Tax on Professional Services

Updated January  14, 2014

The issue

The State of Minnesota faced a budget deficit in 2013. Early preliminary forecasts showed signs of some economic improvement. The projections also showed a significant structural deficit for 2014, 2015 & 2016. The new legislature considered all possible options to provide additional stability to the budget. The Governor and Legislature each presented tax reform including a services tax. 

What is the tax on professional services?

Many times in previous years legislation has been introduced to tax accounting services. Some proposals have included business-to-business transactions and proposals have exempted business-to-business proposals. None of these proposals included a clear definition of which accounting services would be included.

Depending on where you are located in Minnesota, a sales tax on accounting services could add almost 8 percent to the cost of any work done in the state.

The MNCPA has opposed a sales tax on accounting services and we continue to communicate our position to legislators. MNCPA members have testified before legislative committees and continue working to educate legislators on the impact a sales tax on accounting services will have on clients, business and the profession.

What happened in the 2013 Legislative session

The biggest issue facing the CPA profession in the 2013 legislative session was a proposed tax on accounting services. This issue has come up and has been defeated many times during the past 25 years. This year, CPAs faced what was probably the strongest legislative effort to tax accounting services, and the plan was defeated once again.

Many MNCPA members took an active role in our grassroots efforts and communicated the negative impacts a tax on accounting services would present. Legislators view CPAs as trusted advisers and value what the profession has to say.

This probably is not the last time we will see efforts to tax accounting services, so it is important that you, too, communicate your views to your legislators.

The final tax bill did not include a tax on accounting services, but it did contain other items that impact CPAs and the businesses and clients you serve.

Summary of the final tax bill