Our Take: Minnesota’s Proposed Tax on Legal Services Creates Costs for Clients
For the upcoming budget, Minnesota Governor Tim Walz’s administration proposed changes to the state’s sales tax that would expand sales tax to include professional services, including legal, accounting, brokerage, and some bank services. Taxing legal services is not a tax on lawyers. Rather, it places an unfair financial burden on individuals and small businesses seeking legal help because ultimately, the client pays the taxes, not the lawyers.
“Taxing legal services will provide some revenue to the state, but at what cost? The Minnesota State Bar Association appreciates the need to balance the state budget, but it should not be accomplished by taxing people who are in situations that are highly consequential, stressful, and often unexpected. A tax on legal services is a tax on misery.” – Samuel Edmunds, Minnesota State Bar Association President
Taxing Legal Services Makes Accessing Legal Help Less Affordable
Legal services are not a luxury—they are a necessity for many people dealing with critical issues like auto, motorcycle, and truck accidents, pedestrian safety, and workers’ compensation. Clients, not lawyers or law firms, will pay sales taxes. By adding sales taxes to legal fees, the state increases the cost of these essential services, which could make them inaccessible for those who need them most.
Taxing Legal Services Hits Individuals the Hardest
While large corporations are able to absorb these costs (which they often pass along to consumers), individuals and small businesses will have to consider whether they can afford additional costs to pursue their legal rights. Individuals seeking legal advice on an injury sustained at work or in an auto accident would face higher costs, which could deter them from seeking essential professional guidance to secure medical treatment as well as fair and adequate compensation.
Taxing Legal Services Undermines Equal Access to Justice
Minnesota has long valued access to justice for everyone. Adding a tax to legal services disproportionately impacts lower- and middle-income individuals, including small business owners, who may already find it difficult to afford legal representation. Those who can no longer work with a legal team may be forced to navigate complex legal matters alone, leading to worse outcomes for our firm’s clients, only benefiting Big Insurance.
Next Step: Contact Your Elected Officials
Minnesota’s legal community opposes the taxation of legal services because it does not represent the best interests of Minnesotans. If you are concerned about how this tax affects you, your family, and your greater community, you should contact your elected representatives to share your voice.
If you’ve been injured and are seeking legal representation, contact the team at Schroeder & Mandel. We’ll help you navigate the next steps. Our work begins with a FREE consultation, and we operate on a contingency fee—meaning we don’t get paid until you, hopefully with no additional tax to you.