At least eight states have filed legislation this year that would tax professional services, including those services provided by CPA firms. As more states look to do so in the coming weeks, the American Institute of CPAs (AICPA) is working with state CPA societies and other professional groups to fight these types of proposals.
Thus far, Arkansas, Indiana, Missouri, Nebraska, Oklahoma, South Dakota, Utah and Wyoming have introduced bills that would create professional service taxes. Additionally, governors in Oklahoma and West Virginia have advocated for such taxes in their budget proposals.
“Dozens of states are facing budget shortfalls and are considering a tax on professional services as one way to close the gap between how much money they have and how much they need,” said James Cox, AICPA senior manager for state legislation. “We recognize that states are facing budget constraints, but taxing the work of CPAs and other professionals in not a solution,” he emphasized.
In response, the profession is working to educate state lawmakers about the burden a tax on accounting services places on both the profession and the public.
“For example, many individuals and small business owners rely on accountants to help navigate complex tax laws,” Cox said. “A tax on their services means we are essentially taxing people for trying to comply with the tax code.”
As part of its efforts, the AICPA has joined other professional groups in the Professional Services Alliance. The alliance includes representatives from CPA firms and state CPA societies, as well as other professional organizations such as the American Bar Association and the National Federation of Independent Businesses.
“We’ve had a lot of success in educating lawmakers about how taxes on professional services disproportionately affect the small businesses that CPAs represent,” Cox said. In 2016, the profession successfully fought against professional service taxes in Arizona, California, Georgia, Oklahoma and West Virginia.
Currently, only Hawaii, New Mexico and South Dakota broadly levy a sales tax on professional services.