State Tax Resources
This page provides information and resources on state-level issues affecting tax professionals.
Changes to Tax Due Dates
After many years of AICPA tax policy and advocacy efforts, Congress enacted several AICPA-supported federal due date changes and a de minimis safe harbor of $100 of income/$25 of withholdings for corrected Form 1099s that take effect for 2016 tax returns (2017 filing season). For more information on these due dates, along with information on state efforts to conform with the federal due dates, see the links below.
Regulation of Tax Preparers
Regulation of tax preparers continues to be a growing issue of concern by policymakers at both the federal and state level. This issue is likely to receive increased attention in the 2016 state legislative sessions due, in part, to uncertainty about the federal tax preparer registration program. In 2015, there were at least two high profile bills (in Illinois and New Jersey) related to the regulation of tax preparers/preparation. The National Consumer Law Center also released model state-level language in 2014.
State Tax Tribunals
States continue looking at the adoption of tax tribunals as a means of resolving state tax appeal controversies prior to litigation and in a forum outside the dominion and control of the state tax authority.
Thirty-three states currently have tax tribunals located in either the executive or judicial branches of government. In 2014, Alabama enacted a state tax tribunal bill, and five states (Kansas, Missouri, Oklahoma, Tennessee, and Washington) considered proposed legislation to create a state tax tribunal. Several legislatures are expected to consider tax tribunal legislation in 2016, as well.
The 2006 American Bar Association (ABA) Model State Administrative Tax Tribunal Act (Model Act) provides legislative language that often serves as a base for legislation on this issue. As more states consider establishing independent tax appeal forums or revising existing tax appeal systems, it is important to review the proposals to ensure CPAs authorized to practice in the state are able to represent taxpayers before the tribunal.
In addition to the rights of CPAs to represent clients before proposed tax tribunals, it is also important to
consider whether tax laws promote fairness and efficiency in regard to tax administration and policy. Issues of concern relate to:
- independence from the State Revenue Commissioner/Department of Revenue;
- avoiding “pay-to-play” (the ability to challenge an assessment without first paying the tax, interest, and penalties);
- limited jurisdiction/specialized tax expertise;
- experienced tax judges; and
- published precedential decisions.
The specific details of the forums vary among the states, so as states consider this issue, it is important for CPAs to advocate for fairness and mobility in representation rights before the tribunals. This issue is expected to continue to be debated around the country over the next several years.
Importance to CPAs
There are several reasons why state tax tribunals are a good idea for taxpayers and CPAs, as well as for the broader goal of good tax administration. Tax tribunals ensure a fair and effective tax administration system for taxpayers. All taxpayers would have a state tax appeal forum for state tax disputes that functions independently from the state tax authority. Additionally, tax tribunals – when structured in line with the ABA Model Act and state CPA mobility laws – provide CPAs with greater taxpayer representation rights and service opportunities.
While the AICPA does not lobby directly at the state level, it supports efforts by state CPA societies who may advocate for the creation of state tax tribunals structured in line with the provisions of the ABA Model Act. The AICPA believes that if a state is considering possible legislation on this issue, “Section 16. Representation” of the ABA Model Act should be slightly revised to take into account state CPA mobility laws.
Sales Tax on Professional Services
Several state legislatures continue to consider expanding sales tax to services, including professional services such as accounting. The AICPA assists state CPA societies with advocating against a state sales tax on accounting services. Background AICPA Position State Action
States typically impose sales and use taxes on the sale of tangible personal property and selected services, with a few states broadly taxing all types of services, including accounting services. In the past quarter-century, due in part to stagnant sales and use tax revenue as compared to rising expenditures, numerous states have attempted but failed to broaden the sales tax base to include professional services.
Importance to CPAs
Because of the difficulty surrounding the taxation of professional services, there are several reasons why the imposition of sales and use taxes on accounting services should not be considered by state legislatures:
Because of the reasons listed above, the AICPA works with state CPA societies on a state-by-state basis to oppose the imposition of a sales tax on accounting services. The AICPA recognizes that raising revenue to support government programs is an ongoing process that constantly requires the reassessment of current taxing structures. However, as states continue to consider the taxation of additional services, legislatures must understand that some services are more easily subject to a sales tax than others. For example, for services that are performed and received at the same location (e.g., salon services, cleaning services, etc.), the taxing jurisdiction is clearly evident, reducing the complexities around the taxation of such services. It is also easier to administer a sales tax for services that already collect a tax on the sale of tangible personal property (e.g., car repair). However, professional services can be performed in multiple locations and received in completely different locations, creating a difficult dichotomy for tax compliance. Because of the administrative and technical difficulties associated with the enactment of a service tax on accounting services, the AICPA believes states should seek other alternatives.
Currently, three states impose some form of tax on accounting services: Hawaii (four percent), New Mexico (five percent) and South Dakota (four percent). In addition to the traditional accounting services, accounting firms may also provide services that could be construed to be “data processing services,” “information services,” and “management services,” which are taxable in several states. Furthermore, in some cases, state legislatures and courts have acted to redefine traditionally non-taxable services as products subject to the sales tax.
In 2016, legislatures in Arizona, California, Georgia, Oklahoma, and West Virginia introduced bills that would have created new taxes on professional services. States’ attempts in this area are likely to continue in 2017 as a means to bridge state budgetary gaps and as a part of broader tax reform measures.
Several state legislatures continue to consider expanding sales tax to services, including professional services such as accounting. The AICPA assists state CPA societies with advocating against a state sales tax on accounting services.
Other State Tax Issues and Resources
- State conformity to federal partnership audit rules one pager
- AICPA position paper on state pass-through entity-level tax implementation issues
- State pass-through entity-level tax implementation issues one pager
- Automatic 30-day penalty relief for 2018 corporate income tax filing
- Sample bulletin for automatic 30-day penalty relief
- AICPA position paper on state partnership audits
- Contingent fee audit arrangements
- Single point of filing
- AICPA state and local tax advocacy page
- AICPA Insights Blog: Potential state tax law changes on the horizon