and the scope of the services tax. Retail, grocery and hospitality associations warned a prepayment would create cash‑flow risks and administrative confusion for businesses; the retail association cited states that adopted and later repealed prepayment provisions. Small businesses and grocers urged exemptions for wholesaling, food and prescription drugs. Nonprofit and arts groups supported a clarification exempting nonprofit investment income after the Antioch/Anteo court decision.

Public‑health and cancer‑prevention advocates urged parity for nicotine pouches with other tobacco products and asked that FDA‑approved cessation products (nicotine gum, lozenges) be exempt from excise taxes; advocates offered amendment language to exempt cessation medications and tax synthetic nicotine at parity with other tobacco products.

Hospitals and providers warned that expanding sales tax to security, telehealth and temporary staffing would increase operational costs for healthcare providers, noting the sector’s narrow margins and the need for cyber and physical security and contract clinical staff. Staffing firms said taxing temporary‑staff placement is effectively a tax on jobs and would raise labor costs at client businesses.

Why it matters: The bill’s combination of expanding taxable services, taxing synthetic nicotine, and an unusual large‑taxpayer prepayment drew wide stakeholder concern about cash flow, administrative burden and public‑health design; staff provided a multi‑billion dollar revenue estimate while asking for technical input and clarifying amendments.

Committee members heard both technical and policy requests and accepted additional written amendment language from stakeholders.