Legal News

Senators: Sales Tax on Legal Services Remains Far-Fetched

By Brian Harris

By Amaris Elliott-Engel
Of the Legal Staff

Democratic state Sens. Michael J. Stack, D-Phila., and Lawrence M. Farnese Jr., D-Phila., both said Tuesday they are opposed to Gov. Edward G. Rendell's proposal to expand the sales tax to legal services and several other areas in order to build up a reserve fund for when federal stimulus dollars run out.

The Legal reported earlier this year that Rendell's proposal to cut the sales tax rate by lifting the sales tax exemptions from a number of activities has gained little traction in the General Assembly.

Stack told a group of private sector leaders convened Tuesday to speak with the senators about the sales tax proposal that he doesn't believe there "are many Senate Democrats or Senate Republicans who are advocates of this sales tax."

Philadelphia Bar Association Chancellor Scott Cooper, one of the roundtable participants, said a sales tax is a "regressive tax" that impacts the consumers of legal services, not lawyers.

Cooper said a sales tax on legal services would  make it even more expensive to secure counsel.

Cooper also said the Pittsburgh and Philadelphia legal markets could lose their competitive edge in attorney rates by facing a sales tax on legal services, which could drive commercial work "into other competing jurisdictions which are all too ready with capable ... attorneys to snatch up that work."

The need to report sales tax to the commonwealth could also result in violating attorney-client privilege for those clients who do not want it widely known that they've sought legal counsel, Cooper said.

A sales tax on legal services would result in double taxation, Cooper also argued, because litigants pay court fees and then would have to pay sales tax on their legal services.

Kevin Shivers, representing the National Federal of Independent Business Accountants, said expanding the sales tax could result in having to pay sales tax when attorneys are present during business transactions to advise their clients.

Shivers also worried about audits and inspections by the government being turned into "money-making opportunities" if the sales tax base were expanded.

Full post as published by The Legal Intelligencer Blog on May 12, 2010 (boomark / email).