The Professional Services Alliance protects and promotes the interests of professional services in the state tax arena, supporting policies that grow state and local economies.
The Alliance opposes any effort to enact a state service or use tax on accounting, advertising, legal, real estate, or other professional services, even if the new tax were to be in exchange for lower existing taxes.
Application of a services tax penalizes individuals and businesses seeking to comply with state law, generates an administrative burden for the business community, and creates an economic disadvantage for businesses to move to the state or supply services within. It also leads to detrimental effects for state and local economies due to the cascading nature of taxes on business services, arbitrarily and unfairly increasing costs across businesses and raising prices for consumers.
States typically impose sales and use taxes on the sale of tangible personal property and selected services, with only a few exceptions (Hawaii, New Mexico, and South Dakota, where all types of services are broadly taxed). As states explore a variety of options to address budget constraints, some policymakers have floated the idea of a tax on selected professional services.
Current research and past precedence does not lend credence to the idea of a professional services tax. In the past quarter-century, numerous states have attempted expanding the sales and use tax base to professional services, but only a few have actually passed such legislation. These taxes were all short-lived, with each of these states quickly repealing the provision either before or shortly after implementation. A tax on professional services hasn't worked in the past, and it won't work in the future.
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To learn about the negative economic of effects of professional services taxes, why these types of taxes are poor tax policy, and why past attempts to tax professional services have failed, click the 'Learn More' button.