In 2018, Arizona, California, Illinois, Louisiana, Nebraska, New Jersey, Virginia and West Virginia filed legislation that would tax professional services, including those services provided by CPA firms. The American Institute of CPAs’ State Regulation and Legislation team is working with state CPA societies and other professional groups to educate state lawmakers about the burden a tax on accounting services places on both the profession and the public.
California introduced Senate Bill 993 to place a tax on services in exchange for a cut to sales taxes. According to Senator Robert Hertzberg, the sponsor of the bill, the adoption of the bill would create $14 billion of revenue – the amount lost in cutting sales tax.
The legislation received pushback from business groups and trade associations alike. Over 100 business organizations filed comments condemning the bill, including the California Society of CPAs (CalCPA) and the Professional Services Alliance (PSA) – of which the AICPA is a member.
The letter filed by the PSA expressed concern over the burden for businesses collecting sales taxes and the concern that individuals would look to out-of-state businesses for services in the future if the legislation were to pass.
Thanks to the CalCPA and the PSA’s concerted efforts, Senator Mike McGuire, chairman of the Finance Committee, decided to further study the bill and not take a vote on the legislation. The AICPA will continue to monitor these types of bills in the future as states search for alternative means of revenue.