Taxing tax prep and accounting? New Ohio bill would expand sales tax to nearly all services

As a part of his broader attempt to overhaul the tax system in his state, Ohio Governor John Kasich’s plan would expand sales taxes to virtually all services that are currently not subject to sales tax under state laws.

That includes the services that accountants and tax professionals provide, as well as trips to the barber or hair stylist, mechanic labor, phone services and even funerals.

Supporters of the plan, including Kasich, say that the changes are necessary to reflect the movement of the state to a more service-based economy.

Other parts of the overal state tax law rewrite would include cutting small business taxes by as much as 50 percent, and lowering the income tax rate by 20 percent over three years.

Gary Gudmundson, spokesman for the Ohio Department of Taxation, is among those in favor of the proposal.

He said that economic experts have demonstrated “that a consumption-based tax system is more conducive to job creation than one that relies more heavily on an income tax base. The point of this reform is to create jobs. To create an environment in Ohio that is friendly to job creation.”

But while some economists agree, others note that it would likely face pushback from those who provide professional services and consulting, notably accountants, lawyers and architects.

According to the state’s own estimates of the taxation provisions, these types of professionals, along with engineers, designers, marketers, lobbyists and advertisers could end up contributing much of the anticipated revenue, as much as $661 million by 2015, if the new tax laws are passed by the state legislature.

The sales taxes would also applyl to concerts, festivals, professional sports and even online dating websites and digital movie rentals.