2025 Update: For 60th Straight Year, States Reject
Proposals to Broaden Sales Taxes to Services
No major industrial state levies a sales tax on professional services. Every year a handful of state legislatures consider proposals to expand the sales tax base broadly to services. For the 60th consecutive year, every one of these bills failed.
Taxes on professional services hurt state and local economies.
The economic case against taxes on professional services is strong. Reasons include complex administration, regressivity for consumers, outsized impact on small businesses, and tax pyramiding.
Accounting is a Business Service and Doesn’t Belong in the Sales Tax Base
Attempts to impose sales tax on accounting services are nonsensical: the data shows that they’re by definition business services, and thus do not fit in any rational sales tax base. Public finance experts agree that consumption taxes, like the sales tax, should not include business inputs. More than 90 percent of accounting services are either business inputs, or are sold to governments and nonprofits. Subjecting them to sales tax isn’t tax reform.
Past Failed Attempts to Expand Sales Taxes to Services
Many states have pursued attempts to tax services, and each time the law has been repealed shortly after it went into effect.
