Bench & Bar of Minnesota is the official publication of the Minnesota State Bar Association.

Sales Tax on Legal Services

A Very Bad Idea

Since the sales tax was first introduced in Minnesota in the 1960s, Minnesota has rejected the extension of the sales tax to legal services as bad public policy on no less than three occasions.

Minnesota’s historical position on this issue has been the right one, and is in keeping with 46 other states that currently do not apply a sales tax to the delivery of legal services. In the past two decades alone, nine states have considered and rejected extending a sales tax upon their citizens for the delivery of legal services. Two other states that did pass sales tax on legal services quickly moved to repeal that action. All lawyers and citizens have to be on guard to assure that, in these times of declining state revenues and budget shortfalls, Minnesota does not stray from its principled and longstanding position exempting its citizens from a sales tax on legal services.

A Tax on Every Citizen

A sales tax on legal services would be a tax on citizen consumers of legal services: our families, friends, neighbors, community businesses, and any other persons who need legal services to pursue their rights, conduct their business, or protect their safety, property, or liberty from harm.

Every Minnesotan must understand that a sales tax on legal services is not a tax on lawyers—it’s tax on every citizen!

A sales tax is generally described as a “consumer tax,” the argument of proponents being that if you don’t want to pay the tax, you don’t buy the product or service that is subject to the tax. This suggests that the choice to consume legal services is entirely voluntary or discretionary. Legal services are quite often not voluntarily sought out, but rather are required of necessity. Business owners and individuals across our state may require legal advice and counsel to conduct their daily personal and business affairs, or may be drawn into the justice system to protect themselves from the actions of others. In the case of these last mentioned, a sales tax on legal services is fairly classified as a “misery tax.”

Impeding Access to Justice

There exists today a very real and legitimate concern about the difficulty that ordinary citizens have in accessing the justice system for redress of their rights. The online Huffington Post reported recently that, according to a worldwide survey conducted by The World Justice Project, the United States ranks lowest among 11 developed nations surveyed when it comes to providing access to the civil justice system to its citizens.1 Moreover, this country scored lower that some “third world” countries in some of the survey categories. The story further recounted that when it comes to access and affordability of legal counsel for civil legal services (the kind most Minnesotans use) the United States ranks 20th out of 35 nations surveyed, not only lower than some of the surveyed developed nations but also lower than nations such as Mexico, Croatia, and the Dominican Republic.

Any lawyer engaged in providing legal services to individual clients or small businesses can tell you firsthand stories of average working Minnesotans who already have difficulty finding funds in their budgets to pay for needed legal services in these financially challenging times, particularly when faced with an unexpected individual or family crisis. For them, the extra burden of an imposed sales tax may make all the difference in their ability to secure their rights.

Business Also Suffers

Extending the sales tax to the delivery of legal services imposes one more competitive disadvantage to existing businesses and to future business development in Minnesota, perhaps with a disproportionate detriment to small business.

Could it be any more apparent that extending the sales tax to include legal services would only compound the difficulty many Minnesotans—businesses as well as individuals—already face gaining access to justice? Minnesota citizens using the courts presently have to pay ever-rising filing fees. Court administration reports users of the Minnesota justice system in 2009 incurred $42.9 million in such fees; in 2010 such fees already total $48.6 million.

Call to Action

It is likely that the extension of sales tax to legal services is an issue that will arise during the upcoming Minnesota legislative session. As members of our association and profession, each of you in your communities can be a spokesperson in opposition to any attempt to extend the sales tax to legal services. It’s a regressive misery tax with a chilling impact on the right of each citizen to pursue their lawful interests. In the upcoming months we will report legislative activity on any sales tax proposal and will enlist your efforts in supporting our resistance to passage. In the mean time, please serve as a source of information and education in your communities and with your lawmakers.

1 Quoted statistics are taken from the World Justice Project’s Rule of Law Index 2010, released October 14, 2010, at the National Press Club in Washington, D.C.  Information about the World Justice Project and a copy of the Rule of Law Index 2010 are available at

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Terry Votel

Terry Votel was the 2010-11 president of the Minnesota State Bar Association. The division attorney for the Midwest Division of the Claims Litigation Department of Farmers Insurance Group, he practices in the area of insurance defense. He received his J.D. degree from William Mitchell College of Law.