Title 61 Pa. Code — Revenue

Part I Department of Revenue

Subpart A General Provisions

Chapter 1 Preliminary Provisions

61 Pa. Code § 1.1 Definitions.

The following words and terms, when used in this part, have the following meanings, unless the context clearly indicates otherwise: Department—The Department of Revenue of the Commonwealth. FC—The Fiscal Code (72 P.S. § § 1—1804). IRC—The Internal Revenue Code of 1986, including amendments under the Tax Reform Act of 1986 (26 U.S.C.A. § § 1—7872). Secretary—The Secretary of the Department. TRC—The Tax Reform Code of 1971 (72 P.S. § § 7101—10004).

The provisions of this § 1.1 issued under section 270 of the act of March 4, 1971 (P.L. 6, No. 2) (72 P.S. § 7270); amended under section 408 of the act of March 4, 1971 (P.L. 6, No. 2) (72 P.S. § 7408).

The provisions of this § 1.1 amended May 13, 1983, effective May 14, 1983, 13 Pa.B. 1638; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial pages (112676) to (112677).

History

• Authority: The provisions of this § 1.
• Source: The provisions of this § 1.

Chapter 2 Employment Incentive Payment Credit

61 Pa. Code § 2.1 General explanation.

Under the act of April 8, 1982 (P. L. 231, No. 75) (62 P. S. § § 201, 403, 404.1, 405.1, 405.2, 408, 408.1, 422, 423, 432, 432.2—432.7A, 432.9, 432.11, 432.12, 432.15, 432.16, 432.19—432.21, 442.1, 443.6, 475, 481, 487 and 489) a tax credit is available for persons who employ certain welfare recipients, with additional tax credit for those who provide day care services for the welfare recipient’s child or children. This chapter explains the scope and effect of the employment incentive payment tax credit (the ‘‘EIP credit’’), the manner in which it is validated, procedures established by the Department for verification and application of tax credits, and the manner in which they may be used by employers.

The provisions of this § 2.1 amended under section 491 of the Public Welfare Code (62 P. S. § 491); and section 6 of the Fiscal Code (72 P. S. § 6).

The provisions of this § 2.1 adopted July 16, 1982, effective July 17, 1982, 12 Pa.B. 2292; amended August 22, 1997, effective August 23, 1997, 27 Pa.B. 4322. Immediately preceding text appears at serial page (131505).

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.1a Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Closely-related person—The term includes the following:

(i) A son, daughter or a descendant of a son or daughter.

(ii) A stepson or stepdaughter.

(iii) A brother, sister, stepbrother or stepsister.

(iv) A father, mother or an ancestor of either.

(v) A stepfather or stepmother.

(vi) A nephew or niece.

(vii) An uncle or aunt.

(viii) A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law. EIP—The Employment Incentive Payment credit program.

The provisions of this § 2.1a issued under section 506 of The Administrative Code of 1929 (71 P. S. § 186); section 491(e) of the Public Welfare Code (62 P. S. § 491(e)); and section 1701-A(e) of the Tax Reform Code of 1971 (72 P. S. § 8701-A(e)).

The provisions of this § 2.1a adopted October 28, 1988, effective October 29, 1988, 18 Pa.B. 4866.

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.2 Taxes applicable.

Tax credits are available as a credit against the taxes imposed by Article III of the TRC (72 P. S. § § 7301—7361), the personal income tax, with respect to employers who are individuals, partnerships or proprietorships. The credit is available with respect to taxes imposed by Articles IV, VII, VIII and IX of the TRC (72 P. S. § § 7401—7412, 7701—7706, 7801—7806 and 7901—7906) with respect to employers which are corporations, banks and financial institutions, and title insurance and trust companies as well as against the tax imposed by the Mutual Thrift Institutions Tax Act (72 P. S. § § 1986.1—1986.6) with respect to savings and loan company employers. The credit may be used in the year in which it is validated or may be carried over by the taxpayer and used in any of the 3 subsequent years.

The provisions of this § 2.2 amended under section 506 of The Administrative Code of 1929 (71 P. S. § 186); and section 491(e) of the Public Welfare Code (62 P. S. § 491(e)); and section 1701-A(e) of the Tax Reform Code of 1971 (72 P. S. § 8701-A(e)).

The provisions of this § 2.2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.B. 2292; amended October 28, 1988, effective October 29, 1988, 18 Pa.B. 4866. Immediately preceding text appears at serial pages (105749) to (105750).

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.3 Issuance of certificate (Form REV-1601).

(a) The issuance of EIP certificates and verification of entitlement thereto is the responsibility of the Department of Public Welfare. The criteria for issuance of EIP certificates is established by the act of December 19, 1985 (P. L. 356, No. 102) (72 P. S. § 8701-A) and by 55 Pa. Code (relating to Public Welfare).

(b) An EIP Program Certificate shall be issued upon request to an employer who hires a person who is receiving Temporary Assistance to Needy Families or any form of General Assistance at the time of employment. The employer shall request the certificate from the Department of Public Welfare in writing no later than 21 days following the actual date upon which the newly-employed welfare recipient began work. Requests shall be considered to be timely in compliance with this subsection if either:

(1) Received on and date-stamped by a Department of Public Welfare-approved facsimile machine, computer or other electronic device no later than 21 days following the actual date the person began work.

(2) Postmarked by the United States Postal Service no later than 21 days following the actual date the person began work.

(c) An employer may not request an EIP certificate for the employment of the following persons:

(1) A person who displaces another individual, unless the individual was discharged for cause as certified by the Office of Employment Security.

(2) A closely related person to the employer.

(3) A domestic or other household employe in the home of the employer.

(4) Subject to the provisions of subsection (d), a person for whom the employer is simultaneously receiving Federal or State funded job training payments.

(5) An individual who is the employer, such as self-employed.

(6) A shareholder who owns more than 50% of the value of the outstanding stock of the employing corporation, bank, savings institution, company, insurance company or mutual thrift institution.

(7) A member of an employing partnership.

(8) An employe of an estate or trust if the employe is a grantor, beneficiary or fiduciary of the estate or trust.

(d) If for a period an employer receives State or Federally funded payments for on-the-job training for an employe, none of the wages paid to that employe for the training qualify for EIP credit. Wages paid to the employe after completion of the State or Federally funded job training may qualify for EIP credit. In such cases, the EIP certificate shall be requested in writing under subsection (b) no later than the date upon which the employe begins training.

(e) Within 30 days of the date of issuance of the EIP certificate by the Department of Public Welfare, the employer shall forward a copy of the completed certificate to the Department.

The provisions of this § 2.3 amended under section 506 of The Administrative Code of 1929 (71 P. S. § 186); section 491 of the Public Welfare Code (62 P. S. § 491); section 1701-A(e) of the Tax Reform Code of 1971 (72 P. S. § 8701-A(e)); and section 6 of the Fiscal Code (72 P. S. § 6).

The provisions of this § 2.3 adopted July 16, 1982, effective July 17, 1982, 12 Pa.B. 2292; amended October 28, 1988, effective October 29, 1988, 18 Pa.B. 4866; amended August 22, 1997, effective August 23, 1997, 27 Pa.B. 4322. Immediately preceding text appears at serial pages (131507) to (131508).

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.4 Amount of credit.

The EIP credit shall be equal to 30% of the first $6,000 of qualified first-year wages for the first year of employment, 20% of the first $6,000 of wages for the second year of employment, and 10% of the first $6,000 of wages for the third year of employment. If the employer provides or pays for approved day care services for a child of the employe, the employer shall be eligible for an additional credit of $600 for the first year of employment, $500 for the second year of employment, and $400 for the third year of employment. For purposes of this chapter, the term ‘‘wages’’ will include salary.

The provisions of this § 2.4 adopted July 16, 1982, effective July 17, 1982, 12 Pa.B. 2292.

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.5 Total limit of credit against tax.

An employer may not use EIP credits exceeding 90% of its tax liability in a given year; however, excess EIP credits may be applied to any of the 3 immediate succeeding years if total EIP credits applied in a year do not exceed 90% of its tax liability for that year. For the purposes of this section, ‘‘tax liability’’ is defined as the tax liability less credits not prepaid in the form of withholding, estimated or tentative tax prepayments.

For example:

(1) On July 15, 19X0, John Taxpayer hires Employe at $3.35 an hour. Total wages paid until December 31, 19X0 amount to $3,334. On April 15, 19X1 Taxpayer files his personal income tax and his (line 12) income tax liability is $1,200. He has no other credits to offset against this liability. To calculate the actual credit to be taken, the taxpayer must first prorate the maximum annual wage allowance for the partial year. To accomplish this, he takes the proration factor (in this case 5/12, based on 5 full months of employment) and multiplies it times the maximum annual wage allowance ($6,000). Accordingly, the taxpayer’s maximum annual wage allowance for credit purposes would be $2,500. Therefore, the taxpayer’s actual credit would be $2,500 x 30% or $750 (since $750 does not exceed 90% of his tax liability).

During the second taxable year, the employe was paid $3,634 in wages from January 1, 19X1 to July 14, 19X1 and $4,000 in wages from July 15, 19X1 to December 31, 19X1. The taxpayer’s EIP credit for 19X1 is $1,550, computed as follows:

On April 15, 19X2, the Taxpayer’s (line 12) personal income tax liability is $1,020. In addition, the taxpayer has an out-of-State credit of $770. To arrive at the Taxpayer’s actual tax credit, the Taxpayer would subtract the out-of-State credit ($770) from his tax liability ($1,020), resulting in a tax liability of $250. The credit which may be taken would then be $225 ($250 x 90%). The Taxpayer may carry over the remainder of this credit ($1,550-$225 or $1,325) and use it in any of the 3 subsequent years.

(2) Taxpayer Corporation has an EIP credit of $1,800. Taxpayer’s page 1 Schedule Line 6 or 14 corporation net income tax is $2,500 and it has a Neighborhood Assistance Credit of $1,000. Therefore, Taxpayer Corporation has an EIP credit of $1,350. ($2,500-$1,000= $1,500 x 90%). The corporation may carry over the remainder of its credit ($1,800-$1,350 or $450) and use it in any of the 3 subsequent years.

The provisions of this § 2.5 adopted July 16, 1982, effective July 17, 1982, 12 Pa.B. 2292.

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.6 Qualification for and computation of credit.

(a) Qualification for credit.

(1) The employer is not qualified to claim the credit until employment has continued for at least 1 full year, unless prior thereto, the employe:

(i) Has voluntarily left the employment of the employer.

(ii) Becomes disabled or dies.

(iii) Has been terminated for cause—the termination for cause as defined by the Department of Labor and Industry Office of Employment Security Regulations and Standards. See section 402(e) of The Unemployment Compensation Law (43 P. S. § 802(e)).

(2) If an event listed in paragraph (1) occurs prior to the expiration of 1 year, the EIP credit shall be reduced to the fraction of the year which corresponds to each full month that the eligible employe has worked. For example: assume that an employer is eligible for an $1,800 EIP credit. However, 1 month prior to having worked a full year, the employe voluntarily quits. In this case the employer’s EIP credit is 11/12 x 1,800/1 or $1,650. Employment initiated during 1 year may be claimed as an EIP credit at the conclusion of the term of employment or 1 year, whichever first occurs.

(b) Conditional credit. An employer may conditionally take an EIP credit at the time it files its annual return for the portion of the tax year completed by an employe, computed under subsection (a). As to a qualified employe who is working but who has not completed a full year, should the employer subsequently not be qualified for the EIP credit because the employe has terminated prior to the expiration of a full year for any reason other than one set forth in subsection (a)(1) the conditional credit shall be disallowed and interest and additions or penalties shall become payable from the due date of the tax as provided by law. For example: John Taxpayer hired Employe and paid him $6,000 from July 1, 19X0 to December 31, 19X0. Taxpayer’s (line 12) personal income tax is $1,000 and he has no other credits. His employment incentive tax credit is $900 ($6,000 x 30% x 6/12 = $900). In this example, as the taxpayer has already reached his maximum qualified first year’s wage ($6,000), the taxpayer may take the balance ($1,800 - $900 = $900) in the subsequent taxable year, provided the employe is employed until July 1, 19X1. Note, if the employe is discharged on January 1, 19X1, the conditional credit will be disallowed.

The provisions of this § 2.6 amended under section 506 of The Administrative Code of 1929 (71 P. S. § 186); section 491(e) of the Public Welfare Code (62 P. S. § 491(e)); and section 1701-A(e) of the Tax Reform Code of 1971 (72 P. S. § 8701-A(e)).

The provisions of this § 2.6 adopted July 16, 1982, effective July 17, 1982, 12 Pa.B. 2292; amended October 28, 1988, effective October 29, 1988, 18 Pa.B. 4866. Immediately preceding text appears at serial page (105752).

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.7 Application of credits.

(a) An employer is entitled to claim the EIP credit only against a tax which he is required to pay as an employer. Thus, a corporate employer, other than a Pennsylvania S Corporation employer, may not assign an EIP credit to a shareholder for use as a credit against the shareholder’s personal income tax. Similarly, a parent corporation may not assign an EIP credit to a subsidiary corporation or vice versa. Further, an employer may not use EIP credits against taxes withheld from employes.

(b) Taxpayers who are required to prepay their taxes may apply EIP credits against the payments.

(c) In the case of a partnership the EIP credit shall be allocated among the partners as income is allocated.

(d) Married taxpayers who wish to use the EIP credit against personal income tax are required to file a separate tax report and may not file jointly with a spouse.

(e) In computing wages as a business expense for State tax purposes, the wage cost item shall be reduced by any EIP credit taken by the employer and the Federal wage cost item, if also used for State purposes, shall be increased by the Federal Targeted Jobs Tax Credit taken by the employer.

(f) In the case of a Pennsylvania S Corporation, the EIP credit shall be allocated among the shareholders as income is allocated.

The provisions of this § 2.7 amended under section 506 of The Administrative Code of 1929 (71 P. S. § 186); section 491(e) of the Public Welfare Code (62 P. S. § 491(e)); and section 1701-A(e) of the Tax Reform Code of 1971 (72 P. S. § 8701-A(e)).

The provisions of this § 2.7 adopted July 16, 1982, effective July 17, 1982, 12 Pa.B. 2292; amended October 28, 1988, effective October 29, 1988, 18 Pa.B. 4866. Immediately preceding text appears at serial pages (105752) and (126619).

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.8 Accounting for credits.

(a) [Reserved].

(b) If an employe terminates employment prior to the expiration of 3 years, the employer shall notify the Department at the time of tax filing by indicating the employe’s termination date and reason for termination in the appropriate date and reason for termination in the appropriate section of the EIP certificate.

(c) The employer shall maintain the certificate (Form REV-1601) and copies of W-2 Forms issued to the employe for the same period of time that the employer is required to maintain tax records.

The provisions of this § 2.8 amended under section 506 of The Administrative Code of 1929 (71 P. S. § 186); section 491(e) of the Public Welfare Code (62 P. S. § 491(e)); and section 1701-A(e) of the Tax Reform Code of 1971 (72 P. S. § 8701-A(e)).

The provisions of this § 2.8 adopted July 16, 1982, effective July 17, 1982, 12 Pa.B. 2292; amended October 28, 1988, effective October 29, 1988, 18 Pa.B. 4866. Immediately preceding text appears at serial page (126619).

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.9 Returns and reports.

Copies of certificates (Forms REV-1601) and W-2 Forms relating thereto which have been issued by the employer, together with other supporting information as the Department may require, shall accompany each tax return with respect to which an EIP credit is claimed.

The provisions of this § 2.9 adopted July 16, 1982, effective July 17, 1982, 12 Pa.B. 2292.

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.10 Verification of credit.

The Department will not allow an EIP credit claimed by an employer unless the credit is verified by the Department’s receipt of an EIP certificate which:

(1) Was properly issued by the Department of Public Welfare.

(2) Contains information required to be provided by the employer.

The provisions of this § 2.10 issued under section 506 of The Administrative Code of 1929 (71 P. S. § 186); section 491(e) of the Public Welfare Code (62 P. S. § 491(e)); and section 1701-A(e) of the Tax Reform Code of 1971 (72 P. S. § 8701-A(e)).

The provisions of this § 2.10 adopted October 28, 1988, effective October 29, 1988, 18 Pa.B. 4866.

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

61 Pa. Code § 2.11 Appeals.

Determinations made with respect to the employment incentive payments provided in this section may be reviewed and appealed in the same manner which the law provides for appealing and disallowance of other personal income tax or corporate tax credits. See Chapter 7 (relating to Board of Appeals).

The provisions of this § 2.11 issued under section 506 of The Administrative Code of 1929 (71 P. S. § 186); section 491(e) of the Public Welfare Code (62 P. S. § 491(e)); and section 1701-A(e) of the Tax Reform Code of 1971 (72 P. S. § 8701-A(e)).

The provisions of this § 2.11 adopted October 28, 1988, effective October 29, 1988, 18 Pa.B. 4866.

History

• Authority: The provisions of this Chapter 2 issued under section 491(e) of the Public Welfare Code (62 P.
• Source: The provisions of this Chapter 2 adopted July 16, 1982, effective July 17, 1982, 12 Pa.

Chapter 3 Revenue Information System

61 Pa. Code § 3.1 Regulations.

(a) Purpose. The Department issues regulations which are published in Title 61 of the Pennsylvania Code. The purpose of a regulation is to provide taxpayers with rules of general application so that they might clearly understand their rights and duties under the law.

(b) Scope. Regulations comprise activities of the Department in which the legislative element predominates. They are designed to implement, interpret law or prescribe policy, or to govern the procedure or practice requirements of the Department.

History

• Authority: The provisions of this Chapter 3 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 3 adopted May 6, 1988, effective May 7, 1988, 18 Pa.

61 Pa. Code § 3.2 Statements of policy.

(a) Format. For the purposes of providing guidelines to the general public and interpreting law or regulations, the Department issues statements of policy in two forms:

(1) Revenue pronouncements. A Revenue pronouncement will be used to do any of the following:

(i) Interpret law or regulations.

(ii) Announce formally the guidelines or policies that the Department expects to implement in a future regulation or to follow in a future adjudication.

(iii) Explain an administrative procedure within the discretion of the Department.

(iv) Implement an act of Assembly if the Department finds it is unnecessary to use regulatory powers to perform its duties and responsibilities provided by law.

(2) Revenue rulings. The purpose of a Revenue ruling is to provide guidelines and interpretations by advising the public of the Department’s application of the tax laws to a general factual situation. A Revenue ruling is issued when the Department believes that broad public dissemination is appropriate to ensure uniformity in the application of the law to a common factual situation. With respect to taxes where the Auditor General has the power and duty to approve settlements, a Revenue ruling will not be issued without the review and approval of the Auditor General.

(b) Authority. Statements of policy are published as a separate part of Title 61 of the Pennsylvania Code and are issued under the authority of the Secretary, a Deputy Secretary or the Chief Counsel. The taxpayer may rely on a statement of policy only insofar as it binds the Department to follow the stated course of action. Periodically the Department may revise prospectively a statement of policy and taxpayers are cautioned to determine whether a statement of policy relied upon is current.

History

• Authority: The provisions of this Chapter 3 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 3 adopted May 6, 1988, effective May 7, 1988, 18 Pa.

61 Pa. Code § 3.3 Letter rulings.

(a) Purpose. Upon written request, the Department issues private letter rulings to taxpayers based upon specific factual information provided in writing by a taxpayer. They are not formally published, but copies with confidential material deleted may be obtained upon request from the Department of Revenue, Office of Chief Counsel. The purpose of a private letter ruling is to advise a taxpayer of the Department’s application of the tax laws to a specific factual situation unique to the taxpayer.

(b) Applicability. Private letter rulings are issued by the Office of Chief Counsel and may be relied upon only by the particular taxpayer concerned, based upon the facts supplied. When necessary and appropriate, the Department may indicate that sufficient facts have not been furnished and detail certain assumptions. With respect to taxes where the Auditor General has the power and duty to approve settlements, a letter ruling will not be issued without the review and approval of the Auditor General. Absent statutory or regulatory change or rescission by the Department, a taxpayer may rely on a private letter ruling for 5 years from date of issue at which time the taxpayer shall renew the ruling by resubmitting it to the Office of Chief Counsel for review.

(c) Issued at discretion of Department. The Department has discretionary authority to issue private letter rulings. This discretion is exercised in the light of relevant circumstances. Examples of areas where private letter rulings normally will not be issued include, but are not limited to:

(1) Issues under extensive study or review.

(2) Alternative plans of proposed transactions or hypothetical situations.

(3) Matters upon which a lower court decision adverse to the Department has been handed down and the appeal period thereon is still open and the question of following the decision or litigating the matter further has not been resolved.

(4) Transactions, the purpose of which is to avoid taxes.

History

• Authority: The provisions of this Chapter 3 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 3 adopted May 6, 1988, effective May 7, 1988, 18 Pa.

61 Pa. Code § 3.4 Revenue information.

The Department also issues written informational materials in the form of press releases, unpublished notices, instruction forms, pamphlets and the like. Their purpose is to call attention to Department procedures or to well established interpretations or principles of tax law without applying them to a specific set of facts. They are issued by various divisions within the Department when it is believed that general information will assist individuals or organizations. Revenue information material is issued for informational purposes only and should not be relied upon or used in tax appeals. Examples of Revenue information are the Pennsylvania Tax Update, forms, pamphlets, tax bulletins or informational notices provided to taxpayers. Instructions on tax forms and instructional booklets accompanying forms also fall within this category.

History

• Authority: The provisions of this Chapter 3 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 3 adopted May 6, 1988, effective May 7, 1988, 18 Pa.

61 Pa. Code § 3.5 Order of importance.

If there appears to be a conflict between documents within the Revenue Information System, the order of precedence shall be as follows:

(1) Regulations.

(2) Statements of policy.

(3) Letter rulings.

(4) Revenue information.

History

• Authority: The provisions of this Chapter 3 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 3 adopted May 6, 1988, effective May 7, 1988, 18 Pa.

Chapter 4 Interest

61 Pa. Code § 4.1 Definitions and scope.

(a) Definitions. The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Act—The act of December 9, 1982 (P.L. 1057, No. 248) (72 P.S. § § 1, 503, 806, 806.1 and 1108). Fiscal Code (FC)—The Fiscal Code (72 P.S. § § 1—1827.10).

(b) Scope.

(1) The act establishes a uniform interest rate and a uniform method for calculating interest on a daily basis. Also, under certain circumstances, the Department is required to pay interest on overpayments of taxes first due and payable on or after January 1, 1982, and is permitted to make cash refunds of previously determined credits if obligations due the Commonwealth have been paid.

(2) The act repeals other statutes relating to underpayments and overpayments of tax due and payable prior to January 1, 1982. Regulations and rulings concerning taxes due and payable prior to January 1, 1982 are not affected by the act. The rate of interest, method of calculating interest and provisions of law relating to cash refunds for those taxes are governed by statutes, regulations and rulings in effect on the date the tax originally became due and payable. No interest will be paid on overpayments of tax originally due and payable prior to January 1, 1982.

