Professional Privilege Tax - Tennessee Association of Audiologists

Report
Professional Privilege Tax
John Williams, JD
What is this tax?
• Engaging in the professions listed in T.C.A.
§67-4-1702 is declared by the Tennessee
legislature to be a privilege taxable by the
State.
• The tax revenue collected by the Department
of Revenue is deposited into the state
general fund and used to support all the
functions of state government.
Who must pay this tax?
The professions subject to this tax are listed in T.C.A.
§67-4-1702(a):
(1) Persons registered as lobbyists pursuant to § 3-6-302;
(2) Persons licensed or registered under title 48, chapter 1 as:
(A) Agents;
(B) Broker-dealers; and
(C) Investment advisers.
(3) Persons licensed or registered under title 62 as:
(A) Accountants;
(B) Architects;
(C) Brokers, as defined in § 62-13-102;
(D) Engineers; and
(E) Landscape architects.
(4) Persons licensed or registered
under title 63 as:
(A) Audiologists;
(B) Chiropractors;
(C) Dentists;
(D) Optometrists;
(E) Osteopathic physicians;
(F) Pharmacists;
(G) Physicians;
(G) Physicians;
(H) Podiatrists;
(I) Psychologists;
(J) Speech pathologists; and
(K) Veterinarians.
(5) Persons licensed as attorneys by the
supreme court of Tennessee; and
(6) Persons registered as athlete agents
pursuant to title 49, chapter 7, part 21.
How long has this tax been in effect?
• The professional privilege tax (PPT) was first
enacted by the Tennessee General Assembly
in 1992.
• This tax was enacted instead of an income
tax and instead of requiring professionals to
collect and pay sales tax on the services they
provide.
How much is this tax?
• From 1992 to 2002, the PPT was $200 a year.
• In 2002, the General Assembly raised the tax
to $400 a year.
• The tax must be paid by June 1 of each year.
• Penalties and interest are assessed if an
individual does not pay the tax on time.
• A person’s license may be suspended or
revoked if the tax is not paid at all.
How much tax revenue does the State
receive from the PPT?
• The State of Tennessee receives about
$77,500,000 from the PPT each year.
• Of that amount, Speech Pathologists pay
$656,000 each year, and Audiologists pay
$126,400. (These figures are for 2012.)
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ARCHITECT
ATTORNEY
AUDIOLOGIS
BR-DEALER
BR DLR AGT
CPA
CHIROPRCTR
DENTIST
ENGINEER
STATE EMPL
STATE JUDG
INV.ADVISR
LANDS ARCH
LOBBYIST
ST COL EMP
OPTOMETRST
OSTEOPATH
PHARMACIST
PHYSICIAN
PODIATRIST
PSYCHOLGST
ACCOUNTANT
PRIN BRK
SPEECH PTH
SPORTS AGT
VETERINARN
2,899
17,584
316
1,419
99,062
8,629
954
3,314
9,862
2,449
1
204
259
362
953
1,111
846
8,992
18,740
218
1,145
18
3,227
1,640
59
1,795
$1,159,600.00
$7,033,600.00
$126,400.00
$567,600.00
$39,624,800.00
$3,451,600.00
$381,600.00
$1,325,600.00
$3,944,800.00
$979,600.00
$400.00
$81,600.00
$103,600.00
$144,800.00
$381,200.00
$444,400.00
$338,400.00
$3,596,800.00
$7,496,000.00
$87,200.00
$458,000.00
$7,200.00
$1,290,800.00
$656,000.00
$23,600.00
$718,000.00
Why are some professions not
required to pay the PPT?
• No one seems to know the answer to that
question.
• In general, the professions which earn the
most money and practice independently have
been included.
• But it is not clear why speech pathologists
and audiologists were included, when
physical therapists and occupational
therapists were not included.
Doesn’t this violate the Tennessee
Constitution?
• In 2004 the Tennessee Attorney General said the
statute creating the PPT is constitutional.
• The Attorney General said the legislature has
broad discretion to determine which professions
to include within the scope of the tax.
• The Attorney General said the disparity in
average income of the professions required to
pay the PPT does not violate the due process or
equal protection provisions of the Constitution.
Is the PPT a fair tax?
• TAASLP believes that the PPT is not a fair tax for
the following reasons:
1. Many health care professionals are not
required to pay the tax. Speech
pathologists work closely with physical
therapists, occupational therapists, and
nurses on a daily basis. None of those
professionals have to pay the tax. In fact,
only 11 of the 30 health care professions
listed in Title 63 of the Tennessee Code have
to pay this tax.
