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Changes to Pennsylvania Tax Law

Pennsylvania, like many other states, is adjusting its tax statutes to include more goods and services within the taxable definitions. Following recent changes to its somewhat confusing new legislation, the state issued a “clarifying” bulletin for use in interpreting the new requirements. In this blog, we will discuss a few areas of this clarification, as well as an amnesty program available to some businesses.

Electronically or Digitally Delivered Items (that is, Digital Downloads)

This new Sales, Use & Hotel Occupancy Tax Bulletin 16-001, was drafted on July 21, 2016 and became effective on August 1, 2016. This bulletin clarifies recently enacted legislation related to digital products. The legislation applies a tax regime to many of the newly created revenue streams developed by the digital industry. Unlike the traditional taxes on things we can touch and feel (that is, tangible property) lawmakers want to expand the tax revenue base to “new age” things. As you might expect, the attempt to do so has resulted initially in some confusion. The bulletin is an attempt to clarify the new legislation. It explains that a state sales and use tax is imposed on electronically or digitally delivered, streamed or accessed video, photographs, books, any other taxable printed matter, applications (that is, “apps”), games, music, any other audio, including satellite radio service, canned software, or any other otherwise taxable tangible personal property. Additionally, updates or support on these items are also taxable.

In addition to the focus on taxing new digital products, the bulletin also highlights other changes to more traditionally taxed goods.

Snack Food Packaging

Returnable corrugated boxes used to deliver snack food products when purchased by a manufacturer are exempt from the sales and use tax. The corrugated boxes are included with the snack foods when purchased. When they are combined together, they are exempt from the tax.

Besides sales and use taxes, this bulletin also explains state taxes regarding cigarette and tobacco products, corporation taxes and bank share taxes, just to name a few. If you are contemplating doing business with companies in Pennsylvania or setting up operations in Pennsylvania, we can help you navigate the complex new tax laws to your advantage.

For further information explaining all the nuances contained in this bulletin, please visit the PA Department of Revenue. We can help you understand whether the changes apply to you.

New Amnesty Program Put into Effect

In Addition to the new bulletin above, the Pennsylvania state legislature has also been busy enacting a new amnesty program. This new amnesty program was just signed into law last month (July 2016). This amnesty program requires the Pennsylvania Department of Revenue to establish a 60 day amnesty period for delinquent filers to come forward for taxes due through December 31, 2015. Under this program, all interest that is due to the state would also be waived. To read more about the amnesty program put into place, go to the state tax summary at the PA Department of Revenue.

Amnesty programs have been and are used by both the federal and state governments for a variety of perceived benefits to both the government body and the companies/ individuals offered the benefit. Sometimes amnesty programs are put into effect for political reasons. While amnesty programs can be beneficial to delinquent companies, we urge a degree of caution in participating in these programs, as there might be some unexpected consequences if filed incorrectly or incompletely. For more information about how amnesty programs work, please see our earlier blog post on amnesty programs.

Monika Miles

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.