The Governor’s budget proposed to broaden the sales tax on professional services, including Engineering Services. While ACEC-CT worked with our lobbyists to oppose this proposal, we need our ACEC-CT members to contact legislators today to deomonstrate continued opposition to the tax increase.
There are several reasons why the tax on engineering services is bad for Connecticut:
- The increase in the cost of construction projects would discourage businesses from locating or expanding in Connecticut.
- The sales tax would also impact the housing market, making housing less affordable for residents in the state.
- The tax is very complicated to administer for states and taxpayers, as the multi-state nature of customers and service providers often makes it difficult to determine where, when, and how the services take place. In fact, when Connecticut taxed engineering services about 25 years ago, the Department of Revenue Services recommended that the tax be eliminated in part because of the complexity in administering the tax.
- Connecticut engineering firms will also find themselves at a competitive disadvantage. Owners will find ways to have engineering work performed out of state. Out-of-state engineering firms will not collect the sales tax for Connecticut. The loss of work will mean fewer jobs for Connecticut engineers and support staff and lower income taxes for the state.
- The tax discriminates against small businesses because small and emerging businesses often have a need to use outside engineering services that would be taxed, while larger companies with in-house expertise would not be subject to a tax for such services.
- Connecticut would be the only state in the northeast taxing professional services and only the fourth state in the country taxing professional services.The sales tax on engineering services further contributes to Connecticut being considered unfriendly to business.