Toledo Bar Association Opposes the Extension of Ohio Sales Tax to Legal Services
With the overwhelming support of members (95.4%), the Toledo Bar Association Board of Directors voted at its March 21 meeting to oppose the expansion of sales tax to legal services and advocate for the Ohio General Assembly to defeat passage of this portion of the governor’s fiscal year 2014-2015 budget proposal. A compelling reason for this decision was the board’s agreement that imposing sales tax on legal services is inappropriate tax policy because it will unnecessarily burden Ohio consumers and impede access to the legal system.
In a poll of Toledo Bar members taken February 28 – March 4, it was determined that an overwhelming majority of respondents were opposed to the tax. This is a typical sentiment expressed by poll respondents: “This proposed tax will create an additional barrier to obtaining legal services and will have a significant negative impact on the legal profession in Ohio which is continuing to experience the impact of the poor economy.”
The imposition of the Ohio sales tax on legal services jeopardizes access to the very legal services that are essential to every Ohio citizen and every Ohio business.
- Legal services are essential for individuals. The average person could reasonably require professional legal services for any of the following: estate planning and execution; adoptions, guardianships and child support; domestic violence protection orders; separation, dissolution and divorce; personal bankruptcies; and securing pension, retirement and health benefits. Imposing the sales tax on these situations makes difficult times even more difficult for Ohioans. “Adding an additional layer of cost and complexity to providing legal services will hurt Ohio families and jobs.” —TBA poll respondent
- The tax proposal presents barriers to securing legal services. Adding to the costs of legal representation will discourage the use of legal services, impeding access to justice. In 2012, the Toledo Bar Association’s Pro Bono Service provided some 200 attorneys who logged more than 1500 hours of legal service to indigent clients. This does not begin to meet the local need for legal services. Facing increased costs, more clients will seek legal service remedies for their problems. “It may just force an even heavier burden on public defenders and legal aid, which could be forced to turn to the state for funding to handle this greater case load.” —TBA poll respondent
- The tax proposal imposes a burden on Ohio businesses. As written, H.B. 59 taxes will increase the cost of doing business in Ohio, making it less friendly to commerce. Toledo law firms already face competition from firms in states such as Michigan that do not tax legal services. Michigan, in fact, is one of three states (along with Florida and Massachusetts) to recently enact an expansion of a sales tax, only to retreat after problems surfaced. The Ohio Legislature would do well to heed this lesson provided by Michigan. “…regressive taxes discourage commerce.” —TBA poll respondent
- The tax proposal unfairly impacts small law firms. Eighty-four percent of Toledo Bar members practice in small firms or solo offices. While some larger firms may be able to absorb the function of calculating, billing and submitting the sales tax obligations, it will present new administrative challenges to solo practitioners and small firms. “A new tax would further hinder attorneys’ ability to thrive in business…” —TBA poll respondent
Attorneys and their clients are petitioning the Ohio legislature to exempt legal services from the proposed sales tax expansion. More information is available from the Ohio State Bar Association (https://www.ohiobar.org/NewsAndPublications/News/OSBANews/Pages/OSBA-opposes-extension-of-Ohio-sales-tax-to-legal-services.aspx).
Toledo Bar Association resource page: http://www.toledobar.org/OH_Tax/