When it comes to taxes, the rules and regulations can be confusing. In New York State, professional services are generally not subject to sales tax. Most of the remaining 36 states with sales and use taxes implicitly exempt business management and consulting services. But what about the other states? Do consultants charge taxes? The answer is not so straightforward.
Advance sales tax laws generally allowed only “tangible personal property” (TPP) to be taxed, rather than taxing services. No two states tax the exact same specific services, but the general types of services that are taxed can be roughly divided into six categories. We used the North American Industrial Classification System (NAICS) to determine the types of business management and consulting services that would be subject to Connecticut sales and use tax. New Mexico, Rhode Island and West Virginia appear to impose sales and use taxes on all types of business management and consulting services, although they do so without legally specifying them.
While Hawaii, New Mexico and South Dakota generally tax all sales of services, many other states tax some services but not others. The types of companies whose services would be subject to Connecticut sales and use tax are those that provide various types of consulting services, such as human resources, processes, physical distribution and logistics, and public relations. For more information about your company's specific tax liability in each state, consult the state's Department of Revenue for additional information. Some states that tax too few services, such as Utah, continue to tax admission fees for most sporting and entertainment events. New Jersey specifically imposes its tax on information services, the description of which is similar to that of Connecticut's sales and use tax regulations. It is important to note that while most states do not explicitly tax business management and consulting services, they may still be subject to taxation under laws that impose a general tax on any service that is not explicitly exempt.
Therefore, it is important to research the specific laws in each state in order to determine whether or not your company's services are taxable. In conclusion, it is important to understand the different rules and regulations regarding taxation of business management and consulting services in each state. While most states do not explicitly tax these services, they may still be subject to taxation under laws that impose a general tax on any service that is not explicitly exempt. Therefore, it is important to research the specific laws in each state in order to determine whether or not your company's services are taxable.
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