The Maryland Association of CPAs will join a coalition of other Maryland business organizations at a press conference at 11 a.m. ET on March 2 to explain in detail their opposition to a state bill calling for a sales tax on professional services. The press conference will be broadcast via LinkedIn Live from Tom Hood’s LinkedIn account and by following the hashtag #MDTaxOnServices.
House Bill 1628, titled “Sales and Use Tax — Rate Reduction and Services,” would reduce Maryland’s sales tax rate from 6 percent to 5 percent but expand it to professional services (like those that CPAs provide) to help pay for recommended revisions to Maryland’s public education system under the so-called “Blueprint for Maryland’s Future,” a report compiled by the Kirwin Commission. The bill was introduced on Feb. 19 by state Del. Eric Luedtke and will have its first hearing in front of the House Ways and Means Committee on March 2 following the press conference.
The organizations’ opposition to the proposed bill isn’t a position on education reform, MACPA President and CEO Tom Hood said. Rather, it’s a warning against the bill’s complexity, unfairness, and violation of good tax policy.
“Our opposition to HB 1628 is not related to its use as a funding source for the Blueprint for Maryland’s Future,” Hood said. “Rather, it is the administrative and technical complexities that make it a bad bill.
“Our opposition is also not reactive or reflexive. It is proactive and meant to prevent a bad tax policy from being passed that may be doomed to repeal once the realities of the complexity and cost of implementation, administration, and collection are realized.”
The Coalition of Maryland Business Organizations includes the MACPA; the Maryland Chamber of Commerce; the National Federation of Independent Businesses; the Maryland Bar Association; the Restaurant Association of Maryland; the Maryland Retailers Association; the Mid-Atlantic Petroleum Distributors Association; the Washington, Maryland, Delaware Service Station and Automotive Repair Association; the Maryland Motor Truck Association; the Maryland Bankers Association; the American Council of Engineering Companies / Maryland; the Maryland Tech Council; the American Petroleum Institute; and the Apartment and Office Building Association of Metropolitan Washington.
The Maryland Association of CPAs strongly opposes HB 1628, for a number of reasons:
- It puts Maryland businesses and CPAs at a competitive disadvantage. Every business would be forced to pay 5 percent more for CPAs’ services. None of our neighboring states have such a tax, and only three states (with much smaller populations) that we know of — New Mexico, Hawaii and South Dakota — have enacted such legislation.
- This seems like a tax on tax compliance. Most of the services provided by CPAs and accountants are required by federal and state law to comply with existing tax laws and reporting requirements. In essence, this would be a form of double taxation.
- We are concerned about the cost, complexity, and enforceability of this type of legislation. Five other states — Michigan, Florida, Minnesota, Massachusetts, and Utah — passed and then repealed similar laws for this very reason.
- The bill violates six of the MACPA’s 12 principles for good tax policy, which are outlined in this blog post.
The MACPA has already supported two current bills — HB 185 / SB 223, “The Commission on Tax Policy Reform and Fairness,” and HB 765, “The Maryland Tax Revision Commission” — and requested amendments to add at least one licensed CPA to these study groups to help craft good tax policy legislation in the future. We have a long history of volunteering to be at the table when legislators, the Comptroller and the Governor want help in explaining the implications of proposed tax policies. In fact, we were at the table when the federal Tax Cut and Jobs Act was enacted to discuss the impact on Maryland taxpayers and the government.
The MACPA will continue to update its members on the status of this proposed legislation as developments warrant.