Apr 04, 2013

Professional Services Included in Wave of Tax Expansion Proposals

By Peter Calcara, Vice President - Government Relations
More state economies are shifting from manufacturing to services, and budgetary challenges are not letting up. State legislatures across the nation are aggressively looking to close budget gaps with new revenues. One of the first places legislators are looking is at sales taxes on professional services.

In 2012, Pennsylvania and seven other states—Arizona, California, Kentucky, Maryland, Michigan, New Jersey and South Dakota—considered legislation that would tax professional services, including accounting, auditing, tax preparations, and related services. In Pennsylvania, the effort was tied to the elimination of school property taxes. While the proposal fell short of delivering on its claim to eliminate all school property taxes, the plan has already been reintroduced in the Pennsylvania Senate in 2013, with a companion bill to follow in the state House.

Only Hawaii, New Mexico, and South Dakota tax professional services and do not exempt accounting services. Other states have taxes that affect (but do not specifically target) the accounting profession. For example, Delaware imposes a gross receipts tax on monthly receipts over $100,000, and the state of Washington has a business and occupation tax on service providers.

Nationally, expanding the base of the sales tax is gaining popularity, and in some unusual circles. In the AICPA’s annual survey of state CPA societies, 24 states anticipate that their 2013 legislatures will consider proposals to tax accounting services. What’s unusual is the fact that these proposals are coming primarily from tax-averse Republican governors. Ohio, North Carolina, Louisiana, and Kansas—all with Republican governors—have proposals to expand the sales tax on services that include accounting.

As Pennsylvania embarks on budget season, the PICPA will continue to advocate against an expansion of the sales tax to include the professional services provided by our members.

As with any legislative proposal, though, your state lawmakers want to hear directly from you, their constituents. I encourage members to make their voices heard on this and other legislative issues. If you don’t want to forge ahead on your own, consider our annual Day on the Hill event, which is scheduled for Tuesday, June 11, at the Hilton Harrisburg. You can view the agenda and register for the event by visiting our website.

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PICPA Staff Contributors
Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.
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