This section cited in 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

61 Pa. Code § 4.2 Rate of interest.

(a) General. The annual rate of interest is the rate established by the Secretary of the Treasury of the United States under the IRC which is in effect on January 1 of a calendar year without regard to changes in the Federal rate during the year. The Secretary will annually certify the applicable rate of interest and recommend the certification be published in the Pennsylvania Bulletin and be codified in subsections (b)—(y).

(b) Rate. The following rates have been certified by the Secretary: 1982—20%, 1983—16%, 1984—11%, 1985—13%, 1986—10%, 1987—9%, 1988—11%, 1989—11%, 1990—11%, 1991—11%, 1992—9%, 1993—7%, 1994—7%, 1995—9%, 1996—9%, 1997—9%, 1998—9%, 1999—7%, 2000—8%, 2001—9%, 2002—6%, 2003—5%, 2004—4%, 2005—5%, 2006—7%, 2007—8%, 2008—7%, 2009—5%, 2010—4%, 2011—3%, 2012—3%, 2013—3%, 2014—3%, 2015—3%, 2016—3%, 2017—4%, 2018—4%, 2019—6%, 2020—5%, 2021—3%, 2022—3%, 2023—7%, 2024—8%, 2025—7%, 2026—7%.

(c) For 2004, all underpayments of tax will have an interest rate of 4%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 4%, all other overpayments will bear an interest rate of 2%.

(d) For 2005, all underpayments of tax will have an interest rate of 5%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 5%, all other overpayments will bear an interest rate of 3%.

(e) For 2006, all underpayments of tax will have an interest rate of 7%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 7%, all other overpayments will bear an interest rate of 5%.

(f) For 2007, all underpayments of tax will have an interest rate of 8%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 8%, all other overpayments will bear an interest rate of 6%.

(g) For 2008, all underpayments of tax will have an interest rate of 7%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 7%, all other overpayments will bear an interest rate of 5%.

(h) For 2009, all underpayments of tax will have an interest rate of 5%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 5%, all other overpayments will bear an interest rate of 3%.

(i) For 2010, all underpayments of tax will have an interest rate of 4%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 4%, all other overpayments will bear an interest rate of 2%.

(j) For 2011, all underpayments of tax will have an interest rate of 3%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 3%, all other overpayments will bear an interest rate of 1%.

(k) For 2012, all underpayments of tax will have an interest rate of 3%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 3%, all other overpayments will bear an interest rate of 1%.

(l) For 2013, all underpayments of tax will have an interest rate of 3%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 3%, all other overpayments will bear an interest rate of 1%.

(m) For 2014, all underpayments of tax will have an interest rate of 3%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 3%, all other overpayments will bear an interest rate of 1%.

(n) For 2015, all underpayments of tax will have an interest rate of 3%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 3%, all other overpayments will bear an interest rate of 1%.

(o) For 2016, all underpayments of tax will have an interest rate of 3%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 3%, all other overpayments will bear an interest rate of 1%.

(p) For 2017, all underpayments of tax will have an interest rate of 4%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 4%, all other overpayments will bear an interest rate of 2%.

(q) For 2018, all underpayments of tax will have an interest rate of 4%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 4%, all other overpayments will bear an interest rate of 2%.

(r) For 2019, all underpayments of tax will have an interest rate of 6%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 6%, all other overpayments will bear an interest rate of 4%.

(s) For 2020, all underpayments of tax will have an interest rate of 5%, overpayents of tax imposed under Article III of the TRC will bear an interest rate of 5%, all other overpayments will bear an interest rate of 3%.

(t) For 2021, all underpayments of tax will have an interest rate of 3%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 3%, all other overpayments will bear an interest rate of 1%.

(u) For 2022, all underpayments of tax will have an interest rate of 3%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 3%, all other overpayments will bear an interest rate of 1%.

(v) For 2023, all underpayments of tax will have an interest rate of 7%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 7%, all other overpayments will bear an interest rate of 5%.

(w) For 2024, all underpayments of tax will have an interest rate of 8%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 8%, all other overpayments will bear an interest rate of 6%.

(x) For 2025, all underpayments of tax will have an interest rate of 7%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 7%, all other overpayments will bear an interest rate of 5%.

(y) For 2026, all underpayments of tax will have an interest rate of 7%, overpayments of tax imposed under Article III of the TRC will bear an interest rate of 7%, all other overpayments will bear an interest rate of 5%.

The provisions of this § 4.2 amended December 19, 1986, effective January 1, 1987, 16 Pa.B. 4908; amended December 18, 1987, effective January 1, 1988, 17 Pa.B. 5286; amended December 23, 1988, effective January 1, 1989, 18 Pa.B. 5680; amended November 24, 1989, effective January 1, 1990, 19 Pa.B. 5081; amended November 23, 1990, effective January 1, 1991, 20 Pa.B. 5870; amended December 27, 1991, effective January 1, 1992, 21 Pa.B. 6012; amended December 25, 1992, effective January 1, 1993, 22 Pa.B. 6142; amended December 31, 1993, effective January 1, 1994, 24 Pa.B. 81; amended December 23, 1994, effective January 1, 1995, 24 Pa.B. 6486; amended December 15, 1995, effective January 1, 1995, 25 Pa.B. 5788; amended December 27, 1996, effective January 1, 1997, 26 Pa.B. 6224; amended December 26, 1997, effective January 1, 1998, 27 Pa.B. 6866; amended December 25, 1998, effective January 1, 1999, 28 Pa.B. 6351; corrected 29 Pa.B. 617; amended December 17, 1999, effective January 1, 2000, 29 Pa.B. 6377; amended December 15, 2001, effective January 1, 2001, 30 Pa.B. 6494; amended December 21, 2001, effective January 1, 2002, 31 Pa.B. 6990; amended December 13, 2002, effective January 1, 2003, 32 Pa.B. 6220; amended January 16, 2004, effective January 1, 2004, 34 Pa.B. 448; amended December 30, 2004, effective January 1, 2005, 35 Pa.B. 78; amended December 30, 2005, effective January 1, 2006, 35 Pa.B. 7067; amended December 29, 2006, effective January 1, 2007, 36 Pa.B. 8021; amended December 28, 2007, effective January 1, 2008, 37 Pa.B. 6970; amended January 2, 2009, effective January 1, 2009, 39 Pa.B. 103; amended December 24, 2009, effective January 1, 2010, 39 Pa.B. 7256; amended December 24, 2010, effective January 1, 2011, 40 Pa.B. 7443; amended December 30, 2011, effective January 1, 2012, 41 Pa.B. 7041; amended December 21, 2012, effective January 1, 2013, 42 Pa.B. 7775; amended December 27, 2013, effective January 1, 2014, 43 Pa.B. 7602; amended December 26, 2014, effective January 1, 2015, 44 Pa.B. 8063; amended January 8, 2016, effective January 1, 2016, 46 Pa.B. 297; amended December 23, 2016, effective January 1, 2017, 46 Pa.B. 8108; amended December 22, 2017, effective January 1, 2018, 47 Pa.B. 7789; amended December 28, 2018, effective January 1, 2019, 48 Pa.B. 7995; amended December 27, 2019, effective January 1, 2020, 49 Pa.B. 7631; amended December 25, 2020, effective January 1, 2021, 50 Pa.B. 7361; amended December 24, 2021, effective January 1, 2022, 51 Pa.B. 8028; amended December 23, 2022, effective January 1, 2023, 52 Pa.B. 7981; amended December 22, 2023, effective January 1, 2024, 53 Pa.B. 8006; amended December 27, 2024, effective January 1, 2025, 54 Pa.B. 8565; amended December 26, 2025, effective January 1, 2026, 55 Pa.B. 8829. Immediately preceding text appears at serial pages (421448) to (421450).

This section cited in 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

61 Pa. Code § 4.3 Taxes subject to interest.

(a) The new interest rate will apply to taxes due the Commonwealth. It does not apply to money other than taxes due the Commonwealth. There is no interest on interest; nor is there interest on penalties and fines.

(b) Additional tax, additions to tax, surtax and disallowed commissions provided by statute and not designated as penalty or interest by statute are taxes for the purpose of the act and bear interest. See section 1202.1 of the TRC (72 P.S. § 10003).

This section cited in 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

61 Pa. Code § 4.4 Rate of interest applicable to unpaid taxes.

(a) Initial rate of interest. The initial interest rate applicable to unpaid taxes is the rate in effect during the calendar year in which the tax is originally required by statute to be reported and paid to the Department, without regard to the dates of accrual, extensions for filing, subsequent amendments or alterations of the report or return, or subsequent resettlements, reassessments or redeterminations. Examples of the initial interest rate are as follows:

Example 1. Personal Income Tax. The initial interest rate on delinquent annual Personal Income Tax is determined by the rate in effect on the date the tax is required by statute to be reported and paid to the Department, even though the tax may relate to incidents which occurred prior to that date.

Example 2. Withheld personal income tax. In the case of personal income tax withheld by an employer, unpaid tax bears interest at the rate in effect on the date the tax is required to be reported and paid by the employer to the Commonwealth.

Example 3. Sales or use tax. Interest on sales or use tax—or other taxes paid to an officer, licensee or other collector—is due at the rate in effect on the date the tax is originally required by statute to be reported and transmitted by the officer, licensee or collector to the Department, even though the tax was collected or incurred prior thereto.

Example 4. Tentative tax. A tax required by statute to be reported and paid in installments prior to the original due date of the annual report or return—for example, tentative tax—bears interest at the rate in effect on the due date for the prepayment. The remaining portion of the tax due shall bear interest at the rate in effect on the date the taxpayer’s annual report or return is required to be filed under the applicable tax statute, determined without reference to an extension of time for filing the report.

Example 5. Corporate net income tax. Underpayments of installments of estimated tax do not bear interest during the period of the underpayment. Tax finally determined to be due, which is not paid by the date the annual report is due—determined without regard to an extension of time for filing—bears interest from the date until paid.

Example 6. Inheritance tax. With respect to inheritance tax and estate tax, the interest rate is the rate in effect on the date the tax becomes delinquent.

(b) Annual interest rate adjustment. The interest rate in effect when a tax is required to be paid remains in effect until the tax is paid or until the end of the calendar year, whichever occurs first. On January 1 of each succeeding year, the new interest rate for that year will commence to apply to unpaid tax.

This section cited in 61 Pa. Code § 4.5 (relating to computation of interest on unpaid taxes); and 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

61 Pa. Code § 4.5 Computation of interest on unpaid taxes.

(a) Daily computation. Interest is computed daily, beginning on the first day of delinquency through and including the day of payment. If paid by mail, the United States Postal Service postmark date is the date of payment. For purposes of computing the daily interest factor—the annual rate is divided by the number of days in a year—the Department will use a 365-day year. Interest is not compounded.

(b) Extensions. Tax due dates are established without regard to an extension of time for filing reports or returns. Although an extension may relieve a taxpayer from late filing or late payment additions or penalties, the taxpayer is not relieved from the payment of interest upon the amount due from the original due date until payment.

(c) Amendments. Amendments to tax returns or reports, when allowed or required by statutes and regulations are considered to amend the tax liability as of the original due date of the tax for the purpose of computing interest due on account of nonpayment or underpayment of tax. The interest rate will be the rate applicable upon the original due date, even when the rate has changed between the date and the date of the amendment.

(d) Federal report of change. An underpayment of corporate net income tax which results from a settlement or resettlement of tax based upon a final change or correction of Federal taxable income by the Commissioner of Internal Revenue or other agency or court of the United States, under section 407(b) of the TRC (72 P. S. § 7407(b)) and section 806 of the FC (72 P.S. § 806), is deemed first due and payable, for the purpose of establishing the rate and computing interest, 30 days after the corporation receives notice of the final change or correction. The interest is computed until the additional tax is paid.

(1) If the original due date of the tax report is on or before December 31, 1981, the tax settled or resettled is subject to interest at the rate of 6.0% per annum until paid—unless reported and paid within the 30-day period, in which case no interest is due.

(2) If the original due date of the tax report is on or after January 1, 1982, the additional tax is subject to the rate of interest and the annual adjustments as described in § 4.4 (relating to rate of interest applicable to unpaid taxes).

(3) The Federal report of change 30-day period does not apply to the personal income tax. Increases in personal income tax liability assessed or reassessed as a consequence of a Federal redetermination of Federal taxable income will bear interest from the original due date of the return at the rate then in effect, subject to annual adjustment, without regard to the date of the Federal redetermination.

(e) Unpaid tax resulting from application, assignment or refund of credit. If an application, assignment or refund of credit requested by the taxpayer, under Article XXX of the TRC (72 P. S. § § 10001—10004), results in an underpayment of the tax due upon settlement or resettlement, interest will be calculated on the amount of the credit applied, assigned or refunded from the date the credit was applied, assigned or refunded to the date of payment.

Example. On April 15, 1985, a corporation makes the required tentative tax payment in the amount of $100,000 on account of its 1985 capital stock tax liability. On March 6, 1986, the corporation files its 1985 annual corporate tax report, reporting its capital stock tax liability at $50,000 and requesting the transfer of the $50,000 credit to another account. On March 17, 1986, the report is posted to its account and the $50,000 credit acknowledged by the Department, with notice to the taxpayer. On April 20, 1986, the Department prepares the journal entry transferring the credit as requested by the taxpayer. On August 5, 1986, the Department settles the corporation’s 1985 capital stock tax liability at $80,000, an increase of $30,000 over the reported tax liability.

On October 2, 1986, the taxpayer pays the tax increased as a result of settlement. This payment is subject to the imposition of interest from April 20, 1986, the date of transfer, to October 2, 1986, the date of payment.

This section cited in 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

61 Pa. Code § 4.6 Overpayment.

The Commonwealth is liable to pay interest on overpayments of tax originally due and payable on or after January 1, 1982 at the rate established for underpayments of the same tax for the same period. The overpayment will accrue interest at the rate in effect on the date the overpayment is deemed by the act to have occurred as described by the following paragraphs, subject to adjustments of the rate on January 1 of each succeeding year as in the case of underpayments under section 806.1(b) of the FC (72 P. S. § 806.1(b)). Interest will cease to accrue under § 4.7 (relating to termination of interest).

(1) Overpayment of tax. An overpayment is a payment of tax which is determined in the manner provided by statute not to be legally due.

(2) Overpayment of interest or penalty. An overpayment of interest or penalty may not bear interest under section 806.1(a)(7) of the FC (72 P. S. § 806.1(a)(7)).

(3) Date of overpayment. Interest will be allowed and paid for the period during which the Commonwealth retained the overpayment, beginning with the date of overpayment, except that the following applies:

(i) Withheld taxes. Taxes which are actually deducted and withheld at the source are deemed to be overpaid by the employe on the last day prescribed by law for filing the return for the taxable year, determined without regard to an extension of time for filing. Taxes withheld by the employer are deemed overpaid by the employer on the last day prescribed by statute for filing the return for the taxable period or the actual payment date, whichever is later under section 806.1(a)(1) of the FC (72 P. S. § 806.1(a)(1)).

(ii) Installments. An amount of tax overpaid as an installment payment, tentative tax or estimated tax is deemed to be overpaid on the last day prescribed by statute for filing the final return or report for the taxable year determined without regard for an extension of time for filing, or the actual payment date, whichever is later, under section 806.1(a)(2) of the FC (72 P. S. § 806.1(a)(2)).

(iii) Payments before due date. An overpayment made before the due date prescribed by statute for payment of the tax is deemed to have been made on the due date under section 806.1(a)(3) of the FC (72 P. S. § 806.1(a)(3)).

(iv) Taxes collected. Taxes collected by an officer, licensee or collector will be deemed to have been overpaid on the first date that the tax is required by statute to be reported and transmitted to the Department by the officer, licensee or collector, or on the date the tax is actually reported and transmitted to the Commonwealth, whichever is later, under section 806.1(a)(6) of the FC (72 P. S. § 806.1(a)(6)).

(v) Administrative or appellate review procedure. If a taxpayer commences an administrative or appellate review procedure by claiming to have made an overpayment, or contesting the Department’s refusal or denial of its claim, the claimed overpayment is deemed to have been made on the 60th day following the date of initiation of the review or appellate procedure.

Example. A corporation files its 1982 annual corporate tax report on April 15, 1983, reporting and paying its capital stock tax liability at $5,000. No tentative tax payment was made or required to be made. Settlement of this liability as reported is made on July 15, 1983.

Taxpayer files a petition for resettlement with the Board of Appeals on August 15, 1983, claiming an exemption for certain assets. The Board of Appeals refuses the petition on December 20, 1983.

Taxpayer files a petition for review with the Board of Finance and Revenue on December 31, 1983. The Board of Finance and Revenue resettles the tax liability at $4,000, granting a tax credit of $1,000. The initiation date of the administrative review procedure is August 15, 1983—the filing date of the petition for resettlement with the Board of Appeals—not December 31, 1983. Therefore, interest accrues on the $1,000 tax credit beginning October 14, 1983, the 60th day following the initiation of the administrative review.

(4) Period of overpayment for a final return or report. The following applies to the period of overpayment for a final return:

(i) Tax return or report. If an overpayment of tax is refunded or credited within 6 months after the last date prescribed for filing the final return or report of the tax, no interest will be allowed on the overpayment notwithstanding the initiation of an administrative or appellate review procedure. In case the final return or report is filed after the last day, and the overpayment is refunded or credited within 6 months after the date the final return or report is actually filed, no interest will be allowed on the overpayment under section 806.1(a)(5) of the FC (72 P. S. § 806.1(a)(5)). A final return or report is one filed in processible form which means that it shall be filed on a prescribed form containing the taxpayer’s name, address, and taxpayer’s identification number, where applicable, and have the required signature and required information sufficient to permit verification of the tax liability shown on the return. Where a credit or payment is to be applied against a reported tax liability, required information sufficient to verify the credit or payment shall be supplied. If a return or report is not received in processible form, the 6-month period will commence on the date the required additional information is received by the Department.

Example. A corporation files its 1982 annual corporate tax report on April 15, 1983, reporting and paying its capital stock tax liability at $5,000. No tentative tax payment was made or required to be made. Settlement of this liability as reported is made on July 15, 1983.

Taxpayer files a petition for resettlement with the Board of Appeals on July 30, 1983. The Board of Appeals resettles the tax liability at $4,000 by resettlement mailed on October 10, 1983. Although the 60th day following the initiation of the administrative review in this example is September 28, 1983, interest does not begin to accrue on September 28 because the notice of the final determination of the $1,000 credit was mailed on October 10, 1983, within 6 months of the filing of the final report on April 15, 1983.

(ii) Amended return or report. If a taxpayer claims an amount of tax to be overpaid, and the basis for the claimed overpayment consists of additional information that constitutes an amendment of the taxpayer’s prior return or report, the date of receipt by the Department of the additional information will be deemed to be the date of filing of the final return or report under section 806.1(a)(5) of the FC (72 P. S. § 806.1(a)(5)). Interest will be allowed and paid from the date of the overpayment on any portion of the claimed overpayment that is not credited or refunded within 6 months of the date of the Department’s receipt of the additional information.

(iii) Federal report of change. If the amount of taxable income, as returned by a corporation to the Federal government, is finally changed or corrected by the Commissioner of Internal Revenue, or by another agency or court of the United States, the corporation shall make a corrected report to the Department under section 406(a) of the TRC (72 P. S. § 7406(a)). The corrected report will be deemed a final return or report for purposes of section 806.1(a)(5) of the FC (72 P. S. § 806.1(a)(5)).

(5) Unidentified payments. The Department will not recognize as an overpayment of tax a payment which is made without an accompanying statement for the application of the payment. The payment may not bear interest.

(6) Superseding provision. If an administrative review or appellate procedure is initiated under paragraph (3)(v), the overpayment date is determined under section 806.1(a)(4) of the FC (72 P. S. § 806.1(a)(4)), except where paragraph (4)(i) applies.

Example 1. A taxpayer files his 1984 personal income return on April 15, 1985, claiming a refund of $100 of withheld taxes. Taxpayer’s Schedule C reports a loss, but claims apparently excessive deductions. Taxpayer fails to respond to the Department’s request for verification of the deductions. Therefore, the Department disallows the deductions and denies the refund.

Taxpayer files a petition for refund with the Board of Finance and Revenue on September 15, 1985. Taxpayer submits verification of the deductions to the Board of Finance and Revenue. The Board of Finance and Revenue grants the taxpayer a cash refund of $100 by order mailed December 15, 1985.

Interest does not begin to accrue April 15, 1985 on the $100 cash refund under paragraphs (3)(i) and (4)(i). Interest begins to accrue under paragraph (3)(v) on November 14, 1985, the 60th day following the initiation of the administrative review on September 15, 1985 by the filing of a petition for refund with the Board of Finance and Revenue.

Example 2. An employer files four quarterly returns during calendar year 1985, each return reporting $2,500 tax withheld from compensation. In February 1986 the employer discovers a bookkeeping error which overstated the amount of tax withheld as reported on the first quarterly return due April 30, 1985. On March 15, 1986 the employer files a petition for refund with the Board of Finance and Revenue, providing the Board with documentation establishing the employer’s right to the refund. Board of Finance and Revenue orders a cash refund on June 30, 1986. On August 15, 1986, the employer receives the cash refund check dated August 10, 1986. Interest does not begin to accrue on the cash refund beginning April 30, 1985 under paragraph (3)(i). Interest begins to accrue under paragraph (3)(v) on May 14, 1986, the 60th day following the initiation of the administrative review on March 15, 1986 by the filing of a petition for refund with the Board of Finance and Revenue.

This section cited in 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

61 Pa. Code § 4.7 Termination of interest.

(a) Cash refund. If the Commonwealth pays a cash refund to the taxpayer, interest terminates on a date not exceeding 30 days prior to the date of the Commonwealth’s refund check under section 806.1(c)(1) of the FC (72 P. S. § 806.1(c)(1)).

(b) Credit. In cases in which a taxpayer is entitled to a credit, the following applies:

(1) If the Commonwealth recognizes a claimed overpayment and so notifies the taxpayer, or credits the taxpayer’s account against other taxes or other claims which are due or may become due the Commonwealth, interest terminates on the mailing date of the Commonwealth’s notice of recognition of the credit, or on the date the credit is applied by the Department to an account, whichever is earlier under section 806.1(c)(2) of the FC (72 P. S. § 806.1(c)(2)).

(2) If the amount reported as due on a corporation’s annual report is less than the amount of taxes paid, the Department will credit the taxpayer’s account. The credit may be applied in payment of another tax liability, assigned to another taxpayer, or refunded if other obligations due the Commonwealth by the taxpayer have been paid. If the Department provides notification of the available credit within 60 days of filing the annual report by the taxpayer, no interest will be allowed on the credit.

