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RALEIGH — Should the advice you get to buy a lamp and stick it in a particular corner of the living room be taxed at the same rate as the lamp itself?

For years, the answer has been "no." The legislature had decided not to tax services, and interior design was a service.

But over the past few years, the Department of Revenue has decided that if someone buys a piece of furniture or even just a knickknack from a designer, all the services that designer provided to that customer should be taxed at the same rate.

That change threatens one of the fastest growing aspects of the furniture market in High Point, which hosts a semiannual trade show as well as a growing year-round trade.

"It is difficult in just working through this because if you sold a $10 lamp and $50,000 in design services you have to pay taxes on the whole $50,000...but that's our interpretation," Revenue Secretary Reginald Hinton told the Senate Finance Committee on Wednesday.

The committee was hearing from a variety of businesses that had trouble with tax issues, including bakeries and cabinet door manufacturers. It was the interior design issue, however, that seemed to have drawn the biggest crowd, including several representatives from High Point and the Triad.

Designers were once bit players at the semiannual furniture market, long the preserve of manufacturers and retail stores.

But the show has expanded its reach, particularly as higher-end retail stores have closed.

"Major retailers are going out of business and what's happening is designers are playing a major role," said Brian Casey, president of the group that coordinates the High Point Market. About 30 percent of the buyers who registered to attend the spring furniture market were designers.

Increasingly, they are becoming a conduit for customers looking for higher-end goods.

Designers have become such big business there is now an association of showrooms — the High Point Design Center — that markets itself as open to interior designers and their clients year-round.

"I've heard of designers that have gone out of business because of this issue," said Jeanne Glenn, an interior designer who helps run the design center.

Glenn herself has not been audited by the Department of Revenue but, she said colleagues, including one who testified Wednesday, have been hit with tax bills for tens of thousands of dollars after audits.

Those audits can reach back several years and sometimes contradict earlier advice the department gave designers, said Sen. John Snow, a Democrat who represents the state's westernmost counties.

"We (the legislature) have said that services are not to be taxed and they're over there doing it," said Snow, who sponsored a bill to overrule the Department of Revenue's ruling.

The Senate Finance Committee passed that bill Wednesday.

It must next pass the full Senate and then be heard in the House. There was little opposition Wednesday, and both Republicans and Democrats said they favored the measure.

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com