Does my business need a Consumer's Use Tax Account?
I'm making sure my state business information is accurate and came across this quote on the state website: "Professional Service Providers are Accountants, Architects, Attorneys, Chiropractors, Dentists, Engineers, Landscape Architects, Nurses, Occupational Therapists, Optometrists, Osteopaths, Pharmacists, Physical Therapists, Physicians, Psychologists, and Veterinarians. Businesses in these industries that are not making retail sales requiring a Sales and Use Tax Account should apply for a Consumer's Use Tax Account."
It looks like my type of service business isn't listed there, but I would consider myself to be a professional service provider. What do you think? Thanks in advance for any insight!
Joshua is ranked the #1 adviser Nationally by Investopedia’s Advisor Insights audience.*
It sounds like your state requires service-only businesses to track and collect use taxes. As a result, you’ll likely need to get a Consumer’s Use Tax Account in your state. This will be very state-specific, so it might be worth talking with your CPA or finding someone familiar with business taxation in your state.
Defining Professional Service Providers
State and federal laws rarely define terms using specific lists - such as a list of professions that qualify as Professional Service Providers. Instead, laws define topics broadly or in terms of other sections of the code(s) (other related laws). Legislatures intentionally want to cast as wide a net as possible and then allow administrative agencies to further define through regulations, official guidance, and other practices. This gives the government the most latitude to regulate based on their desires and adjust freely with changes in society without having to pass new laws. (It’s easier to update administrative policies than pass a new law).
What your state is providing is more likely a list of example professions that qualify under the legal definition. Still, any other unlisted service that also meets the broad definition will also be required to comply with the regulation. If you feel your business is a Professional Service Provider, most likely, it is going to be encompassed under that broad definition.
Getting Help
As I mentioned, your best bet is to talk with your CPA or your financial advisor for guidance. A local Small Business Development Center may also have resources that can help you answer this question.
Another option is to go to the source. Your state’s taxing authority (the agency that collects taxes in your state) likely has a hotline number that you can call to get some help with this question. Or your city may have a Business/Economic Development Department which might be able to help. One word of warning when calling government agencies, however, is that they often give misleading information. If your profession is not one they have had experience with, they may provide an answer that isn’t aligned with the law. Further, they are prohibited from giving any advice, especially tax, legal, or financial advice. As a result, the answer you get may be less than satisfactory.