Example. A corporation makes the required tentative tax payments in the amount of $150,000 on account of its 1985 corporate net income tax (CNI) liability. The corporation files its 1985 annual corporate tax report timely on April 15, 1986, reporting its CNI tax liability at $100,000. The Department posts the report to the taxpayer’s account and enters a credit for $50,000, providing notice thereof on April 29, 1986 by mailing an account review statement to the taxpayer. By settlement mailed November 15, 1986 the Department settles the taxpayer’s CNI liability at $100,000.

No interest is payable on the $50,000 credit because notification of the availability of the credit was provided to the taxpayer on April 29, 1986, within 60 days of the filing of the annual report on April 15, 1986.

This section cited in 61 Pa. Code § 4.6 (relating to overpayment); 61 Pa. Code § 4.9 (relating to application dates); and 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

61 Pa. Code § 4.8 Refunds.

If a taxpayer has received a notice of allowance of a credit, the taxpayer may apply in writing for a cash refund to the Department under section 1108(b)(4) of the FC (72 P. S. § 1108(b)(4)). A formal petition is not required, but the application shall be in writing, signed by the person entitled to the refund, or his agent. The application shall fully identify the taxpayer, the tax, and the amount claimed. If the Department fails to make a cash refund within 90 days after receipt of a proper application for a cash refund, interest will commence on the credit thereafter, and continue until a date within 30 days of the date of the Commonwealth’s refund check.

This section cited in 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

61 Pa. Code § 4.9 Application dates.

(a) Overpayment credit. When a portion of an overpayment credit upon which interest has been allowed and paid is transferred, applied or assigned in payment of another tax liability, the overpayment credit acquires a new effective payment date under § 4.7(b) (relating to termination of interest).

(b) Interest credit. Interest that has been allowed and credited is available for transfer, application or assignment in payment of another tax liability, effective on the date the interest ceased to accrue under § 4.7(b).

This section cited in 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

61 Pa. Code § 4.10 Payment without prejudice.

A taxpayer has the right to pay all or a part of a tax claim made against him by the Department for the purpose of stopping the running of further interest, and the payment may not prejudice the right to pursue other administrative or judicial remedies provided by statute under section 1108(a) of the FC (72 P. S. § 1108(a)).

This section cited in 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

61 Pa. Code § 4.11 Appeal.

A taxpayer aggrieved by the Department’s determination of the taxpayer’s entitlement to interest on an overpayment shall file a petition for redetermination with the Board of Appeals, Department of Revenue, Harrisburg, Pennsylvania 17128-1021. The petition shall be filed within 90 days of the mailing date of the notice of the action complained of, and shall specify reasons which the taxpayer believes entitle him to a redetermination. The Board of Appeals will dispose of the issue raised by the petition within 6 months after the filing of the petition. The failure of the Board to act within 6 months will act as a denial of the petition as of the date of the Board’s notice to the taxpayer of its failure to act.

The provisions of this § 4.11 amended under sections 6 and 1301.26 of the Fiscal Code (72 P. S. § § 6 and 1301.26).

The provisions of this § 4.11 adopted March 21, 1986, effective March 22, 1986, and applies retroactively to January 1, 1982, 16 Pa.B. 959; amended September 21, 1990, effective September 22, 1990, 20 Pa.B. 4865. Immediately preceding text appears at serial page (117811).

This section cited in 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses).

History

• Authority: The provisions of this Chapter 4 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 4 adopted March 21, 1986, effective March 22, 1986, and shall apply retroactively to January 1, 1982, 16 Pa.

Chapter 5 Payments by Electronic Funds Transfer

61 Pa. Code § 5.1 Purpose.

Section 9 of the FC (72 P. S. § 9) requires the Treasurer and the Secretary to promulgate jointly regulations requiring, in certain cases and with certain exceptions, payments of obligations due the Commonwealth by electronic funds transfer.

History

• Authority: The provisions of this Chapter 5 issued under section 9 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 5 adopted April 3, 1992, effective April 4, 1992, 22 Pa.

61 Pa. Code § 5.2 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: ACH—Automated Clearing House—A Federal reserve bank, or an organization established by agreement with the National Automated Clearing House Association (NACHA), which operates as a clearing house for transmitting or receiving entries between banks and bank accounts, and which authorizes an electronic transfer of funds between the banks or bank accounts. ACH credit—A transaction in which the taxpayer, through its own bank, originates an entry crediting the Commonwealth’s bank account and debiting its own bank account for the amount of the payment due. ACH debit—A transaction in which the Commonwealth, through its designated depository bank, originates an ACH transaction debiting the taxpayer’s bank account and crediting the Department’s bank account for the amount of the payment due. Business day—The hours set by the Department on a day other than a Saturday, Sunday or the following holidays as set by the act of May 31, 1893 (P. L. 188, No. 138) (44 P. S. § 11): New Year’s Day, Dr. Martin Luther King, Jr. Day, President’s Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran’s Day, Thanksgiving Day and Christmas Day. For ACH credit taxpayers, the hours will be between 9 a.m. and 5 p.m. prevailing Eastern time. For ACH debit taxpayers, the hours are specified in the instructions provided by the Department. EFT—Electronic Funds Transfer—A transfer of funds, other than a transaction originated by check, draft or similar paper instrument, which is initiated through an electronic terminal, telephonic instrument or computer or magnetic tape so as to order, instruct or authorize a financial institution to debit or credit an account. Fedwire—Federal Reserve Wire Transfer—A transaction utilizing the National electronic payment system to transfer funds through Federal Reserve Banks. Treasury—The Treasury Department of the Commonwealth.

The provisions of this § 5.2 amended November 5, 1993, effective March 1, 1994, 23 Pa.B. 5306. Immediately preceding text appears at serial pages (168277) to (168278).

History

• Authority: The provisions of this Chapter 5 issued under section 9 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 5 adopted April 3, 1992, effective April 4, 1992, 22 Pa.

61 Pa. Code § 5.3 Payments required to be paid by EFT.

(a) Beginning July 1, 1992, a payment in the amount of $40,000 or more shall be remitted using a method of EFT selected by the taxpayer. A taxpayer may choose the ACH debit method or the ACH credit method.

(b) Beginning January 1, 1993, a payment in the amount of $30,000 or more shall be remitted using a method of EFT selected by the taxpayer. A taxpayer may choose the ACH debit method or the ACH credit method.

(c) Beginning January 1, 1994, a payment in the amount of $20,000 or more shall be remitted using a method of EFT selected by the taxpayer. The taxpayer may choose the ACH debit method or the ACH credit method.

(d) Beginning January 1, 2013, a payment in the amount of $10,000 or more shall be remitted using a method of EFT selected by the taxpayer. The taxpayer may choose the ACH debit method or the ACH credit method.

(e) Beginning January 1, 2014, a payment in the amount of $1,000 or more shall be remitted using a method of EFT selected by the taxpayer. The taxpayer may choose the ACH debit method or the ACH credit method.

(f) This requirement applies to payment of only the following taxes:

(g) A taxpayer may satisfy the obligation to remit a payment by EFT by delivering a certified or cashier’s check, in person or by courier with the appropriate return or deposit statement, to the Pennsylvania Department of Revenue, Bureau of Business Trust Fund Taxes, EFT Unit, Ninth Floor, Strawberry Square, Fourth and Walnut Streets, Harrisburg, Pennsylvania 17128 on or before the due date of the obligation. Payments will not be accepted at other Department locations.

(h) Separate transfers shall be made for each payment.

The provisions of this § 5.3 amended under section 9 of The Fiscal Code (72 P. S. § 9).

The provisions of this § 5.3 amended November 5, 1993, effective March 1, 1994, 23 Pa.B. 5306; amended August 23, 1996, effective August 24, 1996, 26 Pa.B. 4089; amended November 30, 2012, effective December 1, 2012, 42 Pa.B. 7279; amended March 14, 2014, effective March 15, 2014, 44 Pa.B. 1432. Immediately preceding text appears at serial pages (364484) to (364485).

This section cited in 61 Pa. Code § 5.7 (relating to miscellaneous provisions).

History

• Authority: The provisions of this Chapter 5 issued under section 9 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 5 adopted April 3, 1992, effective April 4, 1992, 22 Pa.

61 Pa. Code § 5.4 Voluntary participation.

A taxpayer not required to remit payments by EFT may, upon approval from the Secretary, use the EFT method for tax payments.

History

• Authority: The provisions of this Chapter 5 issued under section 9 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 5 adopted April 3, 1992, effective April 4, 1992, 22 Pa.

61 Pa. Code § 5.6 EFT payments.

(a) General rule. A taxpayer who is required to remit payments by EFT and who elects the ACH debit or ACH credit option shall ensure that each payment of tax is received by the Commonwealth’s depository bank on or before the otherwise applicable due date.

(b) ACH debit and credit taxpayers. For ACH debit and credit transfers, there is a 1-day lag between the date on which payment is authorized and the date on which the transfer is executed. A taxpayer electing these ACH options shall make the appropriate arrangements to initiate payment on or before the first business day prior to the otherwise applicable due date.

(1) Specific payment rules. The taxpayer shall furnish the banking information necessary to generate ACH debits against its designated account. To initiate payment of a tax, the taxpayer shall contact the data collection center designated by the Department to report tax information by operator assisted, touch tone assisted or terminal assisted methods. At the end of the business day, the taxpayer’s reported information will be processed by the data collection center and transmitted to the Commonwealth depository bank to generate the ACH debit instruction.

(2) Changing ACH debit information supplied to the Department. If a taxpayer elects the ACH debit payment option and the banking information necessary to generate ACH debits against its account changes, the taxpayer shall notify the Department of the change. The Department shall receive the new banking information at least 60 days prior to initiating the change.

(c) ACH credit taxpayers. A taxpayer electing the ACH credit option shall initiate each payment of tax by contacting its own financial institution and requesting the institution to transfer both the appropriate identifying information and payment to the Commonwealth’s depository bank by an ACH credit. The transaction shall be initiated to ensure that the Commonwealth’s depository bank receives it on or before the applicable due date.

(d) Certified or cashier’s check in lieu of EFT. A taxpayer required to remit payments by EFT who does not elect the ACH debit or ACH credit option shall remit payments by certified or cashier’s check in person or by courier to the Department, Bureau of Receipts and Control, 4th Floor, Strawberry Square, Fourth and Walnut Streets, Harrisburg, Pennsylvania 17128 on or before 4 p.m. of the due date of the payment.

(e) Fedwire payment rules. The Fedwire payment method may be used in emergency situations and only with prior approval of the Department.

(1) Emergency situations are limited to:

(i) Change in bank accounts.

(ii) Change in electronic payment methods.

(iii) System failures within the banking system/ACH interface beyond the taxpayer’s control.

(iv) A new taxpayer establishing EFT procedures.

(2) Prior approval of the Department may be requested in writing or by telephone. The Department will provide written verification of the appropriate approval or denial.

(3) The Department will not approve more than two Fedwire requests per tax year for each reporting account.

The provisions of this § 5.6 amended November 5, 1993, effective March 1, 1994, 23 Pa.B. 5306. Immediately preceding text appears at serial pages (168280) to (168281).

This section cited in 61 Pa. Code § 5.7 (relating to miscellaneous provisions).

History

• Authority: The provisions of this Chapter 5 issued under section 9 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 5 adopted April 3, 1992, effective April 4, 1992, 22 Pa.

61 Pa. Code § 5.7 Miscellaneous provisions.

(a) A taxpayer who is required to remit payments by EFT shall initiate the transfer so that the tax due is deposited to the Commonwealth’s depository account on or before the day that the tax is due. If a tax due date falls on a day other than a business day, the deposit by EFT is due on the first business day thereafter.

(b) The EFT method of payment does not change current filing requirements for tax returns. If the EFT payment is not timely made or the tax return required is not filed by the due date, the provisions for late filing penalties, interest and loss of collection allowance apply as provided by law.

(c) A taxpayer who is required to remit payments by EFT and who is unable to make a timely payment because of system failures within the banking system/ACH interface which are beyond the taxpayer’s control will not be subject to penalty or interest for late payment or loss of collection allowance.

(d) Errors made by the Treasury, the Department or their agents will not subject the taxpayer to loss of collection allowance or assessment of penalty or interest for late payment.

(e) A taxpayer who is required to remit payment by EFT and who elects to remit the payment by courier as described in § 5.6(d) (relating to EFT payments) will not be subject to penalty or interest for late payment or loss of collection allowance if the courier fails to make timely delivery due to a force majeure.

(f) For the first 6 months that a taxpayer is required to remit tax by EFT, the Department will extend a reasonable grace period to the taxpayer to resolve problems which arise with new administrative procedures, data systems changes and taxpayer operating procedures. To qualify for a grace period, the taxpayer shall demonstrate that a good faith effort to comply was made, or that circumstances beyond the taxpayer’s reasonable control prevented compliance by the required date.

(g) A taxpayer who remits taxes by EFT shall indicate that fact on the return when it is filed. For the purpose of this chapter, ‘‘return’’ means the form designated for filing the report of taxes due for a period, including forms for making installments of estimated tax and tentative tax returns.

(h) The Department and the Treasurer will provide one or more methods for taxpayers who remit taxes by EFT to verify and acknowledge that the payments have been received by the Department.

(i) The Treasurer, the Department and the Secretary of the Budget will provide one or more methods for tax refunds of $1,000 or more. The refunds will be available for the taxes listed in § 5.3(f) (relating to payments required to be paid by EFT). The taxpayer shall file a written request for the electronic transfer of a refund.

The provisions of this § 5.7 amended under section 9 of The Fiscal Code (72 P. S. § 9).

The provisions of this § 5.7 amended November 30, 2012, effective December 1, 2012, 42 Pa.B. 7279; amended March 14, 2014, effective March 15, 2014, 44 Pa.B. 1432. Immediately preceding text appears at serial pages (364487) to (364488).

History

• Authority: The provisions of this Chapter 5 issued under section 9 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 5 adopted April 3, 1992, effective April 4, 1992, 22 Pa.

Chapter 7 Board of Appeals

61 Pa. Code § 7.11 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Administrative proceeding—As defined in 2 Pa.C.S. § 101 (relating to definitions), including proceedings related to registrations and licenses. Appeal—A request for or a review or protest of one of the following:

(i) A resettlement, reassessment, redetermination, review or refund of taxes, interest, penalties, additions or payments made into the State Treasury, including a reassessment or refund as provided under section 2703(a) of the TRC (72 P. S. § 9703(a)).

(ii) A denial of an application for tax exempt status as a charitable, volunteer firemen’s or religious organization or nonprofit educational institution.

(iii) A reconsideration of interest payable on a tax overpayment.

(iv) A redetermination of the Department’s action regarding a claim for a property tax rebate or rent rebate as provided for under section 1311 of the Taxpayer Relief Act (53 P. S. § 6926.1311).

(v) A review of other actions, other than administrative proceedings, arising under statutes administered by the Department. Board—The Board of Appeals of the Department consisting of the Chairperson and members as designated by the Secretary.

The provisions of this § 7.11 issued under section 6 of The Fiscal Code (72 P. S. § 6) and section 306 of the Local Option Small Games of Chance Act (10 P. S. § 328.306).

The provisions of this § 7.11 adopted January 25, 2013, effective January 26, 2013, 43 Pa.B. 532.

History

• Authority: The provisions of this Chapter 7 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 7 adopted January 9, 1987, effective January 10, 1987, 17 Pa.

61 Pa. Code § 7.12 Jurisdiction.

The Board will exercise the powers and duties of the Department and the Secretary with respect to appeals and administrative proceedings before the Department.

The provisions of this § 7.12 issued under section 6 of The Fiscal Code (72 P. S. § 6) and section 306 of the Local Option Small Games of Chance Act (10 P. S. § 328.306).

The provisions of this § 7.12 adopted January 25, 2013, effective January 26, 2013, 43 Pa.B. 532.

History

• Authority: The provisions of this Chapter 7 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 7 adopted January 9, 1987, effective January 10, 1987, 17 Pa.

61 Pa. Code § 7.13 Manner of proceeding before the Board.

A proceeding before the Board shall be initiated by the filing of a petition, whether the proceeding is an appeal or administrative proceeding.

The provisions of this § 7.13 issued under section 6 of The Fiscal Code (72 P. S. § 6) and section 306 of the Local Option Small Games of Chance Act (10 P. S. § 328.306).

The provisions of this § 7.13 adopted January 25, 2013, effective January 26, 2013, 43 Pa.B. 532.

History

• Authority: The provisions of this Chapter 7 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 7 adopted January 9, 1987, effective January 10, 1987, 17 Pa.

61 Pa. Code § 7.14 Petitions.

(a) Place. Petitions shall be filed with the Board.

(b) Time.

(1) Petitions shall be filed within the time limits prescribed by statute, this title or other regulation. The burden is on the petitioner to present evidence sufficient to prove that a petition is timely filed.

(Editor’s Note: The act of October 30, 2017 (P. L. 672, No. 43) amended the appeal period from 90 days to 60 days. The Department will amend the following paragraph in a future rulemaking.)

(2) In the absence of a specific time limit for filing as prescribed in paragraph (1), a petition shall be filed no later than 90 days after the date of the Department’s decision or action that is the subject of the petition.

(3) The date of a Department decision or action for purposes of the filing of a petition is the date of the notice of the decision or action.

(c) Receipt.

(1) General rule. A petition is filed with the Board on the date the Board receives it. A petition that is received by electronic means after the close of business is received on the date of transmission as long as the Board receives the transmission by 12 midnight.

(2) Appeals. Section 1102.1 of the FC (72 P. S. § 1102.1) and section 3003.6 of the TRC (72 P. S. § 10003.6) apply to appeals that are transmitted to the Department by mail.

(3) Department personnel. A petition that the Board receives after the date prescribed by statute or this title that is presented to other Department personnel prior to or on the date prescribed by statute or this title is deemed filed as of the date the other Department personnel receives it.

(d) Manner and form. A petition may be delivered to and filed with the Board by hand delivery, mail or electronically, including facsimile transmittal or through the Department’s web site. A petition shall be in writing. A writing includes an electronic petition submitted through the Department’s web site. The Department will prescribe the form for a petition.

(e) Contents. A petition must contain the information, documentation and attachments required by statute and the following:

(1) General. Petitions must contain the following:

(i) The petitioner’s name, address and telephone number.

(ii) The name, address and telephone number of the petitioner’s authorized representative, if any.

(iii) The petitioner’s signature. If the petitioner is a corporation or association, an officer of the corporation or association shall sign the petition. If an authorized representative files the petition for the petitioner, the authorized representative may sign the petition on behalf of the petitioner.

(iv) A detailed statement in separate numbered paragraphs of the facts and grounds relied upon. If based upon a written document, a copy of the document, or material part thereof, shall be attached.

(v) A statement specifying the relief requested.

(vi) A statement indicating whether or not a hearing is requested.

(vii) A signed statement certifying that the facts in the petition are true and correct to the petitioner’s knowledge and belief and that the petition is not made for purposes of delay.

(2) Appeal petitions. In addition to the requirements of paragraph (1), an appeal petition must contain the following:

(i) Designation of the tax, including the year or other period, and the amount involved.

(ii) The petitioner’s license number, account number, employer identification number, Social Security number, claim number, file number, corporate box number or other appropriate identifying designation.

(iii) In the case of an Inheritance and Estate Tax protest, the petition must contain the decedent’s name, last known address, the file number and the assessment control number, if applicable.

(f) Docketing of petitions.

(1) The Department will docket upon receipt a filing that purports to be a petition or which otherwise claims relief that may be sought through the filing of a petition. If a filing fails to satisfy any statutory requirement for the filing of a petition, the Board will notify the petitioner of the deficiency in the filing and give the petitioner an opportunity to correct the deficiency. The petitioner shall remedy the deficiency within 30 days of the Board’s notice. If the petitioner fails to remedy the deficiencies, the Board will summarily dismiss the petition.

(2) For purposes of section 806.1(a)(4) of the FC (72 P. S. § 806.1(a)(4)), the administrative review procedure will be deemed to be initiated on the date the Board dockets the petition.

(g) Additional information. Upon written request, the Board may require a petitioner to furnish additional information that may be necessary to define the issues or to determine the case.

(h) Signatures. A signature includes an electronic signature issued by the Department to the petitioner.

The provisions of this § 7.14 issued under section 6 of The Fiscal Code (72 P. S. § 6) and section 306 of the Local Option Small Games of Chance Act (10 P. S. § 328.306).

The provisions of this § 7.14 adopted January 25, 2013, effective January 26, 2013, 43 Pa.B. 532.

History

• Authority: The provisions of this Chapter 7 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 7 adopted January 9, 1987, effective January 10, 1987, 17 Pa.

61 Pa. Code § 7.15 Board practice and procedure.

(a) General rules. Practice and procedure before the Board is as follows:

(1) Burden of proof. The petitioner shall have the burden of proof on all issues except fraud.

(2) Representation.

(i) An individual may appear on his own behalf or be represented by a person possessing the requisite technical education, training or experience. There is not a requirement that a petitioner be represented before the Board by an attorney or certified public accountant. A petitioner’s representative shall be authorized in writing to represent the petitioner. A letter signed by the petitioner or a listing as a representative on the face of the petition signed by the petitioner will be accepted as authorization for representation. An authorization continues until the Board is notified in writing by the petitioner that the authorization is rescinded.

(ii) Only an attorney-at-law representing a petitioner, or the petitioner acting without representation before the Board, shall be permitted to raise or make a legal argument at a hearing before the Board.

(iii) A notice or other written communication to the petitioner shall be given to the petitioner’s authorized representative and have the same force and effect as if given to the petitioner directly. Action before the Board taken by petitioner’s authorized representative shall have the same force and effect as if taken by the petitioner.

(3) Consolidation. The Board may, upon its own motion or the request of a petitioner, consolidate or sever two or more proceedings at its discretion.

(4) Hearings.

(i) Request for hearing. The Board will provide a petitioner the opportunity for a hearing upon written request.

(ii) Waiver. The petitioner may waive the right to a hearing and rest the case upon the petition and record, with or without a written brief. The Board on its own motion may require a hearing.

(iii) Notice of hearing. When the petitioner requests a hearing in writing, or when the Board requires a hearing, reasonable notice will be given to the petitioner in writing specifying the date, time and place for the hearing.

(iv) Continuances. The Board may grant a reasonable request for continuance of a scheduled hearing. The request shall be made or confirmed in writing, state the reasons for the continuance and be received at least 5 days prior to the scheduled hearing. The Board may grant a request not in conformity with this paragraph in extraordinary circumstances.

(v) Presiding officer. Hearings will be conducted by a presiding officer who will be a Board member or a hearing officer designated by the Board. Additional Board members or hearing officers may participate in a hearing at the discretion of the Board.

(vi) Authority of presiding officer. The presiding officer has authority to do the following:

(A) Regulate the conduct of hearings, including the scheduling thereof, subject to Board policy, and the recessing, reconvening and adjournment thereof, and to do acts and take measures necessary or proper for the efficient conduct of hearings.

