OUR THOUGHTS ON:

New Law Amends Pennsylvania's Local Tax Enabling Act

State and Local Tax

By Matthew Dodge

The Pennsylvania Senate has passed House Bill No. 1513, which amends The Local Tax Enabling Tax (P.L. 1257, No. 511).  The amendments to The Local Tax Enabling Act establish bright-line tests for determining when a local taxing authority may impose its privilege tax, provide exclusions for gross receipts taxed by other jurisdictions and define the term “base of operations.”  The changes were necessary due to ambiguity created by Pennsylvania court decisions, primarily V.L. Rendina Inc. v. City of Harrisburg and Harrisburg School District, in recent years.  The legislation, when enacted, will remove the risk of double taxation by local taxing authorities on gross receipts and restore certainty for taxpayers in assessing their privilege tax liabilities.

Under the new legislation, a local taxing authority may impose its privilege tax for doing business in the jurisdiction if transactions in the jurisdiction are conducted for all or part of 15 or more days in a calendar year or if a base of operations is maintained in the jurisdiction.  The Bill defines “base of operations” as “an actual, physical and permanent place of business from which a taxpayer manages, directs and controls its business activities at that location.”  Additionally, gross receipts subject to privilege tax in a jurisdiction due to a business conducting transactions there for 15 or more days cannot also be taxed by the jurisdiction where the taxpayer’s base of operations are located.

House Bill 1513 now advances to Governor Corbett for approval.  Once the Governor signs the Bill into law, it will be retroactively effective January 1, 2014.  The positive impact of the Bill on business in Pennsylvania is incontrovertible.  Taxpayers will benefit from the predictability of the new law resulting in reduced tax burdens and administrative costs associated with local tax compliance in the Commonwealth.

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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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© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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