The Democrat-led Finance Committee of the Connecticut General Assembly voted yesterday (4/29/2015) to expand its state sales tax to include accounting services. The Senate President Pro Tem said that he supports the changes but there appears to be opposition to the move beyond that.
Three states currently tax professional services: New Mexico, Hawaii and South Dakota. The AICPA covers this complicated topic but it is not clear whether its published guidance is up to date. Other news sources say that about half of all states are considering proposals to tax accounting services.
It is unclear how the proposed tax applies to services provided online by an accountant in one state (that taxes accounting services) for a client in a different state (that does not tax accounting services), or vice-versa as is more likely to be the case in my own practice.
My small online accounting practice typically provides services across state lines yet I am not actually even sure where my clients are when I provide services since most, like me, maintain homes and offices in more than one state. There is currently no built-in technology to track where I am actually providing these services. I presume that the location of the accountant – the taxpayer in this question – is the controlling factor in determining applicability of theses taxes. Yet states are attempting to expand sales taxes to online purchases made from out-of-state vendors. The entire topic is a potential mess that I hope we can avoid.
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