(B) Administer oaths and affirmations.

(C) Rule upon offers of proof and receive evidence.

(D) Take or cause depositions to be taken.

(E) Hold appropriate conferences before or during hearings.

(F) Dispose of procedural requests or similar matters.

(G) Take other action necessary or appropriate to the discharge of the presiding officer’s vested duties, consistent with statutory authority, regulations and Board policy.

(vii) Contemptuous conduct. Contemptuous conduct is grounds for exclusion from the hearing.

(5) Evidence. Hearings before the Board do not need to adhere to the technical rules of evidence or procedure. In cases involving issues of fact, oral testimony shall be under oath or affirmation. At the discretion of the Board’s presiding officer, depositions or affidavits may be received instead of oral testimony if the actual presence of a witness is not feasible.

(6) Subpoenas. The Board, on its own motion or at the request of a petitioner, may compel the production of books, records, documents and other data pertinent to the issues and may require persons having information to appear and submit to oral examination under oath or affirmation. The petitioner shall pay the costs associated with the issuance of a subpoena requested by the petitioner as a condition precedent to the issuance of the subpoena.

(7) Additional hearings and evidence. After the conclusion of a hearing but prior to the issuance of a final decision, the Board or the presiding officer may, upon its own motion or upon request of the petitioner, allow one or more additional hearings or the submission of additional evidence.

(8) Decision and order. The Board will issue a final decision and order, as follows:

(i) The Board’s final decision and order will include findings of facts and conclusions of law and dispose of all issues raised in the petition.

(ii) The Board’s final decision and order will be in writing and signed by one or more members of the Board.

(iii) When provided by statute, the Board’s exercise of equity power will be limited to situations when the petitioner establishes that he has acted in good faith, without negligence and with reasonable diligence.

(iv) One copy of the final decision and order will be mailed to the petitioner or to the petitioner’s authorized representative at the mailing address shown on the petition.

(v) The Board may publish precedential decisions if the identity of the taxpayer is kept confidential.

(9) Reconsideration.

(i) Within the statutory appeal period and prior to the statutory time when the Board’s failure to act results in a denial of an appeal, and upon the written request of a petitioner or upon request of the Department, the Board may reopen a case in which a final decision and order has been issued, for the following purposes:

(A) Correcting clerical or computational errors.

(B) Considering evidence that the Department or the Board received on or prior to the mailing date of the final decision and order and not taken into consideration as part of the final decision and order.

(ii) If the Board decides to reopen a case, a member of the Board will notify the petitioner in writing and provide an opportunity for a hearing. An amended decision and order will be issued.

(b) Appeals. In addition to subsection (a), practice and procedure before the Board related to appeals shall be as follows:

(1) Nonapplicable law. Sections 501—508 and 701—704 of 2 Pa.C.S. (relating to Administrative Agency Law) do not apply.

(2) Confidential character of hearings. Information gained from hearings shall be considered confidential information under section 731 of the FC (72 P. S. § 731).

(3) Transcripts. Written transcripts of hearings will not be prepared by the Board. A recording of the hearing may be made at the discretion of either the Board or the petitioner.

(4) Decision and order. In the Board’s discretion, the Board’s final decision and order involving an assessment of tax, interest, penalties or additions may separate the reassessment into one of the following:

(i) Reporting periods involving disputed and nondisputed tax, interest, penalties or additions.

(ii) Disputed and nondisputed tax, interest, penalties or additions.

(5) Bonds and security.

(i) Sales, use and hotel occupancy tax bonds.

(A) In the case of petitions involving the sales, use and Hotel Occupancy Tax, the Department may by notice require a petitioner to file a surety bond. This bond shall be filed within 5 days of the date of the notice. Surety bonds shall be on a form approved by the Department, in an amount of 120% of the amount of the assessment remaining unpaid at the time of notice of bond requirement and shall be issued by a surety company authorized to do business in this Commonwealth.

(B) A petitioner, instead of filing a bond, may deposit with the Department a certified check payable to the ‘‘Pennsylvania Department of Revenue’’ in the amount of the bond required. On written application to and approval by the Department, the petitioner may post other security.

(C) If a surety bond is required, a petitioner may, within the time for filing the bond, file a written request for a hearing before the Board regarding the need for or amount of the bond. The petitioner shall furnish a financial statement to the Board at the time the request for hearing is made. The validity of the assessment itself may not be considered at the hearing. The determination of the Board will be final and its order shall be complied with within 15 days after notice thereof is mailed to the petitioner. If a taxpayer fails to appear at a scheduled hearing, the Board may immediately cause a lien to be filed under section 242 of the TRC (72 P. S. § 7242).

(ii) Personal income tax security requirement in jeopardy assessment appeals. A petition for reassessment of a jeopardy assessment shall be accompanied by a bond or other security in an amount that the Department deems necessary. The bond shall be executed by a surety company which is authorized to do business in this Commonwealth. A petitioner may deposit with the Department cash or a certified check payable to the ‘‘Pennsylvania Department of Revenue’’ in the amount required by the Department. On written application to and approval by the Department, the petitioner may post other security. In the case of failure to post an acceptable bond or other security, the Board will nonetheless accept the petition, if filed within the 10-day period provided by statute. If an acceptable bond or other security is not posted, the Department has the right to file a lien or otherwise proceed with collection of the assessment, even though the assessment has been appealed.

(c) Administrative proceedings. In addition to subsection (a), practice and procedure before the Board related to administrative proceedings shall be as follows:

(1) Applicable law. Sections 501—508 and 701—704 of 2 Pa.C.S. (relating to Administrative Agency Law) and other applicable laws and regulations related to the proceeding apply.

(2) Record. A full and complete record shall be kept of the proceedings.

(3) Transcripts. Hearings and testimony provided during hearings shall be stenographically recorded. Copies of hearing transcripts will be made available to the petitioner at the petitioner’s cost.

The provisions of this § 7.15 issued under section 6 of The Fiscal Code (72 P. S. § 6) and section 306 of the Local Option Small Games of Chance Act (10 P. S. § 328.306).

The provisions of this § 7.15 adopted January 25, 2013, effective January 26, 2013, 43 Pa.B. 532.

History

• Authority: The provisions of this Chapter 7 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 7 adopted January 9, 1987, effective January 10, 1987, 17 Pa.

61 Pa. Code § 7.16 Security upon petition for review.

(a) General rule. The Pennsylvania Rules of Appellate Procedure provide that a petition for review of an order of the Board of Finance and Revenue in a tax matter filed with the Commonwealth Court operates as a supersedeas upon the filing of appropriate security.

(b) Alternate procedure. If appropriate security is not filed as described in subsection (a), the Department will pursue collection activity, including the filing of a lien, to collect unpaid tax, interest, additions or penalties subject to the Commonwealth Court’s review except as provided subsection (c).

(c) Rules and procedures.

(1) Request for Department review. A person may submit a request to the Department to determine whether the amount of unpaid tax, interest, additions or penalties is in jeopardy of collection if appropriate security is not provided.

(2) Determination. If the Department determines that the amount of unpaid tax, interest, additions or penalties is not in jeopardy, then the Department will not pursue collection activities during the Commonwealth Court’s review. The Department’s determination will be based upon the documentation required to be submitted in paragraph (3). The Department’s determination under this paragraph is made solely at the Department’s discretion.

(3) Procedure. The request under paragraph (1) shall be made in writing on a form prepared by the Department. The written request shall include the person’s most recent financial statements, including a balance sheet, income statement and all notes pertaining to the statements. The Department may request other financial documentation. An individual may be required to submit a personal balance sheet.

(4) Appeal rights. There is not a right to appeal the Department’s determination under paragraph (2).

The provisions of this § 7.16 issued under section 6 of The Fiscal Code (72 P. S. § 6) and section 306 of the Local Option Small Games of Chance Act (10 P. S. § 328.306).

The provisions of this § 7.16 adopted January 25, 2013, effective January 26, 2013, 43 Pa.B. 532.

History

• Authority: The provisions of this Chapter 7 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 7 adopted January 9, 1987, effective January 10, 1987, 17 Pa.

Chapter 9 Revenue Pronouncements—Statements of Policy

61 Pa. Code § 9.2 Sales and use tax changes.

The act of August 4, 1991 (P. L. 97, No. 22) (act) contains numerous changes to Sales and Use Tax law found in Article II of the TRC (72 P. S. § § 7201—7282). The changes are effective October 1, 1991. These changes also apply to Philadelphia Local Sales Tax. The major changes are:

(1) Services.

(i) The following services are taxable:

(A) Lobbying services.

(B) Adjustment services, collection services or credit reporting services.

(C) Secretarial or editing services.

(D) Disinfecting or pest control services, building maintenance or cleaning services.

(E) Employment agency services, help supply services or other personnel supply services.

(F) Computer programming or other computer related services, including the provision of:

(I) Computer integrated systems design.

(II) Computer processing.

(III) Data preparation or processing services.

(IV) Information retrievable services or computer facilities management services.

(G) Lawn care services.

(H) Storage services.

(ii) Vendors of the services listed in subparagraph (i) are required to collect tax on the purchase price charged for the services. The users of the services are required to pay use tax upon the use of the services if the sales tax had not been paid to the vendor. A person rendering these services in this Commonwealth is considered to ‘‘maintain a place of business’’ in this Commonwealth and shall collect the tax and remit it directly to the Department.

(2) Pay television. Pay television except for ‘‘minimum pay television’’ is taxable. This includes anything charged to a customer for a service other than minimum pay television service. For example, if a cable television customer purchases basic service and in addition purchases a ‘‘pay’’ channel, tax is owed on the price charged for the ‘‘pay’’ channel. Installation and repair service for pay television with the exception of minimum pay television also is subject to tax.

(3) Telephone service. Sales tax is imposed on interstate and intrastate telephone services with the exception of residential subscriber line charges and basic local residential telephone service. Interstate service is taxable if the interstate call either originates or terminates in this Commonwealth and is billed to a service address in this Commonwealth.

(4) Household paper goods and soaps. Household supplies purchased for residential consumption, including soaps, detergents, cleaning and polishing preparations, paper goods, household wrapping supplies and items of a similar nature are taxable with the exception of disposable diapers, incontinence products, toilet paper, sanitary napkins, tampons or similar items used for feminine hygiene.

(5) Food sales. The list of facilities which are considered eating places has been expanded to include facilities which were not specifically listed previously. Purchases of food or beverages from these facilities are subject to tax. For example, the purchase of a pizza from a pizzeria now is subject to tax regardless of whether the pizza is picked up at the pizzeria or delivered to the purchaser.

(6) Tangible personal property. To make the TRC internally consistent ‘‘tangible’’ was added to the clause ‘‘personal property.’’ The most important aspect of this change is that only those producing ‘‘tangible personal property’’ are eligible for the manufacturing exemption.

(7) Remanufacturing. The act provides that the term ‘‘manufacturing’’ includes the remanufacturing for wholesale distribution by a remanufacturer of motor vehicle parts from used parts acquired in bulk by the remanufacturer using an assembly line process.

(8) Baking and food processing. The definition of manufacturing has been amended by excluding the cooking, freezing or baking of food products. The definition of ‘‘processing’’ has been amended to include the baking of food products when the products are packaged in sealed containers for wholesale distribution. Therefore, those engaged in the preparation of food for retail sales are not eligible for the manufacturing or processing exemption. Only those engaged in the business of processing food and packaging the food in sealed containers for wholesale distribution are eligible for the processing exemption. For example, a pizzeria engaged in the retail sale of pizzas and other similar baked items for retail sale is no longer granted the manufacturing or processing exemption and is required to pay tax upon property and services used in the operation.

(9) Ship supplies. The exemption for the purchase of property or services to be used in ship cleaning and maintenance, or ships’ fuels, supplies, equipment or stores now only applies to vessels ‘‘designed for commercial use of registered tonnage of 50 tons or more.’’

(10) Refunds. The payment of sales tax refunds issued in conjunction with a contract with a charitable, volunteer firemens, nonprofit educational, religious or governmental organization shall be paid to that organization.

(11) Licenses. An applicant for a sales tax license shall have filed all State tax reports and paid all State taxes not subject to an appeal or an authorized deferred payment plan. A licensee will be required to file for a renewal of the sales tax license on or before January 31, 1992. Thereafter, a sales tax license shall be valid for not more than 5 years, and the Department will establish a staggered renewal system. If a licensee fails to file State tax reports or pay any State taxes, the Department may revoke the licensee’s sales tax license. The fine for making taxable sales without a license has been increased from not more than $300 to not more than $1,000.

(12) Crimes. The wilfill failure to remit returns timely or timely pay tax is a criminal offense.

The provisions of this § 9.2 adopted September 20, 1991, effective September 21, 1991, 21 Pa.B. 4288.

History

• Source: The provisions of this Chapter 9 adopted September 20, 1991, effective September 21, 1991, 21 Pa.

61 Pa. Code § 9.3 Additional services which are subject to tax.

(a) Beginning October 1, 1991, the services described in this section are subject to State and local sales tax. If the service was purchased prior to October 1, 1991, that portion of the contract relating to the value of the contract after October 1, 1991, is subject to tax. The manufacturing, mining, processing, farming, dairying and public utility exemptions do not apply to the purchase or use of these services. These services are presumed to be subject to Pennsylvania sales tax if the delivery or benefit of the service occurs in this Commonwealth. Use tax is due if the purchaser of the services does not pay tax to the vendor.

(1) Lobbying services. Consideration paid to a ‘‘lobbyist’’ for ‘‘lobbying’’ as those terms are defined in the Lobbying Registration and Regulation Act (46 P. S. § § 148.1—148.7b).

(2) Adjustment, collection and credit reporting services. Consideration paid or retained for the adjustment of accounts, the collection of accounts receivable, credit investigations or the issuing of mercantile and consumer credit reports. Charges for providing credit card and collection services by a central agency, debt counseling or adjustment services for individuals or the billing or collection of an account by local exchange telephone companies are not subject to tax.

(3) Secretarial and editing services. Charges for secretarial and editing services. Examples include: editing, letter writing, word processing, proofreading, filing, sorting, resume writing, typing, answering services and other secretarial duties. Charges for court reporting or stenographic services are not subject to tax.

(4) Employment agencies services. Charges for providing employment services to an employer or an employe of the type performed by an employment agency, executive placing services or labor employment contractor. Charges by theatrical employment agencies, motion picture casting bureaus and services relating to the hiring of farm labor are not subject to tax.

(5) Help supply services. Charges for providing temporary or continuing help services under a contract in which the helper is supervised by the person or business needing the help and the helper is on the payroll of the person or agency providing the help. Examples include: labor and manpower pools, employe leasing services, office help supply services, temporary help services, usher services, escort services, bartending services, modeling services and fashion-show model supply services. Charges for services relating to the hiring of farm labor are not subject to tax.

(6) Computer program services. Charges for providing computer programming or computer software design and analysis. Examples include: services of the type provided by or through computer programming services, customer computer programming services or assistance services, computer code authors and free-lance computer software writers, software upgrading or modification, custom software programming, custom computer programs or system software developments, custom computer software systems analysis and design and custom application software programming.

(7) Computer integrated systems design services.

(i) Charges for developing or modifying computer software and packaging or bundling the software with computer hardware (computer and computer peripheral equipment) to create and market an integrated system for specific application, if the person rendering this service performs the following when providing the service:

(A) The development or modification of the computer software.

(B) The marketing of computer hardware.

(C) Is involved in all phases of systems development from design through installation.

(ii) Examples include: computer systems integration, computer network systems integrations, local area network (LAN) systems integration, office automation or systems analysis, computer systems value-added resellers, computer systems turnkey vendors, computer-aided design (CAD) systems services, computer-aided engineering (CAE) systems services or computer-aided manufacturing (CAM) system services.

(8) Computer processing, data preparation or processing services. Charges for computer processing, data preparation or processing services. Examples include: providing processing and preparation of reports from data supplied by the customer or a specialized service, such as data entry services, and the like, making data processing equipment available on an hourly, time-sharing or other basis; computer time-sharing and leasing or rental of computer time; computer tabulating and calculating services; data entry, processing or verification services; key-punch services and optical scanning data services.

(9) Information retrieval services. Charges for providing computer online information retrieval services. Examples include: data base information retrieval services; online information retrieval services, and the like.

(10) Computer facilities management services. Charges for providing onsite computer facilities management services, controlling the operation of data processing facilities and similar services.

(11) Other computer-related services. Charges for supplying computer-related services not described or included in paragraphs (6)—(10). Examples include: computer consulting services; software documentation services; disk, diskette or tape conversion; disk, diskette or tape recertification services; computer hardware and software requirement analysis services; testing and debugging services; software documentation services; software installation services; software training services; reformatting editing services and data recovery services.

(b) Services described in this subsection are presumed to be subject to sales tax if the service is provided at a location or service address within this Commonwealth. Except for storage services, the following are presumed to be subject to use tax if the applicable sales tax was not charged at the time of the purchase of the service.

(1) Disinfecting and pest control services. Charges for disinfecting, termite control, insect control, rodent control or other pest control services. Examples include: deodorizing rest rooms, sanitizing washrooms, cleaning rest rooms, exterminating or fumigating services.

(2) Building maintenance and cleaning services. Charges for providing maintenance and cleaning services. Examples include: janitorial, maid or housekeeping service; office or interior building cleaning or maintenance service; window cleaning service; floor waxing service; lighting maintenance service, such as bulb replacement; furnace and air conditioning filter replacement; chimney and spouting cleaning service; acoustical tile cleaning service; venetian blind cleaning; building siding cleaning; cleaning and maintenance of telephone booths and cleaning and degreasing of service stations. The term ‘‘building maintenance or cleaning services’’ does not include repairs performed on buildings and other structures.

(3) Lawn care services. Charges for lawn upkeep. Examples include: fertilization, weed control, lawn mowing, shrubbery trimming, lawn thatching, leaf raking and other lawn treatment services. Charges for landscaping, sodding and grass seeding of new lawns is not subject to tax.

(4) Storage service. Charges for the storage of corporeal personal property within a building or similar structure, such as a storage shed, warehouse, truck or airport terminal, freezer locker, and the like. The term ‘‘corporeal personal property’’ includes goods, wares or merchandise; furniture and household goods; vehicles; furs; and farm products. Charges for the storage of personal property outside of a building or similar structure are not subject to tax. The term ‘‘storage’’ includes the storage of vehicles in a building. The term does not include parking in a parking garage.

(5) Pay television. Charges for cable television, community antenna television and other distribution of television, video or radio services, with or without the use of wires, to subscribers or paying customers in excess of charges for the minimum or basic service. Charges relating to the installation or repair of the pay television services are subject to tax. Charges for the minimum or basic service as well as its installation and repair are not subject to tax.

The provisions of this § 9.3 adopted September 20, 1991, effective September 21, 1991, 21 Pa.B. 4290.

History

• Source: The provisions of this Chapter 9 adopted September 20, 1991, effective September 21, 1991, 21 Pa.

61 Pa. Code § 9.12 Foreign dividends effect of Kraft decision.

(a) The act of August 4, 1991 (P. L. 97, No. 22), effective for tax years beginning on or after January 1, 1991, amended the Corporate Net Income (CNI) Tax by repealing the total exclusion of all corporate dividends from taxable income and instead following the dividend exclusion provided under the IRC. In addition, the foreign dividend gross-up was specifically allowed as a deduction, while no foreign tax credit was provided.

(b) In Kraft General Foods, Inc. v. Iowa Department of Revenue, 112 S.Ct. 2365 (1992), decided June 18, 1992, the United States Supreme Court struck down an Iowa statute imposed on a corporation’s net income, substantially similar in all material respects to the amended Pennsylvania CNI Tax, on the ground that it facially discriminated against foreign commerce in violation of the Foreign Commerce Clause. The Department has concluded that the Kraft decision is equally applicable to the CNI Tax to the extent that adoption of the Federal tax base results in a facial discrimination against foreign commerce by not allowing any deduction for certain foreign dividends.

(c) To administer the CNI Tax in a constitutional manner, an additional deduction from the CNI Tax base for foreign dividends is required. See—for example—Commonwealth v. Curtis Publishing Co., 363 Pa. 299, 69 A.2d 410 (1949). Until the General Assembly amends the affected provision of the CNI statute, the Department finds that by allowing a deduction for foreign dividends in the following manner, discrimination is remedied and the original intent of the General Assembly to tax at least a portion of Federally-taxable dividends is achieved.

(1) The Department will allow foreign dividends reported on lines 13 and 14 of the Federal return Schedule C an additional deduction equal to one of the following:

(i) Seventy percent, if the dividends are from a less than 20%-owned foreign corporation.

(ii) Eighty percent, if the dividends are from a 20%-or-more-owned foreign corporation.

(iii) One hundred percent, if the dividends are from a foreign corporation that meets the ‘‘80% voting and value test’’ of section 1504(a)(2) of the IRC (26 U.S.C.A. § 1504(a)(2)) and would otherwise qualify for a 100% deduction under section 243(a)(3) of the IRC (26 U.S.C.A. § 243(a)(3)) if the foreign corporation were a domestic corporation.

(2) The treatment of foreign dividends set forth in paragraph (1) follows the Federal exemption of domestic dividends.

(d) A schedule, in the following form, shall be used to compute the additional deductions for foreign dividends and the total dividend deduction to be claimed on original and amended CNI returns for 1991 and thereafter.

The provisions of this § 9.12 adopted October 2, 1992, effective October 3, 1992, 22 Pa.B. 4897.

History

• Source: The provisions of this Chapter 9 adopted September 20, 1991, effective September 21, 1991, 21 Pa.

61 Pa. Code § 9.13 Pennsylvania S Corporation election.

(a) Generally. The shareholders of a corporation which qualifies as a ‘‘small corporation’’ under subsection (b) may elect to be taxed as a Pennsylvania S Corporation. The shareholders’ election of Pennsylvania S Corporation status is valid only if all shareholders of record on the day the election is filed sign a consent to the election. If an election is made, each shareholder will be subject to Pennsylvania Personal Income Tax on each shareholder’s pro rata share of the S Corporation income, whether distributed or not. For taxable years beginning on or after January 1, 1998, the taxable income of a Pennsylvania S Corporation for corporate net income tax purposes is the corporation’s net recognized built-in gain as determined for Federal income tax purposes under section 1374(d)(2) of the IRC (26 U.S.C.A. § 1374(d)(2)).

(b) Pennsylvania S Corporation election. A Pennsylvania S Corporation election may be made by the shareholders of any small corporation that is subject to the Pennsylvania corporate net income tax or that owns directly, or through a wholly owned subsidiary, 100% of the stock of a qualified Subchapter S subsidiary that is subject to the Pennsylvania corporate net income tax. A corporation is a small corporation if it meets all of the following requirements:

(1) The corporation has a valid election in effect under Subchapter S of the IRC of 1986 (26 U.S.C.A. § § 1361—1379).

