Posted on June 12, 2019
Creating and submitting tax returns could be provided as an externally sourced service to your company by local firms, accountants and CPA’s, or other US tax service providers or professionals.
Early this year, Utah’s Legislature proposed a levy on sales tax on multiple services, including accounting services. Imagine: you are a tax professional completing a tax return, and the services you are providing are taxable services. It’s kind of ironic that as a business, you need to charge your clients sales tax. Multiple CPA firms in Utah were very upset with this policy. Lawmakers received more than 500 calls and emails, causing those lawmakers overturned the levy.
Utah was not the first state to act on this initiative and won’t be the last. California, Florida, Montana, Nebraska, and Texas are in the midst of debating their own tax bills.
In addition to those considering these types of policies, there are three states that are already taxing accounting related services: Hawaii, New Mexico, and South Dakota. Other states like Florida and Michigan have passed tax reforms in the past but they were overturned shortly after being implemented. If a state like Florida was able to maintain a similar policy, it would have a large effect with the vast majority of tax returns in this state coming from higher-income individuals who already pay substantial amounts of tax without considering an additional tax charged on the preparation.
Chicago’s mayor suggested implementing a tax on large invoices from legal and accounting firms to clients. This would add a tax on the larger well-known firms and exempt smaller firms. While this policy would protect small business firms, it could potentially hurt the larger CPA firms due to clients wanting to avoid the additional tax and being reluctant to sign on to larger projects or services from them.
The American Institute of Certified Public Accountants (AICPA) stood up and has showed success in pointing out that this rule would essentially add tax on the act of paying taxes. Utah could still potentially have this tax on taxes, and the legislative is meeting and discussing possible courses to go for this tax reform. If this levy has not been talked about in your state, it will be, so make sure you are on your toes.
Tips for the Taxpayer
It is important to understand what services will be included under this policy change. Professional service providers need to understand the taxability definition of the services their business provides. Research what your services are and see if they fall into the category of legal, accounting, tax, or other services. Businesses need to be aware of what tax services they may need in preparing their returns. This levy could be applicable on the purchase of those services and would result in additional sales tax on top of the tax cost already incurred to maintain compliance. Stay up to date on local articles and news publications for any changes to your state legislation.
For More Information
If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News and Events at www.allynintl.com.
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When performing consulting related activities, we also look to stretch the extra mile to save you money. We always want to keep our clients compliant, paying only what they need to, and keeping them doing what they do best. We keep up to date measure of state bills and local tax changes. A big part of our business is to be well versed in all 50 states so we can keep ahead of the game.
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Contributor: Michael Mech
About Allyn International
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com.