Texas Lawmakers Pass Sales Tax Exemption for CPA Firms

The Texas Legislature passed a bill May 9 that creates a de Minimis exemption for a CPA firm whose work for a client may unintentionally stray into the state’s broad definitions of “insurance services,” the Texas Society of CPAs (TSCPA) announced.

John Sharbaugh, TSCPA managing director of governmental affairs, testified on behalf of the bill, which was signed by Gov. Greg Abbott on May 22, and will go into effect on Jan. 1, 2018. The bill, SB 1083, addresses the murky sales tax issue that arose in 2015 when the comptroller performed a routine audit and determined that a Texas CPA firm conducted insurance services and owed back sales tax. TSCPA worked with the comptroller’s office on the matter. SB 1083 states that insurance services do not include a service performed by:

  • A CPA firm as defined by the Texas Public Accountancy Act; and
  • If less than 1% of the firm’s revenue in the calendar year is from services in this state that would otherwise constitute insurance service.

“The passage of SB 1083 is a win for Texas CPAs and the TSCPA governmental affairs volunteers who worked so hard to lobby for this important issue,” Sharbaugh says in a statement. “It’s important for CPA firms to have some protection in the event they inadvertently perform insurance services, as defined by the Texas Comptroller, as part of their work for their clients, and this bill accomplishes that by providing a limited safeguard for CPAs.”