By John Byczkowski
The Cincinnati Enquirer

A new set of Ohio sales taxes is rubbing Sue Ernst and her employees the wrong way.

Ernst owns the Inner Peace Holistic Center in downtown Cincinnati, which offers massages, facials, waxing and other services. As of today, these and a list of other personal services are subject to a 7 percent sales tax.

Inner Peace charges $50 for a one-hour massage. Customers usually tip $5, Ernst says, but now, they'll also have to pay $3.50 in sales taxes.

Will the tax come out of the tip? That's what Ernst is afraid of. "Our clients aren't going to tip us that much," she said. The new taxes "are going to hurt people who make tips."

The new taxes are part of Ohio's budget bailout, signed into law in June. The state had been charging a 5 percent sales tax, and 87 of Ohio's 88 counties tack on an additional local tax of 0.5 to 1.5 points. (Hamilton, Clermont and Warren counties all add 1 percentage point, and Butler County adds a half.)

An across-the-board increase of 1 percentage point went into effect July 1, raising the state sales tax to 6 percent for the next two years. That's expected to bring the state an additional $1.2 billion in revenue during this fiscal year.

Today, the other shoe drops: Many services are subject to the sales tax for the first time. These include taxi rides, massages, tattoos, safe deposit boxes, satellite TV services, delivery charges and vehicle towing. These new taxes are expected to bring in $62 million this fiscal year and $72 million next year. And unlike the temporary 1-percent increase, these taxes have no expiration date.

It might take some time before the state can track down every business that's subject to these taxes. The Department of Taxation mailed out more than 100,000 letters to the businesses it could locate, informing them of the new taxes. It was no problem finding every licensed massage therapist, but "we don't know exactly how many cab drivers are working in Ohio," said Gary Gudmundson, spokesman for the department.

Mario McConico, owner of Mario's Custom Limousine Service in Finneytown, didn't get his letter until Thursday. Each limo rental costs $120 an hour for a minimum of three hours, so he'll have to collect at least $25.20 from each customer.

"To be in the limousine service in Cincinnati, you got to hustle," he said. "It's hard meeting overhead and staying in the game," and the new tax won't make it any easier.

For many businesses, the current slow economy makes this a particularly bad time to add taxes. The Ohio Cleaners Association, which represents 400 dry cleaner operators statewide, lobbied hard against the broader sales tax.

Executive director David Field said wash-and-wear clothing and more-casual workplace dress codes have already hurt the industry. Business is down 15 percent over the last four years because of the recession. Profit margins are already thin, he said, so any more drop in business from higher prices might be hard for some businesses to handle.

"This is an industry that didn't need another problem, and (the sales tax) is not going to help them," he said.

In addition, the state is still clarifying the rules for what is and isn't taxable. The new law says hair removal is taxable, but haircuts are not. So, what's a shave? The state determined that a shave is a haircut, so you won't be charged tax.

E-mail johnb@enquirer.com