On the Radar: Pennsylvania Business Privilege Tax Revisited


By Michael Stetson

On December 27, 2007, the Pennsylvania Supreme Court announced its decision in V.L. Rendina Inc. v. City of Harrisburg, concluding that The Local Tax Enabling Act did not require a permanent base of operations in the taxing jurisdiction before a business privilege tax could be imposed, which means that municipalities have the right to levy a business privilege tax on any business which operates within its jurisdiction even if the operation happens to be temporary. As a result, Pennsylvania businesses face increased tax burdens, administrative complexity, and the potential threat of double taxation as localities aggressively seek to raise revenue in the current economic downturn. Compounding the problem, Commonwealth Court’s June 2009 decision in A&L Inc. v. Rostraver Township held that the township’s and school district’s business privilege tax ordinances were taxes on the “privilege” of doing business within the township and school district. In effect, the court’s interpretation in A&L, coupled with the Rendina decision, has created two different standards, which can be interpreted to allow for the doubling of tax on the same stream of gross receipts for business privilege tax purposes.

State Senator Pat Browne, CPA (R-Lehigh) is introducing legislation to amend the Local Tax Enabling Act to codify the “base of operations” requirement and require taxpayers to maintain “an actual, physical, and permanent place of business from which a taxpayer manages, directs, and controls its business activities within a jurisdiction before it is subject to business privilege tax. The legislation would clarify that the act of engaging in individual transactions within a jurisdiction, without more presence, does not rise to the level of “doing business” and also looks to provide an exclusion for receipts taxes by other jurisdictions.

Senator Browne is currently seeking co-sponsors to re-introduce similar legislation during the State’s upcoming budget session, and according to Jon O’Brien, Director of Communications with the Master Builders Association and an Officer with the Construction Legislative Council of Western Pennsylvania, the CLCPA is gathering in Harrisburg in May of 2013 to lobby for this legislation.

See also our Insight article dated February 15, 2012, titled Pennsylvania Senate Passes Legislation Regarding “Base of Operations” for Business Privilege Taxes for more information on this subject.

Stay tuned and we will keep you posted as more information becomes available on this topic in the near future.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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