(2) The corporation would have qualified as a Federal S Corporation under Subchapter S of the IRC of 1986, as amended to January 1, 1997.

(c) Form and method of election.

(1) Except as provided in paragraph (5), a Pennsylvania S Corporation election shall be filed with the Department on Form REV 1640 on or before the 15th day of the third month of the current taxable year to be effective for that year. All shareholders of record on the day the election is filed shall consent to the election by signing either Form REV 1640 or a separate statement of consent, which may be attached to the Pennsylvania form. The separate consent shall contain the following:

(i) The name, address, Pennsylvania Corporation Tax account (box) number, if applicable, and Federal employer identification number of the corporation.

(ii) The name, address and Social Security number or identification number of the shareholder.

(iii) The percentage of stock owned by the shareholder and the dates acquired, but not the percentage of shares of stock for those shareholders who sold or transferred all stock in the corporation during the part of the tax year that occurred before the Pennsylvania election form is filed with the Department.

(iv) The day and month of each shareholder’s tax year end.

(2) The corporation shall attach a schedule to the Pennsylvania S Corporation election identifying the name, address, Pennsylvania Corporation Tax account (box) number, if applicable, and Federal employer identification number of each qualified Subchapter S subsidiary owned by the corporation.

(3) The corporation shall submit a copy of the Federal Notification of Approval with its Pennsylvania S Corporation election. If the corporation’s Federal S Corporation election is pending at the time the Pennsylvania S Corporation election is filed, the corporation shall indicate that Federal approval is pending, and shall submit a copy of the Federal approval to the Department within 30 days of receipt.

(4) The Pennsylvania S Corporation election shall be filed with the Department by mailing the original executed Form REV 1640 to the Department by certified mail. The election shall be deemed filed on the date the envelope transmitting the election is postmarked by the United States Postal Service. Presentation of a certified mail receipt issued to the small corporation by the United States Postal Service shall be evidence of the filing of the election on the postmark date indicated on the receipt.

(5) For purposes of implementing the Pennsylvania S Corporation amendments of the act of May 12, 1999 (P. L. 26, No. 4) that are retroactive in effect to taxable years beginning on or after January 1, 1999, a Pennsylvania S Corporation election may be filed with the Department on or before September 15, 1999, to be effective for taxable years that commenced between January 1, 1999, through May 12, 1999. Elections filed with the Department after September 15, 1999, for a corporation that had a taxable year which commenced between January 1, 1999, through May 12, 1999, shall be effective for the following taxable year if the requirements in subsection (b) are met.

(6) Effective for taxable years beginning on or after January 1, 1999, the passive investment income test is repealed. The 5-year requirement for reapplication after termination for failing the passive investment income test is also repealed. A corporation which in the last 5 years failed to meet the passive investment income test and subsequently had its S Corporation status terminated may reapply for Pennsylvania S Corporation status even though 5 years have not lapsed since the taxable year for which the termination was effective.

(7) Every termination of Pennsylvania S Corporation status for failing the passive investment income test made by a settlement of corporate net income tax mailed after January 1, 1999, shall be effective only for tax years beginning prior to January 1, 1999. If termination of Pennsylvania S Corporation status was made by a settlement of corporate net income tax mailed prior to January 1, 1999, the corporation shall file a new election to be eligible for Pennsylvania S Corporation tax treatment for tax years beginning on or after January 1, 1999.

(d) Late elections. Pennsylvania S Corporation elections filed with the Department after the 15th day of the third month of the current taxable year shall be effective for the following taxable year if the requirements in subsection (b) are met.

(e) Newly formed and foreign corporations.

(1) A newly formed corporation may elect Pennsylvania S Corporation tax treatment for its first taxable year in Pennsylvania by filing a Pennsylvania S Corporation election with the Department within 75 days of incorporation. If the corporation does not commence business immediately, the election may be filed within 75 days of the date of first activity to be effective for the corporation’s taxable year during which activities were commenced.

(2) A foreign corporation may elect Pennsylvania S Corporation tax treatment for its first taxable year in this Commonwealth by filing a Pennsylvania S Corporation election with the Department within 75 days of the commencement of its first taxable year in this Commonwealth. A foreign corporation’s first taxable year in this Commonwealth commences on the date the corporation begins doing business in this Commonwealth and becomes subject to the Corporate Net Income Tax imposed under Article IV of the TRC (72 P. S. § § 7401—7411).

(f) Revocation or termination of S status.

(1) A Pennsylvania S Corporation election may be revoked if shareholders holding more than one-half of the shares of stock of the corporation execute their consent to the revocation.

(i) The portion of the taxable year before the revocation takes effect shall be treated as a short taxable year during which the corporation was an S Corporation.

(ii) The portion of the taxable year after the revocation takes effect shall be treated as a short taxable year during which the corporation is subject to Corporate Net Income Tax.

(2) A Pennsylvania S Corporation election shall be terminated for failure to meet the requirements of subsection (b). The termination applies retroactively to the beginning of the corporation’s taxable year.

(3) If a Pennsylvania S Corporation election is revoked by the shareholders under paragraph (1) or terminated under paragraph (2), the corporation will not be eligible to be taxed as a Pennsylvania S Corporation until the fifth taxable year after the taxable year for which the revocation or termination was effective.

Example 1: REV, Inc. is a calendar year taxpayer that has a valid Pennsylvania S Corporation election in effect since January 1, 1990. The shareholders of REV, Inc. revoke their Pennsylvania S Corporation election effective for the taxable year beginning January 1, 1997. REV, Inc. is not eligible to be taxed as a Pennsylvania S Corporation until the taxable year beginning January 1, 2002.

Example 2: MID REV, Inc. is a calendar year taxpayer that has a valid Pennsylvania S Corporation election in effect. The shareholders of MID REV, Inc. revoke their Pennsylvania S Corporation election effective July 1, 1997. MID REV, Inc. will be treated as a Pennsylvania S Corporation for the period from January 1, 1997, through June 30, 1997. MID REV, Inc., will not be treated as a Pennsylvania S Corporation from July 1, 1997, through the remainder of the taxable year. The period from July 1, 1997, through December 31, 1997, shall be treated as a short taxable year for corporate net income tax purposes. MID REV, Inc. is not eligible to be taxed as a Pennsylvania S Corporation until the taxable year beginning January 1, 2002.

Example 3: TERM, Inc. is a calendar year taxpayer that has a valid Pennsylvania S Corporation election in effect. 35% of the gross receipts of TERM, Inc. for the taxable year beginning January 1, 1996, are derived from passive investment income. The Pennsylvania S Corporation election of TERM, Inc. is terminated for failing the passive investment income test effective for the taxable year beginning January 1, 1996. TERM, Inc. is eligible to be taxed as a Pennsylvania S Corporation for the taxable year beginning January 1, 1999. To be taxed as a Pennsylvania S Corporation for the taxable year beginning January 1, 1999, TERM, Inc. shall elect S Corporation status by September 15, 1999.

Example 4: FED TERM 1, Inc. is a calendar year taxpayer that has a valid Pennsylvania S Corporation election in effect. The Federal S Corporation election of FED TERM 1, Inc. is terminated effective for the taxable year beginning January 1, 1997. The Internal Revenue Service determines that the termination was inadvertent and reinstates the Federal S Corporation election of FED TERM 1, Inc. effective for the taxable year beginning January 1, 1997. The Pennsylvania S Corporation election of FED TERM 1, Inc. is not terminated and FED TERM 1, Inc. will be taxed as a Pennsylvania S Corporation for the taxable year beginning January 1, 1997.

Example 5: FED TERM 2, Inc. is a calendar year taxpayer that has a valid Pennsylvania S Corporation election in effect. The Federal S Corporation election of FED TERM 2, Inc. is terminated effective for the taxable year beginning January 1, 1997. The Internal Revenue Service determines that the termination was inadvertent and reinstates the Federal S Corporation election of FED TERM 2, Inc. effective for the taxable year beginning January 1, 1999. The Pennsylvania S Corporation election of FED TERM 2, Inc. is terminated effective for the taxable year beginning January 1, 1997. FED TERM 2, Inc. will not be taxed as a Pennsylvania S Corporation for taxable years beginning on or after January 1, 1997. FED TERM 2, Inc. is not eligible to be taxed as a Pennsylvania S Corporation until the taxable year beginning January 1, 1999. FED TERM 2, Inc. shall file a new Pennsylvania S Corporation election to be taxed as a Pennsylvania S Corporation for taxable years beginning on or after January 1, 1999.

(g) Qualified Subchapter S subsidiaries.

(1) A Pennsylvania S corporation election filed by the parent Federal S Corporation of a qualified Subchapter S subsidiary shall be effective for the qualified Subchapter S subsidiary. A qualified Subchapter S subsidiary is not eligible to file a separate Pennsylvania S Corporation election.

(2) A qualified Subchapter S subsidiary is not eligible to elect Pennsylvania S Corporation tax treatment independent of its parent Federal S Corporation. A qualified Subchapter S subsidiary will not receive Pennsylvania S Corporation tax treatment if its parent Federal S Corporation does not have a valid Pennsylvania S corporation election in effect.

(3) As used in this section, the term ‘‘qualified Subchapter S subsidiary’’ means a corporation that is a qualified Subchapter S subsidiary of a Federal S corporation as determined by the Internal Revenue Service under section 1308(b)(3)(B) of the IRC (26 U.S.C.A. § 1308(b)(3)(B)).

(h) Instructions. The Pennsylvania S Corporation tax report instructions provide further explanation of the taxation of Pennsylvania S Corporations and their shareholders.

The provisions of this § 9.13 adopted October 21, 1994, effective October 22, 1994, 24 Pa.B. 5331; amended December 23, 1995, effective December 24, 1995, 24 Pa.B. 6451; amended July 3, 1997, effective retroactively to taxable years beginning on or after January 1, 1997, 27 Pa.B. 3237; amended August 20, 1999, effective August 21, 1999, 29 Pa.B. 4459. Immediately preceding text appears at serial pages (232203) to (232208) and (249837).

History

• Source: The provisions of this Chapter 9 adopted September 20, 1991, effective September 21, 1991, 21 Pa.

61 Pa. Code § 9.15 Tax amnesty administration and implementation issues.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Amnesty period—The time period of 90 consecutive days beginning on Friday, October 13, 1995, and ending on Wednesday, January 10, 1996. Eligible liability—An eligible tax liability, eligible interest liability and an eligible penalty liability. Program—Tax Amnesty Program.

(b) Nonparticipation penalty.

(1) Scope. The nonparticipation penalty applies to those eligible taxpayers that fail to participate in the Program. Section 6.21(b) (relating to nonparticipation penalty) addresses three general circumstances under which the Department will not impose the nonparticipation penalty. However, many specific questions have been received concerning what effect, if any, the timing of assessments or appeals would have on the application of the nonparticipation penalty. Paragraphs (2)—(6), inclusive, address concerns taxpayers have raised.

(2) Ineligible taxpayers. The nonparticipation penalty will not be imposed upon a taxpayer that is not eligible to participate in the Program under § 6.3(b) (relating to eligible taxpayers).

Example: Prior to the amnesty period, Taxpayer became the subject of a criminal investigation for failing to file and pay sales and use tax. Taxpayer is not eligible to participate in the Program and, thus, the nonparticipation penalty will not apply to this taxpayer.

(3) Corporation tax accounts. Payment of eligible liabilities may be made by the use of any available credit that a taxpayer may have in its corporation tax account. The Department will give a taxpayer the opportunity to request that an eligible liability be offset by such a credit before the nonparticipation penalty is imposed.

Example: Taxpayer has a settled 1990 Capital Stock Tax credit of $10,000 and an unpaid settled 1991 Capital Stock Tax liability of $600. Taxpayer may use its settled credit to pay its 1991 Capital Stock Tax liability under the Program and avoid the imposition of the nonparticipation penalty.

(4) Effect of successful appeal of eligible liability. An administrative or judicial decision that reduces or refunds an eligible liability that was not the subject of a valid appeal under paragraph (6) or was not paid on or before the last day of the amnesty period does not automatically relieve the taxpayer of liability for a nonparticipation penalty. A separate petition to appeal the imposition of the nonparticipation penalty shall be filed.

Example: Taxpayer does not pay an eligible liability during the amnesty period. The nonparticipation penalty is imposed. Subsequently, Taxpayer pays the eligible liability and files a Petition for Refund for the eligible liability. The refund of the eligible liability is granted. The nonparticipation penalty, however, will not be abated automatically.

(5) Post amnesty period increase in eligible liability. Except in cases where there is evidence of fraud or the appeal is not valid under paragraph (6), the nonparticipation penalty will not be imposed upon a taxpayer in any of the following situations:

(i) After the amnesty period, the taxpayer receives an assessment, a determination of additional tax, a settlement notice or resettlement notice establishing an eligible liability, based on an audit, or otherwise, and one of the following occurs:

(A) The tax return or tax report for the eligible liability was timely filed and payment of the reported eligible liability was made on or before January 10, 1996.

(B) The eligible liability was timely reported on a tax amnesty return and payment was timely made. See § § 6.1, 6.5 and 6.6 (relating to definitions; tax amnesty return; and payment).

(ii) After the amnesty period, the taxpayer receives a Federal Report of Change that increases its taxable income and, consequently, its liability for an eligible tax. See section 406 of the TRC (72 P. S. § 7406).

(iii) During the amnesty period, the taxpayer receives an assessment, determination of additional tax due, a settlement notice, or a resettlement notice for an eligible liability, but is not required to file an appeal of the assessment, determination, settlement or resettlement until after the amnesty period, if one of the following conditions are met:

(A) The taxpayer subsequently files a timely and valid administrative or judicial appeal for that particular eligible liability.

(B) The taxpayer subsequently pays the eligible liability on or before the date when an appeal of the assessment, determination, settlement notice or resettlement notice is required to be filed.

(6) Timely and valid appeals.

(i) The nonparticipation penalty will not be imposed upon a taxpayer that on or before the last day of the amnesty period, files a timely and valid administrative or judicial appeal contesting an eligible liability. An appeal is not valid if the Department determines that the appeal is filed in bad faith. An appeal is filed in bad faith when, the appeal has no basis in law or fact, or was undertaken solely to delay the collection of a tax. An appeal is presumptively in bad faith if it is barred by res judicata or time, or was filed with a tribunal that did not have proper jurisdiction to hear the appeal.

(ii) The nonparticipation penalty will not be imposed upon a taxpayer in either of the following situations:

(A) Before the end of the amnesty period, the taxpayer receives an adverse decision in a valid administrative or judicial appeal of an eligible liability, but is not required to file a further appeal of the adverse decision until after the amnesty period.

(B) On or before the last day of the amnesty period, the taxpayer files a timely and valid administrative or judicial appeal contesting an eligible liability and subsequently either withdraws the appeal or does not further appeal an adverse decision.

(c) Prospective continued compliance. The continued compliance requirement as provided in § 6.10 (relating to continued compliance requirement) is intended to apply to those taxes that are to be reported, filed and paid after the amnesty period. Taxes that are to be filed, reported and paid prior to the last day of the amnesty period would not be considered in determining whether a taxpayer that had an eligible penalty liability abated under the Program was in continuing compliance so as to avoid a reinstatement of the eligible penalty liability.

(d) Report all eligible liabilities. To participate in the Program, a taxpayer shall report on a tax amnesty return and make payment in accordance therewith all eligible liabilities that are not the subject of a valid and timely administrative or judicial appeal. See § 6.4 (relating to participation requirements) and § § 6.5 and 6.6.

Example: Taxpayer has an eligible liability for corporate tax as well as an eligible liability for sales and use tax. Taxpayer has filed a valid and timely appeal of the eligible liability for corporate tax on or before the end of the amnesty period. Taxpayer may participate in the Program with respect to the eligible liability for sales and use tax.

Example: Taxpayer has an eligible liability for corporate tax and an eligible liability for sales and use tax. Taxpayer has not filed an appeal for either eligible liability on or before the end of the amnesty period. Taxpayer may not participate in the Program unless it participates with respect to both eligible liabilities.

(e) Partial withdrawal of appeals. When a taxpayer has been assessed both eligible and noneligible liabilities, because the assessment relates to periods both before and after December 31, 1993, the taxpayer may participate in the Program with respect to the eligible liability and still appeal the assessment of the noneligible liability. Except as provided in subsection (d), a taxpayer may not participate in the Program by paying an eligible liability associated with less than all of the issues in an assessment while continuing an appeal on any other issue in the assessment. In this latter case, the appeal must either be withdrawn in its entirety before an eligible penalty liability can be abated under the Program or continued in its entirety.

(f) Interest on additions to tax. An addition to tax for underpayment of estimated tax is defined as an eligible penalty liability under § 6.1 that the Department may abate under the Program.

Example: Taxpayer has an outstanding liability for 1992 Capital Stock Tax and an outstanding $1,000 in addition to tax for underpayment of Estimated 1992 Capital Stock Tax on which interest has been settled in the amount of $100. Taxpayer elects to participate in the Program and pays the 1992 Capital Stock Tax liability. The $1,000 addition to tax will be abated and the $100 interest will not be due because the associated eligible penalty liability, the $1,000 addition to tax, was abated.

(g) Refund based on Federal Report of Change. A resettlement under section 406(b) of the TRC (72 P. S. § 7406(b)) based on a Federal Report of Change that decreases an eligible liability paid by a taxpayer participating in the Program during the amnesty period will be a basis for allowing the taxpayer a refund or a credit.

(h) Amended returns. To participate in the amnesty program, a taxpayer shall file amended tax returns or amended tax reports for all years in which the taxpayer underreported eligible liability. An amended tax return or amended tax report that reduces an eligible liability will not be accepted under the Program.

The provisions of this § 9.15 adopted December 8, 1995, effective December 9, 1995, 25 Pa.B. 5620.

History

• Source: The provisions of this Chapter 9 adopted September 20, 1991, effective September 21, 1991, 21 Pa.

61 Pa. Code § 9.16 Effect of Federal Small Business Job Protection Act.

(a) Internal Revenue Code Subchapter S revisions. The United States Congress has enacted the Small Business Job Protection Act of 1996 (Federal Act) (Pub.L. No. 104-188, 110 Stat. 1755 (1996)) to be effective for tax years beginning after December 31, 1996. This act amends Subchapter S of the IRC by revising the manner in which Federal S corporations may organize. Among other things, these revisions affect the following areas:

(1) The number of shareholders.

(2) The types of shareholders.

(3) Affiliations with other corporations.

(4) Invalid elections.

(5) Reelections within 5 years after termination.

(6) Interim closing of the books upon termination of a shareholder’s interest.

(7) Basis adjustments for distributions occurring in loss years.

(b) Pennsylvania S corporation tax treatment. The TRC authorizes the shareholders of a “small corporation” to elect not to be subject to corporate net income tax. Section 301(s.2) of the TRC (72 P. S. § 7301(s.2)) defines a ‘‘small corporation’’ as ‘‘any corporation which has a valid election in effect under subchapter S of Chapter 1 of the Internal Revenue Code of 1954, as amended as of January 1, 1983, and which does not have passive investment income in excess of twenty-five percent of its gross receipts.’’

(c) Effect of Internal Revenue Code Subchapter S revisions on the TRC. Section 1937 of Title 1 of the Pennsylvania Consolidated Statutes (relating to references to statutes and regulations) provides that a reference to a specific statute includes the statute with all amendments, unless the specific language of the statute clearly includes only the statute as in force as of a specific date. The definition of “small corporation” contained in section 301(s.2) of the TRC specifically references “subchapter S of Chapter 1 of the IRC, as amended as of January 1, 1983.” This specific statutory reference locks in the IRC as it existed on January 1, 1983. Subsequent Federal amendments are not applicable to the TRC definition of ‘‘small corporation.’’ Therefore, the Federal Act has no impact on the manner in which Pennsylvania S corporations may organize. Corporations that do not qualify for Federal Subchapter S status under the IRC, as amended as of January 1, 1983, are not eligible to elect Pennsylvania S corporation tax treatment.

(d) Answers to the most frequently asked questions. Since the enactment of the Federal Act, the Department has received numerous inquiries concerning the impact of the Federal Act on Pennsylvania S corporations. This subsection provides the Department’s response to the most frequently asked questions.

(1) Effect on Pennsylvania S corporations.

(i) Question: Does the enactment of the Federal Act, effective for tax years beginning after December 31, 1996, change the corporations that are eligible to elect Pennsylvania S corporation tax treatment?

(ii) Answer: No. The corporations that are eligible to elect Pennsylvania S corporation tax treatment are not changed by the enactment of the Federal Act. Only Federal S corporations that would qualify to elect Federal S corporation tax treatment under the IRC, as amended as of January 1, 1983, are eligible to elect Pennsylvania S corporation tax treatment.

(2) Limitations on number of shareholders.

(i) Question: Will a valid Pennsylvania S corporation lose its Pennsylvania S status if it expands to 75 shareholders as permitted by the Federal Act?

(ii) Answer: Yes. Pennsylvania is locked into the IRC as of January 1, 1983. The IRC as of that date does not permit a Federal S corporation to have 75 shareholders. Therefore, a Pennsylvania S corporation would cease to be a small corporation eligible for Pennsylvania S corporation tax treatment and its Pennsylvania S election would be terminated if it expands to 75 shareholders. The corporation would not be eligible to elect Pennsylvania S status for 5 taxable years.

(3) Ownership interests.

(i) Affiliated groups. The Federal Act permits a Federal S corporation to be a member of an affiliated group as determined under section 1504 of the IRC (generally, an 80% or greater common interest).

(A) Question: May a Pennsylvania S corporation be a member of an affiliated group? For example, may it hold an 80% or greater interest in another corporation?

(B) Answer: No. Pennsylvania is locked into the IRC as of January 1, 1983. The IRC as of that date does not permit a Federal S corporation to be a member of an affiliated group as determined under section 1504 of the IRC (generally, an 80% or greater common interest). Therefore, a corporation is not eligible for Pennsylvania S corporation tax treatment if it is part of an affiliated group as determined by section 1504 of the IRC. This means that a Pennsylvania S corporation may not own 80% or more of the stock of another corporation.

(ii) Electing small business trusts. The Federal Act permits a Federal S corporation to have an electing small business trust (IRC § 1361(e)) as a shareholder.

(A) Question: May a Pennsylvania S corporation have an electing small business trust as a shareholder?

(B) Answer: No. Pennsylvania is locked into the IRC as of January 1, 1983. The IRC as of that date does not permit a Federal S corporation to have an electing small business trust as a shareholder. Therefore, a corporation is not eligible for Pennsylvania S corporation tax treatment if it has a shareholder that is an electing small business trust.

(iii) Qualified pension, profit-sharing and stock bonus plans; and IRC § 501(c)(3) exempt organizations. The Federal Act permits a Federal S corporation to have shareholders that are qualified pension, profit-sharing and stock bonus plans under section 401 of the IRC or exempt organizations under section 501(c)(3) of the IRC.

