Sales Tax on Services

Overview

As of April 2016, forty-four states1 including the District of Columbia have a sales tax on some services. Typically, services taxed include entertainment, utilities, or telecommunications. However, to date most of the service taxes exclude real estate services or commissions. Many states have considered or are considering expanding the application of sales taxes of services to include a wide range of professional services such as real estate, legal assistance, accounting services, etc.

In November 2016, voters in Missouri approved a ballot measure to ban the state or local governments from expanding sales taxes on services not already taxed. Effectively becoming the first state in the nation to prevent additional sales taxes on real estate services.

1.  Arizona, Alabama, Arkansas, California, Colorado, Connecticut, District of Columbia, Florida, Georgia, Idaho, Illinois, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

Political Advocacy

Current Legislation/Regulation

Legislation at the state level.


In-Depth

Find NAR's letters, testimonies, bill updates, and more on the NAR Federal Issues Tracker


Legislative Contact(s):

Adriann Murawski,
amurawski@realtors.org,
202-383-1068

Regulatory Contact(s):

Adriann Murawski,
amurawski@realtors.org,
202-383-1068

What is the fundamental issue?

As of April 2016, forty-four states1 including the District of Columbia have a sales tax on some services. Typically, services taxed include entertainment, utilities, or telecommunications. However, to date most of the service taxes exclude real estate services or commissions. Many states have considered or are considering expanding the application of sales taxes of services to include a wide range of professional services such as real estate, legal assistance, accounting services, etc. 

In November 2016, voters in Missouri approved a ballot measure to ban the state or local governments from expanding sales taxes on services not already taxed. Effectively becoming the first state in the nation to prevent additional sales taxes on real estate services.

1.  Arizona, Alabama, Arkansas, California, Colorado, Connecticut, District of Columbia, Florida, Georgia, Idaho, Illinois, Iowa, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

I am a real estate professional. What does this mean for my business?

The application of sales tax to real estate services would be a direct tax on real estate commissions. Even if real estate commissions are exempted, it is possible that sales taxes would be applied to other services that relate to real estate transactions (title searches, inspections, etc.), thereby affecting the viability of these businesses and the affordability of real estate.

NAR Policy:

NAR opposes the application of state or local sales tax to rent real estate services and other professional services, including real estate broker commissions, title searches, appraisals, home inspections, property management services, and any other services related to the real estate transaction. NAR finds that the impact of such taxation places an undue burden on homeowners and other consumers of real estate services, falls disproportionately on the real estate sector, and is ultimately detrimental to state and local economies.

Legislative/Regulatory Status/Outlook

State tax policy leaders have said sales tax on professional services are inevitable because there are simply no other effective tax alternatives. In many cases, sales taxes already apply to "consumer" services such as haircuts, massages, etc. Nevertheless, recent proposals have sought to apply state sales tax to "professional" or "business" services--including real estate services. Such taxes would apply to commissions, title searches, appraisals, inspections, property management and potentially other aspects of a real estate transaction.

Although no state has successfully implemented the application of sales tax to real estate services, the recent surge of activity nationwide makes this an issue of interest.

NAR Committee:

State and Local Issues Policy Committee

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