Ted Lanzaro, Author, Managing Partner of Lanzaro CPA, Shelton | Proposed tax poses an unnecessary burden

The state is currently considering legislation that would charge a 5 percent sales tax on accounting services. How would that impact Connecticut’s accounting industry?

The sales tax on accounting services is really a tax on the businesses and people who are using the services.  The last thing that Connecticut needs is another tax on businesses.  Connecticut is already amongst the least business-friendly states in the country, which is why we are losing businesses and population daily. 

Our legislators need to learn that you increase tax revenues from businesses by lowering business taxes not by raising them.  If Connecticut would simply lower or eliminate much of the taxation on business owners, there would be more businesses in Connecticut paying taxes.  Also, businesses would have cash freed up to hire employees, which would mean more income being earned by employees who would pay state income tax.

What’s the biggest problem with the tax?

The biggest problem for accountants is that it places an administrative burden on them to account for the taxes collected from clients and remitting it to the state.  Accountants are already very busy trying to save their business clients from going out of business.  Anything that takes time away from that simply reflects the lack of concern for small business by our legislators.

Would the sales tax impact smaller accounting firms any different than larger firms?

It would impact larger firms more because they have larger clients and generate larger fees.  They also have more clients than smaller firms, which means a larger tracking and administrative burden on the bigger firms.  Firms who offer fixed fees to clients may have to lower their fees by 5 percent to fit the tax into the fixed-fee quote. 

Overall, it is still just another proposal to tax business owners who are already struggling to make ends meet.  It makes about as much sense as taxing medicine for sick people.

Are there ways for small businesses to buck the current economic downturn and come out the other end stronger than they are now?

In order for a business to survive this downturn the business owner will need to micro-manage the business better, replace ineffective employees with more effective employees who are now available, be a better marketer of the business, and really have the desire to do what it takes to stay in business.

This is a time of economic “Darwinism.” The weak — those who cannot adapt to change — will lose their business.  The strong — those who can see the downturn as an opportunity to improve their business skills and implement the changes necessary — will survive.