(A) Question: May a Pennsylvania S corporation have a shareholder that is a qualified pension, profit-sharing and stock bonus plan under section 401 of the IRC or an exempt organization under section 501(c)(3) of the IRC?

(B) Answer: No. Pennsylvania is locked into the IRC as of January 1, 1983. The IRC as of that date does not permit a Federal S corporation to have a qualified pension, profit-sharing and stock bonus plan under section 401 of the IRC or an exempt organization under section 501(c)(3) of the IRC as a shareholder. Therefore, a corporation is not eligible for Pennsylvania S corporation tax treatment if it has any shareholder that is a qualified pension, profit-sharing and stock bonus plan under section 401 of the IRC or an exempt organization under section 501(c)(3) of the IRC.

(4) Qualified Subchapter S subsidiaries.

(i) Flow through treatment. The Federal Act permits a Federal S corporation to own a 100% ownership interest in another corporation known as a qualified Subchapter S subsidiary (IRC § 1361(b)(3)(B)(ii)). Upon election of the parent Federal S corporation, the two corporations shall be treated as a single entity and the assets, liabilities, income, deductions and credits of the wholly owned subsidiary shall be treated as belonging to the parent corporation.

(A) Question: May a Pennsylvania S corporation own a 100% ownership interest in another corporation and elect qualified Subchapter S subsidiary tax treatment?

(B) Answer: No. Pennsylvania is locked into the IRC as of January 1, 1983. The IRC as of that date does not permit a Federal S corporation to own 80% or more of the ownership interest of another corporation. Therefore, a corporation is not eligible for Pennsylvania S corporation tax treatment if it has a qualified Subchapter S subsidiary.

(ii) Taxation.

(A) Question: How will Pennsylvania tax a Federal S corporation that creates a qualified Subchapter S subsidiary?

(B) Answer: Under the IRC as of January 1, 1983, neither the parent Federal S corporation nor the qualified Subchapter S subsidiary would be eligible for Pennsylvania S corporation tax treatment. Both corporations would be required to file Pennsylvania corporate tax reports on a separate company basis with pro forma Federal 1120’s identifying the Federal corporate net income tax that would have been reported to the Federal government if they had filed separate returns as C corporations.

The provisions of this § 9.16 adopted December 27, 1996, effective December 28, 1996, 26 Pa.B. 6190.

History

• Source: The provisions of this Chapter 9 adopted September 20, 1991, effective September 21, 1991, 21 Pa.

61 Pa. Code § 9.17 Research and development tax credit implementation issues.

(a) The Research and Development Tax Credit Law (72 P. S. § §

History

• Source: The provisions of this Chapter 9 adopted September 20, 1991, effective September 21, 1991, 21 Pa.

61 Pa. Code § 9.18 Cost of collection.

(a) Definition. The following term, when used in this section, has the following meaning:

Cost of collection—Limited only to lien filing costs, costs imposed under a Federal or other State tax refund offset program, or costs incurred by the Department or the Office of Attorney General in paying commissions or other remuneration, such as private attorneys’ fees, or fees to private collection agencies to collect the Department collectible tax liabilities.

(b) Reimbursement for cost of collection.

(1) The costs of collection incurred by the Department or the Office of Attorney General on a liability for taxes administered by the Department, in addition to all tax principal, interest, penalties and fees, must be paid in full before the delinquent taxpayer’s liability will be extinguished by the Department on its records unless the cost of collection is discharged by operation of law.

(2) Exceptions are as follows:

(i) Fuels tax liabilities.

(ii) Motor Carrier Road Tax liabilities. The fuel tax system is excluded from these provisions because statutory provisions in 75 Pa.C.S. § 9014(b) (relating to collection of unpaid taxes) already establish a commission that shall be paid by a delinquent distributor when a delinquent fuel tax liability is paid by the distributor, after institution of a suit by the Office of Attorney General and the commissions under 75 Pa.C.S. § 9014(b) already constitute a lien on a delinquent distributor’s property.

(c) Cost of collection.

(1) The costs of collection shall be added to the amount of the liability for taxes administered by the Department and constitute a lien against the real and personal property of the person, with or without any evidence of the specific itemized breakdown of the costs of collection being stated on the underlying filed tax lien or on the State tax lien certificate itself. The tax lien will not be satisfied until all of the tax, interest, penalty and cost of collection directly associated with the liened tax liability have been entirely paid or discharged by operation of law.

(2) Private attorneys’ fees or expenses incurred by a private attorney to file and argue the need for a supersedeas bond or any other form of adequate security while the private attorney is still litigating the underlying merits of a contested State tax appeal will not be deemed a cost of collection.

(3) The costs of collection may be collected by the Commonwealth in any other lawful way or method that the underlying tax liability can be collected.

The provisions of this § 9.18 adopted July 14, 2006, effective July 15, 2006, 36 Pa.B. 3673.

History

• Source: The provisions of this Chapter 9 adopted September 20, 1991, effective September 21, 1991, 21 Pa.

Chapter 11 Organ and Bone Marrow Donor Tax Credit

61 Pa. Code § 11.1 Organ and bone marrow donor tax credit.

(a) Applicable taxes. The Organ and Bone Marrow Donor Act (35 P. S. § § 6120.1—6120.6) provides for an organ or bone marrow donor tax credit to be claimed by a business firm against the taxes imposed under Article III, IV, VI, VII, VIII or XV of the Tax Reform Code of 1971.

(b) Apportionment of credit of multistate business firms. The organ or bone marrow donor tax credit that may be claimed against the taxes in subsection (a) by a business firm subject to tax in more than one state shall be apportioned to Pennsylvania by multiplying the credit by a fraction, the numerator of which is the total amount paid in this Commonwealth during the tax period by the business firm for compensation and the denominator of which is the total compensation paid everywhere during the tax period.

History

• Authority: The provisions of this Chapter 11 issued under section 506 of The Administrative Code of 1929 (71 P.
• Source: The provisions of this Chapter 11 adopted December 1, 2006, effective December 2, 2006, unless otherwise noted.

Subpart B General Fund Revenues

Chapter 21 General Provisions

61 Pa. Code § 21.1 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Act—The Race Horse Industry Reform Act (4 P. S. § § 325.101—325.402). Commission—The State Horse Racing Commission or the State Harness Racing Commission of the Commonwealth. Licensed corporations—A corporation that has obtained a license from the Commission to conduct thoroughbred or harness meetings for parimutuel wagering. Make-up-race day—A previously authorized race day which was cancelled due to reasons beyond the control of the licensed corporation and which has been authorized and rescheduled by the Commission and certified as a make-up-race day to the Secretary under the section 207 of the act (4 P. S. § 325.207). Meeting—The period within a calendar year for which approval to race has been granted by the Commission to a licensed corporation. Multiple/exotic race—A race involving two or more horses including exacta, daily double, quinella, trifecta and similar races. ‘‘Outs’’ tickets—A ticket resulting in a distribution from the parimutuel pool which has not been presented for payment. Postmark date—The date imprinted upon an envelope or wrapper by the United States Postal Service but does not include the postmark date printed by a postal meter licensed by the United States Postal Service. Race day—A day during a meeting for which horse or harness racing has been authorized by the Commission and which has been certified to the Secretary under section 207 of the act. Secretary—The Secretary of the Department.

History

• Authority: The provisions of this Chapter 21 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 21 amended March 9, 1984, effective March 10, 1984, 14 Pa.

61 Pa. Code § 21.2 Wagering tax.

(a) General. A licensed corporation shall pay daily to the Department a tax upon the total amount wagered together with a tax upon the total amount wagered in each multiple/exotic race during the race day.

(b) Filing tax return and payment of tax. Each licensed corporation shall file a tax return for each race day including previously authorized race days which are cancelled. The tax return together with the required tax and breakage shall be filed with the Department by the due date. The tax return shall be in the format prescribed by the Department and shall be completed in accordance with instructions of the Department.

(c) Due date.

(1) The wagering tax return shall be filed, and tax payment and breakage shall be made by the end of the day following the race day during which the wagers were made.

(2) This subsection shall be subject to § § 21.6 and 21.7 (relating to extension of time for filing tax returns; and timely mailing treated as timely filing and payment).

(d) Rate of tax. The rates of tax which shall be paid to the Department by the licensed corporation with its tax returns shall be computed at the rates set forth in the act for the periods covered by the return. The rates shall apply to total wagers notwithstanding the fact that the licensed corporations shall cease business operations prior to July 1, 1984.

(e) Cancelled race days. A tax return shall be filed for each cancelled race day even though tax is not required to be paid. A tax return, together with the required tax and breakage, shall be filed with the Department for each make-up-race day during which wagers are made.

History

• Authority: The provisions of this Chapter 21 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 21 amended March 9, 1984, effective March 10, 1984, 14 Pa.

61 Pa. Code § 21.3 Admission tax.

(a) General. A licensed corporation is required to collect and remit to the Department a tax upon each admission. The tax is imposed upon one of the following:

(1) The admission price charged for individual admissions.

(2) The admission price charged for seasonal discount tickets.

(3) The minimum charge approved by the Commission in the case of free passes, cards or badges issued under special promotional programs to persons other than those listed at subsection (e).

(b) Filing of tax returns and payment of tax. Each licensed corporation shall file a tax return for each race day, including previously authorized race days which are cancelled. The tax return together with the required admission tax collected shall be filed with the Department by the due date. The tax return shall be in the format prescribed by the Department and shall be completed in accordance with instructions of the Department.

(c) Due date.

(1) For a licensed thoroughbred corporation an admission tax return shall be filed, and the tax payment shall be made by the end of the 10th day following each race day.

(2) For a licensed harness corporation an admission tax return shall be filed, and the tax payment shall be made by the end of the 10th day following the end of the meeting including split meetings.

(3) This subsection shall be subject to § § 21.6 and 21.7 (relating to extension of time for filing tax returns; and timely mailing treated as timely filing and payment).

(d) Rate of tax. The rate of admission tax which shall be collected and remitted by a licensed corporation shall be 5.0% of the established admission price or 5.0% of the approved minimum charge.

(e) Free passes, cards and badges which are exempt for admission tax. Free passes, cards and badges which are issued to corporate officers, employes and stockholders of licensed corporations conducting the race; officers, members and employes of the commissions; members of horse racing associations of other states and foreign countries; government employes, including those of the Department, whose duties require admission to the race; persons employed and accredited by the press to attend the race; and stable managers, trainers, jockeys, concessionaries, and other persons whose duties require their presence at the race track, are not subject to admission tax.

This section cited in 61 Pa. Code § 21.9 (relating to records).

History

• Authority: The provisions of this Chapter 21 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 21 amended March 9, 1984, effective March 10, 1984, 14 Pa.

61 Pa. Code § 21.4 Breakage.

(a) General. Licensed corporations which conduct thoroughbred horse racing shall pay to the Department, in addition to wagering taxes, an amount equal to 25% of the breakage retained by the corporation from total wagers each racing day.

(b) Payment date. Breakage shall be paid daily to the Department and shall accompany the wagering tax return filed with the Department. This subsection shall be subject to the provisions of § § 21.6 and 21.7 (relating to extension of time for filing tax returns; and timely mailing treated as timely filing and payment).

History

• Authority: The provisions of this Chapter 21 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 21 amended March 9, 1984, effective March 10, 1984, 14 Pa.

61 Pa. Code § 21.5 Unclaimed award money.

(a) General. Winning parimutuel tickets shall be presented for payment to the licensed corporation by March 31 of the year following the calendar year of purchase. The failure to present a winning ticket by that date constitutes a waiver of the right to receive the award money. The licensed corporation is required to remit to the Department unclaimed award money.

(b) Filing of return and payment. The licensed corporation shall file an unclaimed award money return together with the unclaimed award money by the due date. The return shall be in the format prescribed by the Department and shall be completed in accordance with instructions of the Department.

(c) Due date.

(1) The unclaimed award money return shall be filed and all unclaimed award money shall be paid by April 10 of each year.

(2) This subsection shall be subject to § § 21.6 and 21.7 (relating to extension of time for filing tax returns; and timely mailing treated as timely filing and payment).

History

• Authority: The provisions of this Chapter 21 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 21 amended March 9, 1984, effective March 10, 1984, 14 Pa.

61 Pa. Code § 21.6 Extension of time for filing tax returns.

(a) General. The Department may, for good cause, grant to a licensed corporation an extended period of time up to 60 days within which to file its wagering or admission tax return, if the request for extension is in written form, is received by the Department, Attn: Bureau of Examination, on or before the due date for filing the tax return to which the extension relates, and specifies the extended date upon which the return will be filed. Upon receipt of the request, the Department will in writing advise the licensed corporation whether or not the request has been granted. Notwithstanding the grant of an extension for filing a return, the Department will impose interest upon the unpaid tax. The Department may not impose penalties if the tax return is filed and the tax payment has been remitted to the Department on or before the extended due date for filing the tax return.

(b) Nonbusiness due date. Whenever a due date for filing a wagering or admission tax return falls on a Saturday, Sunday or on a day made a legal holiday by the statutes of this Commonwealth or by the United States, the due date shall be the next regular business day.

This section cited in 61 Pa. Code § 21.2 (relating to wagering tax); 61 Pa. Code § 21.3 (relating to admission tax); 61 Pa. code § 21.4 (relating to breakage); 61 Pa. Code § 21.5 (relating to unclaimed award money); and 61 Pa. Code § 21.8 (relating to interest and penalties).

History

• Authority: The provisions of this Chapter 21 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 21 amended March 9, 1984, effective March 10, 1984, 14 Pa.

61 Pa. Code § 21.7 Timely mailing treated as timely filing and payment.

(a) General. A tax return and payment enclosed in an envelope or wrapper which reflects a postmark date shall be considered as filed by the postmark date. If the postmark date reflects a date on or before the due date, the return and payment will be deemed timely filed. If the postmark date reflects a date after the due date, the tax return and payment will be considered as having been filed late.

(b) Registered mail. If a tax return and payment are sent by registered mail, the date of registration shall be treated as the postmark date.

(c) Certified mail. If tax return and payment are sent by certified mail, the postmark date imprinted on the sender’s receipt shall be treated as the postmark date.

(d) No postmark and metered marks. Tax returns and payments enclosed in envelopes or wrappers having no postmark date or having a postmark date printed by a meter, even if licensed by the United States Postal Service, shall be deemed as having been filed late if received by the Department more than 5 days after the due date.

This section cited in 61 Pa. Code § 21.2 (relating to wagering tax); 61 Pa. Code § 21.3 (relating to admission tax); 61 Pa. Code § 21.4 (relating to breakage); and 61 Pa. Code § 21.5 (relating to unclaimed prize money).

History

• Authority: The provisions of this Chapter 21 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 21 amended March 9, 1984, effective March 10, 1984, 14 Pa.

61 Pa. Code § 21.8 Interest and penalties.

(a) Interest. Wagering and admission tax paid or remitted to the Department after the due date shall be subject to interest at the rate in effect as determined by the Secretary, beginning on the day following the due date and continuing to the date of payment.

(b) Penalty. Admission tax paid or remitted to the Department after the due date or extended due date under § 21.6 (relating to extension of time for filing tax returns), shall be subject to a penalty at the rate of 5.0% per month, for each month the tax remains unpaid, beginning on the day following the due date and continuing to the date of payment. If a licensed corporation fails to file a wagering tax return by the due date or extended due date and fails to file the return within 30 days following a written demand by the Department, the licensed corporation shall be subject to a penalty of $500 in accordance with section 1703 of The Fiscal Code (72 P. S. § 1703).

This section cited in 61 Pa. Code § 21.10 (relating to miscellaneous).

History

• Authority: The provisions of this Chapter 21 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 21 amended March 9, 1984, effective March 10, 1984, 14 Pa.

61 Pa. Code § 21.9 Records.

(a) Required records. A licensed corporation shall maintain records which will permit the Department to examine and verify the following:

(1) Daily wagers.

(2) Contributions to, retention of and distributions from the corporation’s parimutuel pool.

(3) Unclaimed award monies or ‘‘outs’’ listings.

(4) Manually processed ‘‘outs’’ tickets.

(5) Taxable admissions for which admission charges are made.

(6) Taxable seasonal discount ticket programs.

(7) Taxable special promotional programs for which free passes, cards or badges are issued.

(8) Exempt free passes issued to those individuals described at § 21.3(e) (relating to admission tax).

(b) Record retention period. Records required under subsection (a) shall be retained for a minimum period of 1 year following the close of the race meeting and may not be destroyed without the written consent of the Department.

History

• Authority: The provisions of this Chapter 21 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 21 amended March 9, 1984, effective March 10, 1984, 14 Pa.

61 Pa. Code § 21.10 Miscellaneous.

(a) Settlements.

(1) Wagering or admissions tax. If a licensed corporation fails to pay to the Department the required wagering or admission tax by the due date, the Department will determine the amount of tax interest and penalty due and settle the tax together with interest and penalty, under § 21.8 (relating to interest and penalties).

(2) Breakage and unclaimed award money. If a licensed corporation fails to pay to the Department the required breakage and unclaimed award money by the due date, the Department will determine the amount of unclaimed award money due and settle the account with the licensed corporation.

(b) Overpayments. If a licensed corporation overpays a wagering or admission tax or breakage or unclaimed award money, it may claim the overpayments in section 217 of the act (4 P. S. § 325.217).

(c) Appeals. If the licensed corporation is indebted or is believed to be indebted to the Commonwealth, the Department will state and settle the tax with the licensed corporation under section 1001 of the FC (72 P. S. § 1001).

(d) Enforcement. Settlements for wagering and admission tax, together with interest and penalties, and breakage and unclaimed award money are enforceable against a licensed corporation under sections 1401, 1402, 1404, 1405 and 1704A of the FC (72 P. S. § § 1401, 1402, 1404, 1405 and 1704A).

History

• Authority: The provisions of this Chapter 21 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 21 amended March 9, 1984, effective March 10, 1984, 14 Pa.

Chapter 31 Imposition

61 Pa. Code § 31.1 Persons and sales subject to tax.

An excise tax shall be imposed upon the sale at retail or the use within this Commonwealth of tangible personal property and certain services, unless otherwise exempted.

(1) Sale at retail includes a transfer for value of the ownership, custody or possession of tangible personal property. ‘‘Rentals or leases’’ of tangible personal property and the grant of a license to use or consume are sales at retail.

(2) Use includes the exercise of a right or power incidental to the ownership, custody or possession of tangible personal property and shall include, but not be limited to, transportation. Use also includes the obtaining of taxable services.

(3) The term tangible personal property includes, but is not limited to, the following:

(i) Goods, wares and merchandise, other than household supplies purchased from retail establishments for residential consumption.

(ii) Steam, electricity and fuel oil, when not purchased directly by the user solely for his own residential use.

(iii) Natural, manufactured or bottled gas when not purchased directly by the user solely for his own residential use.

(iv) Intrastate telephone and telegraph service for nonresidential use.

(v) Spirituous or vinous liquor.

(vi) Malt and brewed beverages.

(vii) Soft drinks.

(4) The following services are subject to tax:

(i) Cleaning, inspecting, lubricating, polishing, washing or waxing motor vehicles whether performed directly or by coin-operated equipment.

(ii) Wrapping or packaging tangible personal property.

(iii) Applying or installing tangible personal property as a repair or replacement part of personal property other than clothing or shoes.

(iv) Altering, cleaning, dry-cleaning, dyeing, fitting, laundering, mending, pressing or repairing tangible personal property other than clothing or shoes.

(v) The imprinting or printing of tangible personal property furnished by others.

(vi) The labor or services billed by the vendor for delivering, installing or applying tangible personal property sold by the vendor even if the services are contracted for separately.

This section cited in 61 Pa. Code § 31.6 (relating to persons rendering nontaxable services).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.2 Rates.

The tax shall be imposed on the purchase price at a rate of 6%.

(1) The purchase price is the total value of anything paid or delivered, or promised to be paid or delivered, whether it is money or otherwise, in complete performance of a sale, lease or purchase. Deductions from this total value may not be made on account of: the cost or value of the property sold; the cost or value of transportation; the cost or value of labor or service; interest or discount paid or allowed after the sale is consummated; and any other taxes imposed by the Commonwealth. A separately stated deposit charge for returnable containers shall be excluded from the determination of the purchase price.

(2) The tax shall be imposed according to the following schedule:

(3) The tax imposed shall be paid on each separate sale at retail. It shall be computed and collected on the basis of the total amount of taxable items in the transactions without regard to the value or price of the separate items making up the total amount of a single sales transaction. A vendor may neither advertise nor otherwise state that the tax or any part thereof will be absorbed by the vendor or not be charged.

(4) When referred to in advertising or other price quotations, the tax shall be separately stated. For example, an article selling for 99¢ may not be advertised at ‘‘$1.05’’ or ‘‘$1.05 including tax’’ but shall be advertised at ‘‘99¢ plus tax,’’ ‘‘99¢ plus 6¢ tax’’ or ‘‘99¢.’’ Credit shall be allowed for taxes paid to another state on tangible personal property purchased for use therein and later brought into this Commonwealth if the other state allows similar credit to this Commonwealth residents.

(5) When a purchaser fails to pay the tax to the vendor, the Commonwealth may collect the tax from the purchaser or the vendor.

The provisions of this § 31.2 adopted September 9, 1972, effective September 9, 1972, 2 Pa.B. 1686; renumbered August, 1979 at serial page (40181). Amended September, 1993, effective September 1993 at serial page (179188). Immediately preceding text appears at serial page (265160).

This section cited in 61 Pa. Code § 31.6 (relating to persons rendering nontaxable services).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.3 Exclusions.

The tax does not apply to the following:

(1) Sales of tangible personal property or rendition of services for resale. Resale includes incorporation of property as an ingredient into other tangible personal property which is either sold in the regular course of business or transported in interstate commerce to out-of-State destinations for use outside of this Commonwealth.

(2) Isolated transactions other than: sales of inventory and stock in trade; and sales of motor vehicles, trailers and semitrailers, motor boats, aircraft or other similar tangible personal property required under either Federal law or the laws of the Commonwealth to be registered or licensed.

(3) Gasoline and other motor fuels subject to The Liquid Fuels Tax Act (72 P. S. § § 2611a—2611c) and The Fuel Use Tax Act (72 P. S. § § 2614.1—2614.24).

(4) Tangible personal property used but not consumed within this Commonwealth if it is purchased outside of this Commonwealth and then brought into this Commonwealth for the following purposes:

(i) Temporary use not to exceed 7 days by a nonresident.

(ii) A period by a nonresident vacationer or tourist.

(5) Wrapping paper, wrapping twine, bags, cartons, tape, rope, labels, nonreturnable containers and other wrapping supplies, when the use is incidental to the delivery of tangible personal property. Charges for wrapping or packaging are subject to tax.

