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MACPA prepares to fight sales tax on accounting services

Posted By: Tom Hood on September 28, 2007 in Legislative / Regulatory

MACPA members across the state have made it very clear: We must work to prevent sales taxes on accounting and tax services, and we have been very busy. This message has been delivered loud & clear in our town hall meetings and professional issues updates across the state this summer and fall. With the prospect of a "special session" to specifically address Maryland's $1.7 billion deficit, MACPA is preparing to make sure our voice is heard by Maryland's Governor and 188 legislators.

Yesterday, MACPA's Political Action Committee and Legislative Executive Committee met and agreed on our strategy to deal with the possibility that a sales tax on professional services could come up in a special session.

Our strategy is to make our voices heard before the Governor and our 188 legislators (Maryland General Assembly) go into a special session. Here is our strategy:Sales_tax_study

  1. We have already met with the Governor, Speaker of the House (Mike Busch) and President of the Senate (Mike Miller) along with our partners at the Maryland Chamber of Commerce and Maryland Bankers Association to review the special economic report on taxes we commissioned. We encouraged the leadership to implement taxes with the least detrimental economic impact first (sales taxes on professional services was one of the worst economic impacts in the report).
  2. MACPA has written a letter that gives our reasons for opposing sales tax on professionals services and requests the legislators to keep that proposal off the table during their deliberations. That letter is on its way to the Governor, Speaker, Senate President, and three primary taxation committees : Senate Budget & Taxation, House Ways & Means, and House Appropriations
  3. Mobilized our legislative key person network to reach out to their legislators to deliver the message personally that CPAs do not want to see sales taxes on professional services.
  4. Asking our members to make contributions to our PAC so we can continue to support legisaltors that support CPAs. Our latest campaign has tripled contributions from last year but are still along way from our $100,000 goal.
  5. Asking members to inform us of their key person relationships with legislators so we can notify them in situations like this.
  6. Membership - there is no question that there is strength in numbers and our voices are louder when we have more members.

Here are the top six reasons we think taxing professional services are bad for Maryland:

    1. This is a form of double taxation. Millions of individuals and small businesses are forced to hire CPAs for tax preparation and consulting due to the inherent complexities in our federal and state tax system. Taxing these services adds “insult to injury” as they bear the added expense of a sales tax on top of these necessary services.
    2. The tax discriminates against small and emerging businesses. Small businesses rely heavily on CPA consulting and tax services in their earliest stages to comply with the numerous federal and state regulations. Adding a sales tax on top of these services will increase their costs and inhibit their growth during the most critical stages of their development
    3. Taxes on services would be difficult to administer, for both the state and taxpayers, because of the multi-state nature of so many transactions these days. Due to this complexity, Florida was not able to successfully implement a tax on professional services. In fact Florida had to repeal this law after only a few months due to the compliance issues.
    4. Under this kind of system, the potential for goods and services being taxed several times exists and this results in higher consumer costs.      
    5. This will harm Maryland CPAs. States with service taxes are at a competitive disadvantage compared with states that do not tax services. Not only does it discourage the use of services, it discourages companies seeking to relocate or expand. For CPAs on our borders with Delaware, Virginia, Pennsylvania, and West Virginia, their clients could seek professionals across the state line very easily to avoid these taxes, hurting Maryland CPAs and CPA firms
    6. This is one of the most damaging tax revenue proposals to consider. According to the recent Economic and Fiscal Impact Analysis of Maryland Tax Policy Options dated September 13, 2007,  sales tax on professional services was the worst form of sales tax revenue sources due to the highest job losses predicted (1,550 jobs lost per $100 million of tax revenue raised). View a copy of the report here:Download chamber_final_report_091307pdf.pdf
    7. Save the Date - January 23, 2008 will be our annual CPA Day in Annapolis at the Governor Calvert House Hotel in Annapolis(Across from the capital).

We hope you will join us in making sure that CPAs are heard before the legislature acts!

More resources:

Governor's Comprehensive Solution to the Structural Deficit

MACPA's talking points for opposing Sales Tax on Services Download sales_tax_talking_points.doc

MACPA's Position paper against Sales Tax on Professional Services Download macpa_position_paper.doc

MACPA's State Tax Committee Ten Criteria for Effective Tax Legisaltion Download 10_criteria_for_evaluating_proposed_tax_legislation.doc

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