Sales Taxes on CPA Services: A New Year With An Old Issue
Source: Wisconsin Institute of Certified Public Accountants
Wisconsin’s budget problems have been widely publicized, and the current economic environment will create additional fiscal challenges for the State. Comments from legislators and articles indicate that additional sales taxes are certain to be considered next year.
Although the WICPA has helped defeat prior attempts to impose a sales tax on services, Wisconsin’s poor fiscal health will make such a tax more appealing now than in the past. It is therefore very important that CPAs inform their legislators about the adverse consequences of a sales tax on services:
- Small and emerging businesses are especially disadvantaged by a tax on services, since they must purchase services such as accounting, data processing, and legal, which larger businesses provide internally.
- Small businesses bear higher costs of service taxes because the additional compliance costs are proportionately greater for small firms and comprise a higher percentage of their revenue.
- A tax on services would create a disincentive for larger businesses to purchase services from small businesses because of the additional tax cost burden.
- A service tax would create significant administrative and enforcement challenges since it would differ from normal retail “point of sale” collection procedures, there would be a dramatically increased number of new vendors to be registered and monitored, and there would be complexities of use tax collection by out-of-state vendors.
- A service tax would impose both direct and indirect costs on consumers by, for example, increasing the price of purchasing a home due to indirect taxes on construction services, as well as increasing the professional fee of an accountant, attorney and others.
- Increased consumer costs from a service tax could decrease demand and sales, lowering production and resulting in job loss with the State.
- A service tax would have a negative effect on companies seeking to relocate or expand in Wisconsin, and CPAs practicing near borders of states without service taxes would lose business to competitors in those states.
- A sales tax on accounting services would discourage individuals and businesses from retaining accounting professionals which could increase non-compliance with state tax laws that generate revenue.
Please share the above considerations with your state legislators so they appreciate the importance of voting against any proposal to impose a sales tax on accounting services. CPAs have significant credibility among legislators and your calls and letters will make a difference.
Dennis F. Tomorsky, CPA, J.D.
is CEO of the Wisconsin Institute of CPAs.
He can be reached at 262-785-0445
ext. 3014 or dennis@wicpa.org.