(6) Prescription or nonprescription medicines, drugs or medical supplies; crutches and wheelchairs; artificial limbs; artificial hearing devices; false teeth, materials used by a dentist in dental treatment; prescription eyeglasses for the personal use of the owner or purchaser; artificial braces and supports designed solely for persons with disabilities.

(7) Coal.

(8) Sales of motor vehicles, trailers, and semitrailers or bodies attached to the chassis thereof to a nonresident of this Commonwealth, to be used outside of this Commonwealth and which are registered in a state other than this Commonwealth within 20 days after delivery to the vendee.

(9) Water.

(10) Wearing apparel and footwear, and other articles of clothing carried on or about the human body. This exclusion does not include the following:

(i) Accessories.

(ii) Ornamental wear.

(iii) Formal wear.

(iv) Sporting goods and clothing normally used or worn when engaged in sports.

(v) Real or imitation fur articles if the fur is more than three times the value of the next most valuable component material.

(11) Charges for repairing, altering or cleaning clothing or shoes. Charges for cleaning household goods remain taxable except when performed by coin-operated, self-service laundry equipment.

(12) Food and nonalcoholic beverages for human consumption. This exemption does not apply to purchases from caterers or eating places when the purchase price of the total transaction exceeds 10¢. Spirituous and vinous liquors are subject to tax when purchased from a Pennsylvania Liquor store. Malt beverages are subject to tax when purchased from a brewer or distributor. Soft drinks are subject to tax when sold at the retail level by anyone for a price more than 10¢. Food and beverages purchased at or from a school or church in the ordinary course of its activities are exempt from tax.

(13) Caskets, burial vaults, markers and tombstones for human graves.

(14) The sale at retail or use of textbooks for use in schools, colleges and universities when the following are met:

(i) The textbooks are used in public or private schools, colleges and universities.

(ii) The textbooks are purchased on behalf of or through these schools, colleges and universities.

(iii) The schools, colleges and universities are recognized by the Department of Education.

(15) Vessels designed for commercial use of registered tonnage of 50 tons or more when produced on special order of the purchaser and property or services used or consumed in building, rebuilding and repairing these vessels.

(16) Sales or use of property or services to be used for ship cleaning, maintenance, fuel supplies, ships’ equipment, ships’ or sea stores, to be used or consumed by vessels to be operated principally outside of this Commonwealth.

(17) Motion picture film rented or licensed from a distributor for commercial exhibition.

(18) The sale at retail or use of mail order catalogs and direct mail advertising materials.

(19) Property upon which work or services are performed for the sole purpose of transporting the property in interstate commerce to a destination outside of this Commonwealth for exclusive use outside of this Commonwealth.

(20) Tangible personal property purchased outside of this Commonwealth by a nonresident and brought into this Commonwealth in connection with the establishment of a permanent business or residence herein, if the property was purchased more than 6 months prior to the date it was brought into this Commonwealth or more than 6 months prior to the establishment of the business or residence, whichever is earlier. This paragraph is not applicable to property temporarily in this Commonwealth for the performance of real estate construction or maintenance contracts.

(21) Sales to or use of tangible personal property or services by: charitable organizations; volunteer firemen’s organizations; nonprofit educational institutions; or religious organizations for religious purposes.

(i) This exclusion does not apply to property or services used in an unrelated trade or business carried on by this type of organization or institution. This exclusion does not apply to materials, supplies and equipment used in the construction, reconstruction, remodeling, repair and maintenance of real estate, other than materials and supplies used in routine maintenance and repairs of real estate.

(ii) Equipment used in the routine maintenance and repair of real estate is subject to tax.

(22) Property or services purchased by the United States, the Commonwealth or its political subdivisions, or instrumentalities thereof.

(23) Flags of the United States and the Commonwealth.

(24) The sale at retail or use of rail transportation equipment used in the movement of personalty.

(25) The sale at retail of horses, if at the time of purchase, the seller is directed to ship or deliver the horse to an out-of-State location. The seller shall obtain a bill of lading from the carrier or purchaser, reflecting the out-of-State destination. The seller shall execute and retain a ‘‘Certificate of Delivery to Destination Outside of the Commonwealth’’ to justify the noncollection of sales tax. If a horse is sold and delivered to a domiciled person prior to out-of-State delivery the ‘‘Certificate of Delivery to Destination Outside of the Commonwealth’’ shall have both bills of lading attached.

(26) The sale at retail or use of fish feed purchased by or on behalf of sportsmen’s clubs, fish cooperatives or nurseries approved by the Fish and Boat Commission.

(27) The sale at retail or use of supplies and materials to tourist promotion agencies, which receive grants from the Commonwealth, for distribution to the public as promotional material.

(28) The sale or use of brook trout, brown trout or rainbow trout.

(29) The sale at retail or use of buses to be used exclusively for the transportation of children for school purposes.

(30) The sale at retail or use of firewood cut into proper lengths for burning and used for fuel for cooking, hot water production or to heat residential dwellings.

The provisions of this § 31.3 amended under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 31.3 amended January 20, 1984, effective January 21, 1984, 14 Pa.B. 222; amended September 14, 1984, effective September 15, 1984, 14 Pa.B. 3366; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322; amended March 24, 2000, effective March 25, 2000, 30 Pa.B. 1654. Immediately preceding text appears at serial pages (179189) to (179192).

This section cited in 61 Pa. Code § 31.6 (relating to persons rendering nontaxable services).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.4 Rentals or leases of tangible personal property.

(a) Imposition. Transfers of possession or of custody of tangible personal property for consideration, by whatever means effected and irrespective of the terms employed by the parties to describe the transaction, are taxable. The rental, lease or license to use or consume tangible personal property is subject to tax. For example, when a machine shop grants to another the right to use its machinery on weekends for a fee, the transaction is taxable. Similarly, the grant of a right to use an electronic computer for a fee is subject to tax. If a transferee fails to pay the tax to the transferor in connection with a taxable transaction, the Commonwealth may collect the tax from the transferor or transferee.

(1) If the equipment is furnished with the services of an operator, it shall be presumed that the transaction involves a transfer of the right to use or direct the use of the equipment. This presumption may be rebutted by establishing that the work to be accomplished is exclusively under the control of the person who furnished the equipment and operator.

(2) If the equipment furnished with an operator consists of tools of the operator’s trade and the value of the use of the tools is insignificant in relation to the operator’s services performed, a taxable transfer will not be presumed or deemed to have occurred. For example, if a neighborhood gardener cuts lawns and provides other gardening services, the rakes, shears and other hand tools used will not be deemed to be transferred.

(b) Exemptions. Persons who purchase tangible personal property for the predominant purpose of renting or leasing it to others are entitled to claim the resale exemption. Purchases of repair parts or otherwise taxable services for the property are similarly entitled to exemption. Purchases of equipment or supplies used in conjunction with the service or care of rental property are subject to tax since the materials are not considered to be resold.

(1) If a purchaser uses or consumes property purchased for resale or disposes of property purchased for resale in a manner other than for resale, the purchaser becomes the ultimate consumer or user of the property and shall pay use tax with respect to the taxable use. When the property is used or consumed in a manner other than for resale, the purchaser shall also pay use tax on otherwise taxable services which were performed on the property if the purchaser purchased the services exempt from tax by claiming the resale exemption.

(2) The TRC grants certain purchasers an exemption from tax not only on tangible personal property purchased for use in exempt activities, but also on rentals of the tangible personal property. Persons engaged in activities such as farming, dairying, manufacturing and mining, may, on renting or leasing tangible personal property, use an Exemption Certificate applicable to their particular activity.

The provisions of this § 31.4 amended October 24, 1975, effective October 25, 1975, 5 Pa.B. 2843; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (94350) to (94351) and (40191).

This section cited in 61 Pa. Code § 31.27 (relating to morticians and funeral directors); 61 Pa. Code § 33.1 (relating to definitions); and 61 Pa. Code § 47.1 (relating to coin-operated amusement devices).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.5 Persons rendering taxable services.

(a) Imposition. The following services rendered upon tangible personal property are ‘‘taxable services’’ whether or not tangible personal property is transferred in conjunction with the rendition of the services:

(1) Repairing, altering, mending, pressing, fitting, dyeing, laundering, drycleaning or cleaning tangible personal property other than clothing or footwear. Effective July 1, 1971, charges for repairing, altering, mending, pressing, fitting, dyeing, laundering, drycleaning or cleaning clothing or footwear are exempt from tax. For example, if a bookcase is taken to a carpenter to have a defective shelf repaired, the charge for the repair is subject to tax. However, if a shoe is taken to a shoe repairperson to have a heel fixed, the charge for the repair is not subject to tax.

(2) Applying or installing tangible personal property as a repair or replacement part of other tangible personal property. For example, if a garage employe replaces a tire on an automobile with a new one, the installation charge plus the price of the new tire is subject to tax. If the garage employe merely replaces the old tire with a spare belonging to the car owner, the installation charge is nevertheless subject to tax.

(3) Labor or services billed by the vendor for delivering, installing or applying tangible personal property sold by the vendor even if the services are contracted for separately. The taxability of these services is effective March 4, 1971. For example, if a dealer delivers and installs a gas range which the dealer has sold, the charges for delivery and installation, as well as the price of the range, are taxable. The delivery and installation charges are taxable whether or not they are invoiced separately from the price of the range.

(4) Inspecting, altering, cleaning, lubricating, polishing, repairing or waxing motor vehicles.

(5) Printing or imprinting tangible personal property for persons furnishing the materials used in the operations. The services shall be taxable whether the person for whom they are rendered or the person’s agent supplies the materials. When the person for whom taxable services are rendered fails to pay the tax to the person rendering the taxable services, the Commonwealth may collect tax from either party.

(b) Services when performed by coin-operated self-service laundry equipment. Effective July 1, 1971, charges for the services of repairing, altering, mending, pressing, fitting, dyeing, laundering, drycleaning or cleaning of clothing and household goods by means of coin-operated self-service laundry equipment shall be exempt from tax. Laundry equipment includes washing and drycleaning machines. Included within this exemption are services performed on the following types of property: clothing, sheets, towels, rugs, drapes or other household goods. Charges for similar equipment for use in conjunction with motor vehicles are subject to tax. Charges by a laundry for the services in the subsection performed upon household goods are subject to tax.

(c) Tangible personal property subsequently affixed to real estate. The vendor shall collect and remit tax on the vendor’s rendition of services even though the tangible personal property upon which the taxable services are performed will later be affixed to the real estate so as to become a permanent part thereof. For example, when a lighting fixture is temporarily removed from a home and taken to a silversmith to be electroplated, tax shall be collected on the entire charge for the electroplating.

(d) Tangible personal property belonging to a third person. The vendor shall collect tax from persons paying the purchase price for taxable services even though the tangible personal property on which the services are performed belongs to another. For example, when an insurance company has a car repaired for an insured person the person rendering the service shall collect tax from the insurance company on the total charge.

(e) Application of tax to service or maintenance agreement. Persons who enter into ‘‘service’’ agreements to render a taxable service are making ‘‘sales at retail’’ and shall collect sales tax on the entire charge made under the agreement. The fact that the agreement may be designated ‘‘Inspection,’’ ‘‘Maintenance’’ or by any other name does not change this rule if, under the terms of the agreement, the persons shall be obligated to render taxable service upon the tangible personal property of their customers. For example, when a firm enters into agreements with a serviceman to have its office equipment inspected, repaired and cleaned, the entire charge, without any deduction for separately stated items, is subject to tax.

(f) Taxable services performed outside Pennsylvania on tangible personal property used in this Commonwealth. When taxable services are performed outside of this Commonwealth on tangible personal property brought into this Commonwealth for use in this Commonwealth, the services shall be subject to the use tax, based upon the entire charge made by the vendor. If the tax is not collected by the vendor, the purchaser of the services shall report and pay use tax directly to the Commonwealth. For example, when a resident of this Commonwealth has his automobile repaired outside of this Commonwealth, tax shall be paid directly to the Commonwealth by the person for whom the services were rendered, or alternatively to the person rendering the services if the person is ‘‘maintaining a place of business within the Commonwealth.’’ A tax credit shall be permitted for taxes paid to most other states. See § 31.7 (relating to use tax).

(g) Services performed in this Commonwealth on tangible personal property to be used by nonresidents outside of this Commonwealth. Services performed in this Commonwealth on tangible personal property to be used by nonresidents outside of this Commonwealth shall conform with the following:

(1) The vendor shall collect tax on services if the tangible personal property on which the services have been performed is delivered to the purchaser or the purchaser’s agent in this Commonwealth, even though the purchaser will subsequently use the services and tangible personal property outside of this Commonwealth. The fact that the purchaser is a nonresident and the services will be used outside of this Commonwealth does not in itself make the transaction exempt. For example, when a nonresident of this Commonwealth has his car repaired in this Commonwealth while vacationing, the garage employe shall collect tax on the entire charge. A person rendering a taxable service need not collect sales tax on the rendition of services for a nonresident when the agreement between the vendor and the purchaser requires the vendor to deliver or provide delivery of the tangible personal property at a destination outside of this Commonwealth for use outside of this Commonwealth, and when the delivery is in fact made. For example, when a laundry in this Commonwealth picks up soiled drapes from a Maryland customer and delivers the clean laundry in Maryland to the customer, the laundry is not required to collect tax. Similarly, when a nonresident has his car repaired while on vacation in this Commonwealth and directs the garage employe to deliver his car to his out-of-State residence, the garage employe is not required to collect tax.

(h) Exemptions. The TRC grants certain purchasers an exemption from tax not only on tangible personal property purchased for use in exempt activities but also on services which may be performed on the exempt tangible personal property. Therefore, the fact that the TRC now imposes tax upon the full charge for taxable services rendered does not affect the use of the Exemption Certificate by purchasers who are entitled to an exemption from tax under the act. Thus, persons engaged in activities such as farming, dairying, manufacturing and mining may, upon their purchases of services on exempt tangible personal property, use an exemption certificate applicable to their particular activity. For example, when a manufacturing firm has a machine repaired which is directly used in its manufacturing operations, the charge for the rendition of such service is not subject to tax. When the same firm has a filing cabinet repaired, the charge for the repairs is subject to tax, since the filing cabinet is not directly used in manufacturing.

(i) Purchase of equipment and materials used in taxable services. Persons rendering taxable services shall be considered the consumers of all tangible personal property which they use but do not transfer to their customers. Therefore, all machinery, equipment, tools, supplies, materials or other tangible personal property, or services performed thereon, purchased for this type of use is subject to tax. They are entitled to use the ‘‘resale’’ exemption with respect to purchases of tangible personal property or services which they will transfer to their customers. The following examples illustrate these rules:

(1) A furniture repair shop purchases sand paper and paint brushes to be used in refinishing the furniture. The shop cannot claim a ‘‘resale’’ exemption for the purchases but shall pay tax thereon. When a furniture repair shop purchases finishing nails and varnish to be incorporated into its customer’s furniture in connection with the rendition of repair services, the shop may give a ‘‘resale’’ exemption certificate on its purchases of such materials.

(2) An auto repair shop shall pay tax on purchases of brushes, sandpaper, masking tape and other equipment and supplies used in rendering its repair services but not transferred to its customers. On paint, parts and other property which is transferred to the customer as part of the repair service, the shop may give a resale exemption to its suppliers.

The provisions of this § 31.5 amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (40191) to (40194) and (54477).

This section cited in 61 Pa. Code § 31.6 (relating to persons rendering nontaxable services); 61 Pa. Code § 31.12 (relating to imposition of tax); and 61 Pa. Code § 52.4 (relating to sellers and repairers of eyeglasses).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.6 Persons rendering nontaxable services.

(a) Application of tax. Under the TRC, taxable services include services constituting a ‘‘sale at retail,’’ and services made taxable because of the broad definition of ‘‘purchase price’’ contained in the TRC. See section 201(g) and (k)(4) of the TRC (72 P. S. § 7201(g) and (k)(4)). See also § § 31.1—31.3, 31.5 and 33.2. Persons rendering nontaxable services are consumers of the taxable personal property and services used in their business, and shall pay tax upon their purchase or use thereof. Following are examples of services upon which the person rendering the service does not collect tax but is liable for payment of tax on the purchase of taxable personal property and services used in the person’s business:

(1) Services rendered by the learned professions.

(2) Barber-beautician services. Services performed on wigs, falls or other hair-pieces are subject to tax.

(3) Funeral director services.

(4) Stenographic services.

(5) Construction or repair services to realty.

(6) Hauling and transportation services.

(b) Sales at retail of tangible personal property or services subject to tax. If, in addition to the rendition of the nontaxable services, the person rendering the service regularly sells, rents or otherwise transfers or grants the customer a license to use or consume taxable personal property or performs taxable service the person is, with regard thereto, a vendor and shall register for a license and collect and remit sales tax thereon to the Department.

The provisions of this § 31.6 amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (54477) to (54478).

Although creation of art work necessarily entails services by skilled professionals, purchase of tangible products of their efforts, such as material prepared for reproduction into printed manuals, is not the purchase of a nontaxable service, Westinghouse Electric Corp. v. Board of Finance and Revenue, 417 A.2d 800, 802 (Pa. Commw. 1980).

This section cited in 61 Pa. Code § 34.3 (relating to tax returns).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.7 Use tax.

(a) Imposition. Imposition of use tax shall conform with the following:

(1) A person who purchases taxable tangible personal property or services outside of this Commonwealth incurs a use tax liability at the rate of 6% of the purchase price if the property or services are subsequently used or consumed in this Commonwealth and Commonwealth tax is not paid to the vendor. The use tax is also incurred by a purchaser of taxable tangible personal property or services within this Commonwealth if tax is not paid to the vendor.

(2) Licensees shall report and pay use tax at the time their regular sales tax return is due. Nonlicensees shall report and pay use tax on or before the end of the month following the month during which the tax was incurred.

(3) Purchasers who are licensed by the Bureau of Sales and Use Tax (Bureau) or who reside outside of this Commonwealth shall pay the tax directly to the Bureau. Purchasers who reside in this Commonwealth, except those who reside in Philadelphia County, shall be given the option under the law of paying the tax either directly to the Bureau or to the treasurer of the county in which they reside. The following are illustrations of transactions which give rise to tax liability. It is assumed in each example that the vendor has not collected sales tax from his purchaser:

Example 1. A resident of this Commonwealth purchases a radio from a New York supply house. The purchaser incurs use tax liability whether the purchaser brings it into the Commonwealth himself or has it shipped to him.

Example 2. A resident of this Commonwealth purchases a radio from a Commonwealth vendor who fails to collect tax on the transaction. The purchaser is liable for use tax.

Example 3. A company has offices in New York and this Commonwealth. It sends office equipment purchased in New York to its offices in this Commonwealth. The company incurs use tax liability on the equipment.

Example 4. A New York firm has salespersons soliciting orders in this Commonwealth. It purchases advertising displays in New York which it uses for promotional purposes in this Commonwealth. The company incurs use tax liability on the displays.

Example 5. A furniture manufacturer purchases lumber tax-exempt under a resale exemption certificate. It uses some of the lumber to repair its own office flooring. It incurs use tax liability on the lumber.

Example 6. A resident of this Commonwealth has his truck repaired in New Jersey. The resident incurs use tax liability on the repair charges when he brings his repaired truck into the Commonwealth.

Example 7. A contractor of this Commonwealth purchases plumbing materials from a New York manufacturer to install in houses the contractor is building in this Commonwealth. He incurs use tax liability on the materials.

Example 8. An Ohio contractor brings equipment and materials into this Commonwealth to use or consume in constructing an office building. He incurs use tax liability on the equipment and materials.

(b) Credit against tax. A credit against use tax shall be granted with respect to tangible personal property purchased for use outside of this Commonwealth equal to the tax paid to another state by reason of the imposition, by the other state, of a tax similar to the tax imposed by the TRC, if credit will not be granted unless the other state grants substantially similar tax relief by reason of payment of the tax under the act. A current listing of the states can be obtained upon request from the Bureau.

(c) Alternate imposition. Use tax is generally imposed upon the original purchase price of tangible personal property. Exceptions to this general rule are as follows:

(1) Purchases made 6 months or longer prior to first taxable use—fair market value. For property purchased 6 months or more prior to its first taxable use in this Commonwealth, the taxpayer may elect to pay the tax on the fair market value of the property at the time of its first use in the Commonwealth rather than on its original purchase price. The fair market value is the prevailing market price of similar personal property at the time and place of its first taxable use. The election to use this alternative base shall be made within 1 year from the date the return for the taxable use is due by filing notice with the Bureau on Form PA-3 and by paying tax together with any accrued penalties and interest due.

(2) Vehicle dealer temporarily using inventory vehicle. An election may be made to pay an alternate use tax of 6% of the fair rental value on motor vehicles, trailers or semitrailers, other than wreckers, parts trucks, delivery trucks or courtesy cars, purchased by a dealer for resale and used for a period not exceeding 1 year. See § § 31.41—31.50 (relating to vehicles).

(d) Exemptions. The provisions of this section are applicable, with the following exceptions:

(1) General exemptions. The resale and isolated sale exemptions and limited exemptions applicable with respect to tangible personal property or services purchased by exempt business entities such as manufacturers, farmers, dairymen or other persons, organizations or institutions entitled to exemption under the TRC are applicable. Reference should be made to individual sections applicable to each particular exemption. Generally, if a purchaser is not subject to tax on the ‘‘sale at retail’’ to him of property or services, he is not subject to tax on their use. This general rule is not applicable to property or services purchased without payment of tax by a nonexempt purchaser from an out-of-State vendor or when an exempt purchaser makes a use inconsistent with his exemption.

(2) Establishment of permanent business or residence in this Commonwealth. When a nonresident natural person or business entity not actually doing business in this Commonwealth brings property into this Commonwealth in connection with the establishment of a permanent business or residence, tax is not due provided the property was purchased more than 6 months prior to the date it was brought into this Commonwealth or more than 6 months prior to the establishment of the business or residence whichever first occurs. This paragraph is not applicable to tangible personal property temporarily brought into this Commonwealth for the performance of contracts for the construction, reconstruction, remodeling, repairing or maintenance of real estate.

(3) Property brought into this Commonwealth by tourists, vacationers for less than 7 days. The use of tangible personal property purchased by a nonresident person outside of this Commonwealth and then brought into this Commonwealth for use herein for a period not to exceed 7 days or for any period of time when the nonresident is a tourist or vacationer is not subject to tax if the property is not consumed within this Commonwealth. This 7-day period is calculated on a cumulative basis within any 12 consecutive months.

This section cited in 61 Pa. Code § 31.5 (relating to persons rendering taxable services); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.11 Definitions.

