Tonight, I’ll be testifying on behalf of SMCpros on the House Bill 677.  As Scott Litman of Magnet360 points out, 

If this proposed tax goes through, Minnesota will be the only market in the country to tax this form of professional services, putting Minnesota’s professional services firms at a significant competitive disadvantage to our out-state rivals.  This tax will make the decision easy for many current and future customers to move their business to out of state offices to avoid this premium.

As the operations leader of a social media agency that is on-goal to triple our revenue this year, adding over 21 people, I find the bill convoluted and concerning. To compete in the national marketplace, we’ll either have to drop our prices by 5.5% (which would cost about 1/3 of those new jobs,) or find another way to eat the cost, including passing the cost onto our customer. This bill threatens our growth in a very real way.

Growth and Innovation Will Suffer
This bill harms much-earned growth after a recession. Taxing our way to prosperity burdens small businesses already struggling. What this bill will do, is offer an incentive for professional services businesses to move their organizations outside of Minnesota. Although this bill is about taxing businesses that perform work in MN, who may not live in MN, it will hurt businesses all the same.

It will also hurt budding entreprenuers during their start-up phases as well as affect home prices, create a series of, “comply or else,” issues.  5.5% truly is a drop in the proverbial bucket. The projected net tax increase of $2b is going to be costly to implement and force compliance with small companies who don’t have the tax breaks to hire staff to maintain compliance.

Let’s focus on less waste, and attracting more companies of growth to our State. This will only affect the average consumer slightly, however it will affect the very core of Minnesota’s businesses and their shareholders and those that invest in Minnesota businesses. With less investments, more red-tape, less profit, we are literally chancing the loss of growth and innovation in our great State.

No Programs Are In Place To Collect Sales Tax From Professional Services Companies
This isn’t a Democrat or Republican issue, this is a Minnesota issue. There are no systems in-place for most MN businesses to collect this type of tax. It will cost money both in training and compliance.

The Real Bottom Line

This is a hidden tax on consumers. It’s a hidden cost within transactions that most businesses will have to build in to the consumer. House Bill 677 will affect all MN families and businesses from home prices, to repairs, to legal bills and business consulting. Let’s propose a different bill, with more transparency and look at the real factors of the waste in our budget. This isn’t about not wanting to pay our fair share, it’s about wanting to provide job growth and innovation when we are feeling bound in red-tape.

Follow our hashtag, #MNLeg677 to find out more about the bill or what’s being said within the Capitol. 

 

Originally published on SMCpros’ blog: http://smcpros.com/2013/02/thoughts-on-house-bill-677-governor-daytons-tax-proposal-on-business-services/