2. All the professions listed in T.C.A. §67-4-1702
pay the same amount of tax -- $400 a year. Yet
many of the professionals required to pay the
PPT have incomes which exceed $100,000 a
year, while the average speech pathologist or
audiologist earns $60,000 or less. This tax
creates a greater hardship for SLPs and
audiologists than it does for most of the other
professionals who pay it.
3. Audiologists and speech pathologists are not able to
raise their fees to recover the tax from their clients and
patients. Most of them are either salaried employees of
hospitals and other institutions or receive fixed
reimbursement from insurance companies and
government agencies. Most audiologists and speech
pathologists pay the tax out of their own pockets,
unless they are lucky enough to have an employer who
agrees to pay it for them.
What about audiologists and speech
pathologists who work in the schools?
• There are more than 1000 SLPs and about 15
audiologists who hold a license from the
Tennessee Department of Education to
provide services in the primary and
secondary schools.
• They are not required to hold a professional
license from the Board of Communications
Disorders and Sciences, and thus they are not
required to pay the PPT.
• However, many of the SLPs and audiologists who work in
schools would like to supplement their income by working in
the private sector part-time or in the summer.
• To do so, they must hold a license from the Board of
Communications Disorders and Sciences.
• By obtaining this license, they become subject to the PPT.
• This is a strong disincentive to those who might otherwise
provide these services in the private sector and deprives
Tennesseans of the services of many SLPs and audiologists.
• This is a strong argument in favor of removing SLPs and
audiologists from the list of professions required to pay the
PPT.
What can we do about the PPT?
• For many years, TAASLP has been trying to get the
statute changed to remove SLPs and audiologists
from the list of professionals required to pay the
PPT.
• Audiologists have been divided about whether they
want to be removed from the list because of the
fact that (like many of the other professions which
pay the tax) they must hold a doctorate degree.
• The current position of the TAA is to seek to remove
audiologists from having to pay the tax.
What are the chances of success?
• From 2008 to 2011, Tennessee’s economy
was not in good shape. As a result, sales tax
collections were down. The State needed
every penny of taxes it could get.
• In the last three years, the economy (and
sales tax collections) have improved
dramatically.
• The State is not as strapped for tax revenue.
Have any other taxes been repealed?
• In 2012, the Tennessee legislature voted to
repeal the gift tax in its entirety.
• In 2012, the Tennessee legislature voted to
phase out the inheritance tax over a 5-year
period, raising the monetary level of estates
to which the tax applies in each year from
2012 through 2016. After 2016, there will be
no tax on any estate.
• In 2012 and 2013, the Tennessee legislature
reduced the sales tax on food sold at grocery stores
and other retail locations from 5.5% to 5%.
• In 2013, the Tennessee legislature changed the law
which exempts persons 65 or older from having to
pay the Hall tax on income from stocks and bonds if
their total annual income is below a certain
amount.
• The exemption level was increased from $26,200 to
$37,000 for single persons and from $37,000 to
$59,000 for couples.
What about repealing the PPT?
• Senate Bill 1238/House Bill 1080 deletes SLPs
from the list of professionals required to pay
the PPT.
• This bill can be amended to include
audiologists.
• Senate Bill 1238 is sponsored by Sen. Janice
Bowling of Tullahoma.
• House Bill 1080 is sponsored by Rep. Darren
Jernigan of Nashville.
How can you help the effort?
• Talk with your state senator and your state
representative in person.
• It is not enough to simply send a letter or email.
• During the fall, you can usually set up a meeting
with your legislators in your home town.
• Don’t be afraid to call them to set up a meeting.
They like to meet with constituents.
What if you don’t know who your
legislators are?
• Go to the following website:
http://www.legislature.state.tn.us/
On the right-hand side of the home page, look
under “Find Your Legislator.”
Type in your home address.
Your legislators will be displayed, with all their
contact information.
The rest is up to you!
Won’t it take time to meet with my
legislators?
• Yes, it will.
• But the question is, how badly do I want to
get rid of the PPT?
• If you’re really tired of paying the PPT or if it
is a real financial burden to you, then you
won’t mind spending a little time explaining
that to your legislators.
What should you say to your
legislators?
• Just “tell it like it is”.
• Explain in your own words why you think it is unfair
for SLPs and audiologists to have to pay the PPT.
• The TAASLP lobbyist can provide handouts for you
to use:
John P. Williams
(615) 244-2770
[email protected]

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