Gov. Ed Rendell's recent budget proposal to remove the exemption of the state sales tax for professional services would have damaging long-term effects on Pennsylvania business growth, says the Pennsylvania Institute of Certified Public Accountants

From a press release issued today by the PICPA:

While the PICPA recognizes the state's need for revenue to support critical state operations and programs, expanding the sales tax to include services - such as those provided by CPAs, attorneys, advertisers, and public relations - will be a quick fix that ultimately hurts Pennsylvania's long-term growth prospects.

PICPA, in several testimonies to the Pennsylvania House and Senate, has strongly encouraged a simplification of the current state tax code to attract more business and thus more revenue. Removing the sales tax exemption on services will create more confusion in the marketplace and could also be a strong deterrent for business expansion and sustainability. The negative effects of this tax expansion include the following:

-- Compliance difficulties and increased administrative burden to the
thousands of small businesses in Pennsylvania.

-- Pennsylvania would be at a competitive disadvantage, as only three
other states tax professional services, and none surround the
Commonwealth.

-- Further expansion of the sales tax will not make the state any more
business-friendly as Pennsylvania already has one of the highest
business tax rates.

Pennsylvania CPAs established the "Guiding Principles of Good Tax Policy" pamphlet, which can be viewed on PICPA's Web site at www.picpa.org/taxpolicy

The Pennsylvania Institute of Certified Public Accountants is a professional association of more than 19,000 CPAs who work in public accounting, industry, government and education.

For more information, visit the group's Web site at www.picpa.org