Each year politicians at the Federal and State level are often torn between increasing taxes or cutting services. Although the Federal government has the ability to run a deficit, avoid raising taxes AND avoid cutting services, the States do not, since they must balance their budgets. In the past, most taxpayers in Wisconsin have focused their tax “complaints” on income and property taxes, since Wisconsin has been historically high on both fronts. As the global landscapes continue to evolve, we see the politicians following that lead while trying to avoid cutting services. To that end, many Wisconsin politicians have turned their focus on sales tax. Wisconsin is currently a state which only imposes sales tax on certain types of services and treats most services as tax exempt. From a Department of Revenue administrative stance, we as practitioners have seen a dramatic increase in what the Department see is a non-taxable service and what are taxable services. Services that involve any (no matter how insignificant) taxable service along with the main non-taxable service may make the entire transaction subject to sales tax; software services that include text services could be viewed as taxable. The expansion of this view should make businesses concerned and cause them to re-look not only at what they are taxing, but how they are invoicing their clients since presentation alone may make the difference in the eyes of the Department of Revenue. This area is something all business owners should be concerned with. Does it end there? Most likely not. Although their is no major sales tax changes in the current Wisconsin budget bill, many expect that we will see a proposal to include sales tax on all services in the coming year. Factors such as the continued boom in online/software based sales, increased service costs, and the recent push to eliminate real property taxes will force this issue to the forefront.
In the end, all taxes are charged by a government but borne by the end consumer as businesses will be forced to pass any taxes along in order to stay profitable and continue in business.
Will the elimination of property taxes reduce rents and related fees when sales tax are increased on services? Will a sales tax on services help to assure the government can provide the services we all want?
Will a different tax be more fair than the existing?
Nobody can answer these questions. An informed CPA team is crucial in staying up to speed on these and thousands of other changes in the tax world. RPB can help you find your way through the evolving tax law maze. We are here to help.
Brad Voght, CPA is the tax partner at Reilly, Penner & Benton, LLP, a public accounting firm and trusted adviser specializing in business and personal tax matters as well as in not-for-profit work, school organizations as well as government and municipal agency work. The firm also provides ERISA audit services to publicly held entities throughout the country. A PCAOB registered firm, Reilly, Penner & Benton CPAs also known as RPB CPAs, has served closely held businesses and has provided tax preparation and advice, financial statement audits, reviews and compilations, employee benefit plan audits, bookkeeping services, business valuations, fraud prevention and consulting services since 1907.