To close budget gaps, state legislatures have explored expanding sales tax to include professional services. Sales tax generally applies to the purchase of tangible goods like clothing or furniture. Taxing professional services provided by accountants, engineers, architects, and other similar professions could harm businesses and consumers. What’s more, such taxation is difficult to implement.
Tax, audit, and other accounting advisory services can happen at multiple locations and be received in different locations — even across state lines — complicating tax compliance.
Given the evolving nature of how states define taxable professional services, it’s critical for accounting professionals to stay actively engaged in advocacy efforts that shape fair and consistent policy.
“[Any proposed taxation] will unfairly raise taxes for consumers and small businesses, which means you could in effect be diverting businesses away from certain people in certain states,” said Matthew Crawley, lead manager of state advocacy at the AICPA. “The businesses themselves will have to find new avenues to source things, to provide services, which could then strain them, especially if they’re smaller firms or individual CPAs.”
State-by-state variability in service taxation
Sales tax on services is specific to each state. Hawaii, New Mexico, South Dakota, and West Virginia tax services. Washington State expanded its sales tax to include professional and digital services this year. In New Jersey, taxes are applied to some business and personal services — like janitorial services or credit reporting — but exemptions are made for accountants, lawyers, doctors. Florida’s taxable services include detective and crime prevention services.
Professional services are a kind of business input, a specialized expertise and labor that helps an organization achieve its goals. But taxing such services can lead to tax pyramiding, where these specific taxes compound along the production chain, meaning the service can be taxed multiple times. Because taxes are then reflected in the purchase price, tax pyramiding results in random price differences between services.
All consumers pay sales tax at the same rate specific to their state. If taxes on professional services are enacted, however, they could eat into the budgets of middle- and low-income families, who tend to spend a larger share of their income on goods and services.
When states impose taxes on accounting services, the specifics of what qualifies as an accounting service might vary significantly. The inconsistency could prompt businesses to relocate and customers to seek services from a state that doesn’t levy such taxes.
Small businesses and start-ups hire CPAs for tax, audit, and other advisory services. A tax on these professional services would increase their costs and could stunt their growth.
“Local economies can also suffer,” said Crawley. “If you’re a small firm … in a state that has these taxes, you know you’re a member of a business community that has been unfairly targeted.”
Navigating the complexity of taxing professional services
With shifting state definitions around which services are taxable services, the voice of accounting professionals in advocacy is not optional. Working together, members of the profession can help ensure that policies remain equitable, consistent, and reflective of the realities of the profession — and of the public we serve.
The AICPA works closely with state CPA societies and monitors for proposed legislation that would impose sales tax on accounting and professional services. Several bills were defeated in 2025, but Crawley anticipates that the issue will return in 2026 — with eyes on Florida, Maryland, and Nebraska.
“This not only affects [AICPA members] directly but it also affects their clients and the wider business community that they’re a part of,” said Crawley. “Connect with your state society, learn about the bills, engage in grassroots efforts, and make your voice heard.”
Because taxes on professional services have the potential to disrupt the accounting profession and undermine the broader public interest, AICPA Advocacy remains vigilant in monitoring and responding to legislative developments. To learn more about how these taxes would harm businesses and to receive legislative updates, explore the resources of the Professional Services Alliance.