Practice Tip – Professional Services Sales Tax on Lawyers?

From time to time over the years there has been talk about imposing a sales tax on professional services.   One cannot help but wonder whether there will be an effort to impose such a tax to help solve the budget problem facing our state government.

Like all sales taxes, a tax on professional services should be paid by the client.  However, to make that absolutely clear to the client, you may wish to include a paragraph similar to the one set out below in your fee agreement.

Possible Tax on Professional Services. In addition to the expenses listed above, in the event that the State of Tennessee imposes a tax on legal services (legal services, expenses of representation, or both), Client agrees to pay any such tax that is assessed against Attorneys. No such tax has been imposed by the State of Tennessee at this time, and Attorneys will inform me if such a tax is passed by the Legislature and signed in to law by the Governor.  If the contingent fee option is chosen, any such taxes will be deducted from the recovery after attorneys’ fees have been calculated and deducted.   If the hourly fee option is chosen, the applicable taxes will added to Client’s monthly bill.