As you may have heard, a bill calling for a sales tax on professional services has been introduced in Maryland’s General Assembly. House Bill 1628, titled “Sales and Use Tax — Rate Reduction and Services,” was introduced on Wednesday by Del. Eric Luedtke, a Montgomery County Democrat and House majority leader. If enacted, the bill would reduce Maryland’s sales tax rate but expand it to professional services (like those that CPAs provide) to help pay for the Kirwan Commission’s recommended revisions to Maryland’s public education system.

The Maryland Association of CPAs strongly opposes this bill, for a number of reasons:

1. It puts Maryland businesses and CPAs at a competitive disadvantage. Every business would be forced to pay 5 percent more for CPAs’ services. None of our neighboring states have such a tax, and only three states (with much smaller populations) that we know of — New Mexico, Hawaii and South Dakota — have enacted such legislation.
2. This seems like a tax on tax compliance. Most of the services provided by CPAs and accountants are required by federal and state law to comply with existing tax laws and reporting requirements. In essence, this would be a form of double taxation.
3. We are concerned about the cost, complexity, and enforceability of this type of legislation. Five other states — Michigan, Florida, Minnesota, Massachusetts, and Utah — passed and then repealed similar laws for this very reason.
4. The bill violates five of the MACPA’s 12 principles for good tax policy, which are outlined in this blog post.

In addition, this bill comes as a surprise to the MACPA and our legislative volunteers. We had previously predicted there might be a high risk of such legislation due to the Kirwan proposals. But in January, more than 200 of our members joined us in Annapolis for CPA Day, and we heard at that time that legislators did not expect such legislation to surface this year.

What is the MACPA doing about it? We are already mobilizing our legislative volunteers and are preparing to take action.

1. We met yesterday with Del. Luedtke, who indicated that he understands our opposition to the bill.
2. We will be testifying at a hearing about the bill in front of the House Ways and Means Committee. The date of that hearing has not yet been finalized.
3. We have reached out to the Maryland Bar Association and its CEO, Victor Valsquez, who wants to join our legislative efforts. We also are reaching out to other groups as well, including the Maryland Chamber of Commerce and the Maryland Association of Engineers, to help build a coalition in opposition to the bill.
4. We are preparing to mobilize our key persons and CPA Day attendees to be ready to contact legislators as we follow the bill through the process, from the House Ways and Means Committee to the House floor, if it passes. It would then move onto the Senate Budget and Tax Committee and the Senate floor.

To learn more, tune in to my LinkedIn Live broadcast today at 3 p.m. ET. You’ll find that broadcast here.

We are counting on your help as well. As the legislative process advances, we’ll need as many CPAs as possible to step up and provide written and oral testimony about why this bill would be bad for Maryland’s businesses and its economy.

This bill presents significant risks that previous attempts to tax professional services did not. Maryland’s House of Delegates and Senate are each under new leadership, as are several key committees. This bill also is said to have the support of key House committee chairs. This has never happened in my 20-plus years of legislative advocacy.

As always, we will be working hard to protect our profession, as well as your businesses and clients. We need your help as well. It’s more important than ever.

We will continue to update you about this issue as developments warrant. In the meantime, stay vigilant and be ready to take action on behalf of your profession.