Sales Tax on Services

OSCPA has fought and won any attempts to tax accounting and consulting services many times. As school funding, prisons and Medicaid and Medicare continue to take up an increasing amount of the state’s budget, many states seeking new revenue sources are considering taxing professional services, including accounting and consulting services. The Ohio Society will continue to bring the message to the legislative and executive branches that an expansion of the state’s sales tax base would be bad for Ohio.

Background

Every time state government faces a budget shortfall, legislators begin to look for possible revenue sources or budget cuts. Since Ohio’s economy has generally shifted away from a manufacturing base, legislative advisors have begun looking to the long list of services—including accounting and consulting—that currently and intentionally are not taxed because they are correctly viewed as highly mobile services that can be provided across state and national borders.

The accounting profession strongly opposes any efforts to broaden the sales tax base to include accounting professionals due to the numerous problems that would result should such a tax be levied:

  • Small businesses, which typically cannot afford in-house CPAs, would automatically suffer fee increases of at least 5%.

  • Larger corporations would suffer as well: any business, large or small, that undergoes an independent audit would also see its costs increase by at least 5%.

  • CPAs would face a record-keeping nightmare in trying to differentiate between the types of service they provide. For example, a single meeting could cover tax preparation and advice, financial planning, and strategic business advisory services. Figuring out which part of the hour is taxed and which is not would create burdensome administrative problems.

  • CPAs would be at competitive disadvantage when compared to other states. Very few—none adjoining Ohio—levy a sales tax on professional accounting services. With today's electronic climate, it would be very easy for clients to simply go out of state to secure many of the services provided by Ohio CPAs. Not only will Ohio accounting professionals have higher fees due to the tax, they will also have to pay for internal administration of the sales tax collection.

  • Ohio taxpayers would have to pay for the increased staffing that would be required in the sales tax collection division.

For more information, contact the governmental affairs department.