As we approach the midpoint of the Maryland General Assembly’s 2025 legislative session, the MACPA remains steadfast in its mission to protect Maryland CPAs from policies that could harm both our profession and the clients we serve.

One critical threat is the potential expansion of the state sales tax to include professional services, including accounting. With Maryland’s fiscal pressures intensifying, lawmakers may view this as a quick fix for revenue gaps, but the long-term consequences for CPAs, their clients, and the state’s economy are too significant to ignore.

We need CPAs to stand united against any such proposal and be ready to raise their voices in defense of our profession.

The real costs of taxing professional services

While expanding the tax base might seem straightforward, the reality is far more complex. Taxing professional services — especially accounting services — would create administrative headaches for CPAs, strain client relationships, and hurt Maryland’s economy. Here’s how.

1. complex administrative challenges: More work, more risk for CPAs

Implementing a sales tax on professional services would mean CPAs would shoulder significant new administrative burdens, complicating compliance not only for their clients but for their own practices. The complexities would be significant and would include the following:

• Multi-jurisdictional complexities: CPAs working with clients across state lines would face intricate questions about where services are taxable. This creates more room for error, more compliance risks, and higher operational costs for accounting firms.
  
  
• Disadvantages for small businesses: Small businesses would bear the greatest burden under a sales tax on professional services. Unlike larger companies that often have in-house accounting and legal teams to handle complex tax requirements, small businesses typically rely on outsourced services for compliance and financial management. Taxing these essential services would force small businesses to absorb higher costs or invest in additional compliance resources — diverting limited funds away from growth, innovation, and day-to-day operations. This added financial strain could reduce competitiveness, hinder expansion, and place small businesses at a distinct disadvantage compared to larger corporations.
  
  
• Tax pyramiding: A compliance nightmare: Taxing professional services would lead to "tax pyramiding," in which taxes stack up at multiple stages of production and service delivery. CPAs would not only have to navigate these complexities for clients but also factor them into their own billing practices.
  
  
• Competitive disadvantage for Maryland CPAs: Maryland CPAs could lose clients to firms in neighboring states that don’t impose such taxes. Prospective clients may opt for out-of-state firms to avoid added fees, putting Maryland-based CPAs at a significant disadvantage.
  
  
• Regressive tax burden: CPAs serving small businesses, non-profits, and lower-income individuals will see firsthand how regressive this tax is. It forces those least able to afford professional services to pay more — or skip crucial financial guidance altogether.

2. maryland CPAs risk losing business across state lines

Maryland’s proximity to states that don’t tax professional services presents a clear threat to in-state CPA firms. If accounting services become taxable here, clients could simply take their business elsewhere.

Take transportation services as an example. The Fiscal Policy Note from the Department of Legislative Services for House Bill 846 — a proposal to expand the sales and use tax on transportation services — highlights this exact risk.

“Expanding the number of services subject to the sales tax may result in a decline in consumer purchases of these services in the State,” the note reads. “To the extent possible, residents may purchase services in neighboring states where these services are not taxed (or are taxed at a lower tax rate) or may choose not to purchase these services at all. … A majority of Maryland residents live within a short distance to a neighboring state and, therefore, could have access to service providers located in other states.”

This same logic applies directly to accounting services. Maryland CPAs would face an immediate competitive disadvantage, leading to client losses and reduced revenue for our firms — especially smaller practices that rely heavily on local clients.

3. small businesses and non-profits: CPA clients who can’t afford the hit

Many CPAs work with small businesses and non-profits that already operate on thin margins. Increasing the cost of accounting services through a sales tax would force many of these clients to cut back on critical services like tax planning, audits, and compliance work.

This isn’t just bad for our clients — it’s bad for CPAs whose work is deeply connected to these vital community sectors.

4. compliance risks that directly undermine CPA work

Taxing accounting services could make Maryland’s tax system less transparent and harder to enforce. By making CPA services more expensive, some businesses and individuals may forgo professional help altogether, increasing the risk of tax errors, non-compliance, and financial mismanagement.

Join the fight to protect Maryland’s CPAs

We can’t do this alone. Our strength lies in the collective voice of Maryland CPAs. We encourage all members to stay informed, share their perspectives, and be prepared to take action when the time comes. Together, we can protect not only our profession but also the economic health of the communities we serve.

Do you have questions or want to get involved in our advocacy efforts? Contact Mary Beth Halpern at marybeth@macpa.org for more information.