Texas passes insurance services tax exemption for CPAs

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The Texas legislature has passed a bill granting an exemption to CPA firms allowing them to provide a limited amount of insurance services to clients without being subject to sales taxes.

The bill passed the legislature May 9 and was signed into law by Governor Greg Abbott on May 22. It will take effect on Jan. 1, 2018.

The Texas Society of CPAs lobbied for the bill after a CPA ran afoul of the Lone Star State’s sales tax collectors. In 2015 the state comptroller conducted a routine audit and found a CPA firm provided insurance services and owed back sales taxes. The TSCPA worked with the comptroller’s office to create a de minimis exemption for CPA firms whose work for a client may unintentionally stray into the state’s broad definitions of “insurance services.”

The bill, known as SB 1083, specifies that “insurance services” do not include a service performed by a CPA firm as defined by the Texas Public Accountancy Act if less than 1 percent of the firm's revenue in the calendar year is from services in the state that would otherwise constitute insurance service. In other words, firms need to earn at least 99 percent of their revenue from other services besides insurance, or else they owe sales taxes on the revenue they earn from insurance.

“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,” said TSCPA managing director of governmental affairs John Sharbaugh 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.”

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