The following words and terms, when used in this section and § § 31.12—31.16, have the following meanings, unless the context clearly indicates otherwise: Construction contract—A contract, whether lump sum, cost plus, unit price or time and materials under which a person agrees to perform construction activities. Construction activities—An activity resulting from an agreement or contract under which a contractor attaches or affixes tangible personal property to real estate so as to become a permanent part thereof. Construction activities also include the service of repairing real estate even though tangible personal property is not transferred by a contractor in conjunction with the repairs which he makes. In the absence of satisfactory evidence to the contrary, the following items are presumed to become a permanent part of real estate:

Air, chiller

Air conditioner, wall including filters, diffusers, grilles, registers

Air conditioning system, central including filters, diffusers, grilles, regis ters

Air, handler

Alarm systems (smoke, fire, burglar, security)

Asphalt

Awnings (other than cloth)

Ballast, light

Backboxes, electrical

Blacktop (installed-contract Form No. MS-944)

Boilers (including related accessories)

Bricklaying

Bridge (construction)

Building (moving a building)

Building (prefabricated, precut log, steel)

Burglar alarm systems

Cabinets (attached by screws or fasteners and the like)

Can and bottle crusher (built-in)

Car wash equipment

Carpets (attached by tacking, adhesive, hooks, tape or other methods)

Carports

Ceiling (drop)

Ceiling, molding trim

Chalkboard attached by bolts, nails or screws

Chimney cover

Chimney damper

Circuit breaker

Circulating pump

Computer rooms, wall and flooring

Condenser, heating and air conditioning

Conduit

Control center (motor)

Cooler, display (center cooling system)

Dehumidifier (installed in hot air system)

Dishwasher (built-in)

Disposal, garbage

Dock leveling equipment

Doors, folding fabric

Doors, overhead, garage

Electrical fixtures and outlets

Elevators

Elevators (home stair model)

Emergency lighting (built-in)

Escalators

Excavating (cellars)

Fans, exhaust (built-in)

Fencing

Fire alarm system

Fireplaces

Fire protection system

Flagpole

Floor covering (tile, linoleum, and the like)

Fuel saving units (installed in heating units)

Furnaces (electric, gas, oil) including accessories and filters

Freezer, walk-in

Garage door opener, mechanical, electronic, and the like

Glass (window)

Glass tint material

Guard rails (see also ‘‘medial barriers’’ this listing)

Heaters, baseboard, electrical

Heating fan, coil

Heating systems, central (including distribution system, exchanger)

Hospital equipment Nurses aid stations

Housing, prefabricated

Insulation (building)

Ironwork (ornamental)

Joists

Laboratory tables (with plumbing, utilities)

Landscaping

Lavatories (partition, soap dispenser, toilet tissue dispenser, towel dis penser, dryer, urinal, mirror)

Lifts (hydraulic vehicular)

Lighting fixtures, wires and switches (see also ‘‘Backbox’’ this listing)

Lighting system foundation material (example: concrete, stud and anchor bolts, and the like)

Lighting systems (exterior) embedded in concrete

Lighting, traffic, foundation materials (example: concrete, stud and anchor bolts, and the like)

Lightning rods

Locks, door

Mantels, fireplace

Mausoleums

Medial barriers, highway (embedded in ground or concrete)

Mirrors (attached by screws or bolts)

Oil burners

Ovens (built-in)

Painting (a building or construction)

Parking facility control equipment foundation material

Partitions (attached by means of bolts or screws)

Patio covers (other than cloth)

Playground equipment foundation material (example: concrete, bolts, and the like)

Pumps, water (above ground and submersible)

Railing (porch)

Range, cooking (wood or coal)

Refrigerator, walk-in

Restaurant equipment

Bins, storage

Bun steamer, connected to water system

Electrical systems

Exhaust ventilators

Faucets

Plumbing systems

Refrigerator, walk-in

Scullery sink

Shelving, built-in

Sinks, vegetable and scullery

Steamer, high speed, connected to water system

Road (construction)

Roofing (repairs)

Saunas

Scales, pit

Scotchtint

Sealant, driveway

Security alarm system

Security systems (burglar, smoke and fire alarm, and the like)

Septic tank and pipes

Shrubbery

Shutters

Siding (aluminum, metal or vinyl)

Sink

Solar energy system

Smoke alarm system

Spouting

Sprinkler system

Stair lift

Swimming pool accessories (installed or attached to an in-ground swim ming pool)

Swimming pools (installed in-ground)

Tank, storage

Television, cable distribution system including equipment mounted on the home owner’s TV set

Temperature controls (installed as part of heating or air conditioning sys tem)

Tennis courts

Tile

Toilets

Traffic control equipment foundation material (example: concrete, stud and anchor bolts)

Trees

Vacuum systems, central

Vanities

Ventilating systems

Wall paper

Washer, dish (built-in)

Water chillers

Water heaters

Windows, storm

Wires, electrical

Woodburning stoves Contractor—A person engaged in performing a construction contract or construction activities. The term includes prime contractors and subcontractors. Sales activities—An activity resulting from an agreement or contract under which a contractor transfers tangible personal property or performs services upon tangible personal property belonging to another person and installs the property so as not to become a permanent part of the real estate. In the absence of satisfactory evidence to the contrary, the following items are presumed not to become a permanent part of real estate: Air conditioner, window including filters Amplifiers, all (Beck Electric) Antenna, television Appliances (not built-in) Auditorium type seating Awnings (cloth) Backboxes, clock (Beck Electric) Baseboard, trane (plug-in) Basketball backstop (bolted) Blacktop (materials contract Form No. MS-963) Bleachers Blinds (venetian) Bowling alleys and pin setting equipment Bulb, lamp Buss duct Cabinets (free standing) Can and bottle crusher Carpets (unattached room size) Chalkboard (attached by hooks) Church pews Clock, master clock and program relay equipment (Beck Electric) Clock system, clock backbox, wiring (Beck Electric) Communication equipment Conveyors Cooler, display (unit self-contained) Dehumidifier (free standing) Dental chairs and accessories Dishwasher (free standing) Dispensing equipment, soda and liquor Drapes Dryer, clothes (free-standing) Emergency lighting (portable battery operated) File cabinets Fire extinguishers Fixtures, shelving, islands, (store) Freezers (home) Furniture Fuses Generators, electrical Grave marker foundations Grill, cooking Gymnasium equipment (portable) Hospital equipment Doctor paging system Nurse calling system Operating room lights Oxygen and gas systems Patient wall unit TV calling system TV monitoring system Hydro therapy equipment and accessories Laboratory tables (without plumbing, utilities) Lamps, portable Library shelving Lighting, emergency (portable battery) Lighting, stage, including power tracks Lighting, traffic (not foundation material) Lighting systems street and parking in which fixtures are attached to pre pared foundations by bolt (not including foundation material or under ground wiring and conduit) Linoleum (not attached to floor; see § 58.13 (relating to carpeting and other floor coverings)) Loud speakers, assemblies (Beck Electric) Medial barriers, highway (pre-cast cement free standing) Microphones Mirrors (attached by hooks) Modulars, room dividers, not attached Parking facility control equipment (not including foundations) Playground equipment (freestanding) Poles traffic light and luminaries when attached to concrete bases by means of bolts not including foundation material Racks, bicycle Radio sets Railroad signal equipment Range, cooking (gas, electric) Rectifier, electrical (Beck Electric) Refrigerators (home) Restaurant equipment Board, cutting Cabinet, warming, portable Can opener Cutter/mixer, vertical Cutting boards French fryers Gas grill Mixer Peeler, potato Rack, oven Rack, pan Shelving, portable Slicer Truck, dish Truck, food Truck, tray and silverware Truck, utility Scales, portable Screen, projection Seating (auditorium, stadium, and the like) Signal head, traffic Signs (electric, neon, wood, metal or plastic attached by bolts or screws) Sound equipment (including amplifiers, transformers and microphones) (Beck Electric) Stone, sand, gravel, and the like, delivered on pile or spread but not involv ing a contract of installation Swimming pool accessories (freestanding or installed on an aboveground swimming pool) Swimming pools (installed aboveground) Switchgear, electric (Beck Electric) Telephone communication equipment Television sets, wiring and antennas Television transmission or receiving facility Traffic control equipment (not foundation material) Transformers (Beck Electric) Venetian blinds Washer (clothes—freestanding) Washer, dish Water cooler, drinking Water softener and filtration equipment Wired music equipment X-ray Equipment X-ray Illuminator

The provisions of this § 31.11 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667; amended September 26, 1975, effective September 27, 1975, 5 Pa.B. 2538 through August 19, 1983, effective August 20, 1983, 13 Pa.B. 2554. Immediately preceding text appears at serial pages (40199) and (40200).

A property that is installed or attached so as to not become a permanent part of the real estate is subject to a sales tax because it falls under the definition of ‘‘sales activities’’ in § 31.11. Regarding medical equipment, § 31.11 only uses the example of nurses’ aid stations as presumed to be a permanent part of the property and thus subject to a sales tax. Northeastern Pennsylvania Imaging Center v. Commonwealth, 35 A.3d 752 (Pa. 2011).

This section cited in 61 Pa. Code § 31.13 (relating to claims for exemptions); 61 Pa. Code § 46.3 (relating to construction contractor installing stained glass windows); 61 Pa. Code § 46.7 (relating to nonresident contractors); and 61 Pa. Code § 46.8 (relating to industrialized housing).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.12 Imposition of tax.

(a) Construction activities. Imposition of tax on construction activities shall conform with the following:

(1) A contractor shall pay tax upon the purchase price, as defined by the TRC, of all property, including materials, equipment, components and supplies, which he furnishes and installs in the performance of his construction activities.

Example 1: As part of a contract for the construction of a house ‘‘X’’ Contractor has agreed to install a built-in dishwasher for his customer. ‘‘X’’ Contractor pays his supplier $150 for the purchase of the dishwasher. ‘‘X’’ Contractor pays $9 sales tax to his supplier and subsequently installs the dishwasher in the kitchen of the house he is building. The dishwasher becomes a part of the realty and is included in the overall price of the house to the customer. ‘‘X’’ Contractor does not charge sales tax on this transaction to his customer. The contractor may include the tax he must pay in his bid proposal but not as a separately stated item.

(2) A contractor whose activities are confined to construction activities is required to pay tax directly to his supplier at the time he purchases the materials, equipment, components or supplies which he furnishes and installs. A use tax license number shall be available to a construction contractor from the Department to permit him to remit tax directly to the Department upon the purchases from vendors who are not required or are not licensed with the Department for the collection and remission of tax.

Example 1: ‘‘X’’ Contractor purchases lumber in Baltimore, Maryland, which is delivered in Pennsylvania. The lumber supplier is not registered with this Commonwealth to collect sales tax of this Commonwealth. ‘‘X’’ Contractor shall be required to remit use tax on his ‘‘purchase price’’ (including shipping charges) of the lumber directly to the Department under his use tax number. See § 33.2 (relating to purchase price).

Example 2: ‘‘X’’ Contractor purchases and takes possession of lumber in Baltimore, Maryland. At the time of purchase the Maryland rate of tax is 4%. ‘‘X’’ Contractor pays to his supplier 4% tax. Maryland and the Commonwealth have enacted reciprocal tax statutes. Because of this reciprocity, ‘‘X’’ Contractor may take a 4% tax credit against the use tax of the Commonwealth which he owes. ‘‘X’’ Contractor shall be required to remit 2% use tax on his ‘‘purchase price’’ of the lumber directly to the Department under his use tax number.

(3) A construction contractor shall pay tax upon all tools and equipment, such as backhoes, cranes, saws, drills, motor vehicles, and the like, which are used but not transferred in conjunction with his construction activities. Effective March 4, 1971, a construction contractor performing contracts for public utilities may no longer claim the exemption of the utility upon the purchase or rental of such items.

(4) A contractor who performs both construction activities and sales activities shall be required to be licensed with the Department for the collection and remission of sales tax and shall be issued a sales tax license number. As to property which he knows he will resell, he may use a resale exemption certificate upon his purchase from his supplier. He shall collect and remit tax upon the sales. As to all other purchases which he may make, he shall pay tax to his supplier at the time of purchase.

(b) Sales activities. Imposition of tax on sales activities shall conform with the following:

(1) A contractor who, in addition to performing construction activities, makes sales at retail, as defined by the TRC, of tangible personal property is deemed to be a vendor and is required to register with the Department for the collection and remission of tax upon the sales which he makes.

(2) A contractor who performs taxable services in repairing and altering tangible property or applying or installing tangible personal property as a repair or replacement part of other personal property is also deemed to be a vendor and is required to collect and remit tax. See § 31.5 (relating to persons rendering taxable service).

(3) Effective March 4, 1971, charges for labor or transportation in conjunction with the sale at retail and installation of tangible personal property are subject to tax even though the labor or delivery charges are separately stated on the billing.

Example 1: ‘‘X’’ Contractor, who has been issued a sales tax number, purchases a portable dishwasher which is delivered to the house ‘‘X’’ Contractor is building for ‘‘Y’’ Customer. ‘‘X’’ Contractor purchases the dishwasher for $150 from his supplier and gives him a resale exemption certificate. ‘‘X’’ Contractor then charges ‘‘Y’’ Customer $200 for the dishwasher, including delivery, unpacking and installation charges. ‘‘X’’ Contractor shall collect $12 sales tax from ‘‘Y’’ Customer based upon the total sales price of $200.

(c) Contractors producing the property they consume, as part of the same business operation. Contractors who, as part of the same business operation, produce the property they consume shall conform with the following:

(1) A contractor, in addition to performing construction activities, may also manufacture, mine, process or grow the materials, supplies or equipment which he consumes in the performance of his construction activities. With respect to his manufacturing, mining, processing, and the like, operations, the contractor is entitled to the exemption provided by the law for the operations.

(2) With respect to construction activities, the contractor’s use tax base is the acquisition cost of the raw material purchased to produce the property which he consumes.

Example: A contractor purchases seedlings for $2 which he grows and later transfers to his customer in conjunction with his construction activities. At the time of transfer, the seedlings have a market value of $50. The contractor, however, is required to pay tax upon the $2 cost of the seedlings which he paid at the time of their acquisition.

The provisions of this § 31.12 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667.

Exemption

The manufacturing exclusion of subsection (c)(1) does not apply to materials used in construction and affixed to real estate. That is consistent with the statutory definition of ‘‘manufacture.’’ Golden Eagle Construction Co. v. Commonwealth, 813 A.2d 13 (Pa. Cmwlth. 2002); affirmed 834 A.2d 1103 (Pa. 2003).

‘‘Use’’ of Materials

Where the taxpayer uses raw materials as part of its paving activities, the activity is not considered ‘‘sale at retail,’’ and, since the materials are incorporated into and made a part of real estate, the materials are considered ‘‘used’’ and not ‘‘sold.’’ Golden Eagle Construction Co. v. Commonwealth, 813 A.2d 13 (Pa. Cmwlth. 2002); affirmed 834 A.2d 1103 (Pa. 2003).

This section cited in 61 Pa. Code § 31.11 (relating to definitions); 61 Pa. Code § 46.3 (relating to construction contractor installing stained glass windows); 61 Pa. Code § 46.7 (relating to nonresident contractors); and 61 Pa. Code § 46.8 (relating to industrialized housing).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.13 Claims for exemptions.

(a) With the exception of the limited exemption set forth under subsections (h)—(k), a contractor may not claim an exemption upon his purchase of materials, supplies, equipment or parts which he installs so as to become a part of the real estate in conjunction with his construction activities. Thus, a contractor erecting a building, repairing a roof, replacing a door for a governmental agency, manufacturer, processor, public utility, school district, charitable or religious organization, and the like, shall pay tax upon the property which he consumes and is not entitled to use the exemption of the ultimate customer for whom he is performing the contract.

(b) Effective March 4, 1971, the exemption which a contractor has with respect to contracts with public utilities, manufacturers, and the like, has been limited. The exemption is limited to the purchase of property constituting equipment, machinery and parts thereof which the contractor, in conjunction with his contract, transfers to and is subsequently used directly by the public utility, manufacturer, processor, and the like. To qualify for exemption the equipment, machinery or parts thereof shall be used directly in the rendition of a public utility service, manufacturing operation, and the like, upon installation. The exemption applies whether or not the equipment, machinery or part thereof is affixed to the real estate. The following are examples of equipment to which the limited exemption applies:

(1) Coal conveyor systems, pulverizers, boilers, cooling towers, electrostatic precipitators, utility poles, transmission wire, transmission wire poles, transmission and substation equipment installed for public utilities or electric cooperatives.

(2) Sanitary sewer, not storm sewers, or water mains, manholes and covers, sewage treatment equipment, pumping equipment installed for public utilities, municipalities or municipal authorities.

(3) Machinery and equipment which act upon or convey the manufactured or processed product between the first and last production operation installed for manufacturers or processors. Machinery and equipment which act upon or convey dairy products between the point where raw milk enters the clarifier to the point the dairy product is bottled or capped, installed for a dairy.

(4) Silos which produce ensilage, hay and grain conveyor systems, irrigation pumps, pipe and fittings, water pumps and piping used to convey water to farm animals installed for a farmer.

(c) Notwithstanding any other procedure established by this section, a contractor, whether or not licensed with the Department for the collection and remission of sales tax, shall obtain a ‘‘Certification’’ from the exempt public utility, manufacturer or similar customer certifying that:

(1) The property will be resold or transferred to the exempt public utility, manufacturer, or the like.

(2) It constitutes machinery, equipment or parts thereof.

(3) Upon installation it will be directly used by the exempt customer in its public utility facilities, manufacturing operations, or the like. Attached to the ‘‘Certification’’ shall be a listing of the specific items of equipment, machinery or parts upon which the exempt customer claims an exemption.

(4) A sample copy of the required form for this ‘‘Certification’’ is as follows:

(d) At the time the contractor makes purchase of the items for resale, he is required to tender a copy of the ‘‘Certification’’ to the supplier, upon which the supplier will mark the date filed, which the supplier will retain, together with a copy of the Department’s ‘‘Blanket Exemption Certificate’’ (Form REV-345), completed by the contractor setting forth on the face thereof the following language: ‘‘Property and/or services will be resold to (Name of Exempt Customer) pursuant to the Certificate executed by them and filed with you on (Date of Filing)’’.

(1) A sample copy of the required format is as follows:

(2) The supplier shall retain the Blanket Exemption Certificate together with the ‘‘Certification’’ in his exemption certificate file to justify the tax free sale of the list of items filed with the certification. Contractors failing to follow this procedure may not make tax free purchases and are liable for tax upon the materials used in conjunction with their contracts.

(e) A contractor may make tax free purchases of property which he resells to exempt entities in conjunction with his construction activities. This exemption applies only to property furnished by the contractor which, upon installation, does not become a permanent part of the real estate. Examples of property which, upon installation, do not become part of the real estate are set forth in the definition of ‘‘sales activities’’ in § 31.11 (relating to definitions).

(f) A contractor who is licensed with the Department to collect and remit sales tax; that is, holds a sales tax license, may make tax free purchases of property which he will sell by tendering to his supplier a completed copy of a Blanket Exemption Certificate (Form REV-345). To qualify as a valid exemption certificate, the face side of the certificate must reflect the following language: ‘‘Property and/or services will be resold in the ordinary course of the purchaser’s business conducted under Pennsylvania Sales Tax License Number (Insert Number).’’

(1) A sample copy of the required format is as follows:

(2) If the exempt customer to whom the property will be transferred holds a valid exemption; that is, a governmental agency, school district, and the like, applying to the property being transferred, the contractor shall obtain a completed copy of a Blanket Exemption Certificate (Form REV-345) from the exempt entity in lieu of the collection of tax. If the ultimate consumer does not hold an exemption, the contractor shall collect and remit the tax upon the contract price of the item or items including charges for delivering or installing the item under the contract.

(g) A contractor who is not licensed with the Department to collect and remit sales tax is not authorized to follow the normal procedure outlined in subsection (f) in making tax free purchases of property he will resell in conjunction with his construction activities. A contractor may not use a Use Tax License Number in making tax free purchases for resale. A Use Tax License Number is that number issued by the Department prefixed with the digits ‘‘89.’’

(h) When the ultimate customer is a governmental agency, school district, religious organization, or the like, the contractor not holding a sales tax license shall obtain a ‘‘Certification’’ from the exempt customer certifying the following:

(1) The property will be resold to the exempt customer.

(2) The basis for the exemptions.

(3) The property, upon installation, will not constitute an improvement to real estate but remain tangible personal property.

(i) Attached to the ‘‘Certification’’ shall be a listing of the specific items upon which the exempt customer claims an exemption.

(1) A sample copy of the required format for this ‘‘Certification’’ is as follows:

(2) At the time the contractor purchases the items for resale, he shall tender a copy of the ‘‘Certification’’ to the supplier, upon which the supplier shall mark the date filed, which the supplier shall retain together with a copy of the Department’s ‘‘Blanket Exemption Certificate’’ (Form REV-345), completed by the contractor, setting forth on the face thereof the following language: ‘‘Property and/or services will be resold to (Name of Exempt Customer) pursuant to the Certification executed by them and filed with you on (Date of Filing).’’ A sample copy of the required format is as follows:

(3) The supplier shall retain the Blanket Exemption Certificate together with the ‘‘Certification’’ in his exemption certificate file to justify the tax free sale of the list of items filed with the ‘‘Certificate.’’ Contractors failing to follow this procedure may not make tax free purchases. If the contractor fails to obtain a ‘‘Certification’’ and does not pay tax at the time of purchase, he shall be deemed to be the ultimate consumer of the property which he transfers and shall pay the applicable tax. A contractor’s failure to register shall make him liable for tax upon the installed value, including delivery, labor and installation costs, of the property not incorporated as part of the real estate.

(j) When the ultimate customer is not entitled to an exemption, the contractor shall be licensed with the Department either temporarily or permanently for the collection and remission of tax. Upon receipt of a temporary or permanent sales tax license number, he may purchase property for resale utilizing the procedure outlined in subsection (f). A temporary sales tax license number may be used for 90 days after issue by the Department and may be obtained from a District Sales Tax Office.

(k) A contractor may not use a use tax license number in making exempt purchases for resale. A contractor may not collect sales tax from his customer unless he has been issued a sales tax license number by the Department. A contractor making taxable sales of property not incorporated as part of the real estate shall be liable for the collection of tax upon the installed value including delivery, labor and installation costs of the property not incorporated as part of the real estate.

The provisions of this § 31.13 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667.

This section recognizes sanitary sewer systems and water systems as public utility facilities for purposes of the statutory exemption for use sales tax purposes. Ernest Renda Contracting Co., Inc. v. Commonwealth, 532 A.2d 416, 419 (Pa. 1987).

For an exemption certificate to be valid on its face there must be ‘‘a listing of the specific items of equipment, machinery or parts upon which the exempt customer claims an exemption’’ attached to the certification. Ernest Renda Contracting Co., Inc. v. Commonwealth, 532 A.2d 416, 423 (Pa. 1987).

This section cited in 61 Pa. Code § 31.11 (relating to definitions); 61 Pa. Code § 46.3 (relating to construction contractor installing stained glass windows); 61 Pa. Code § 46.7 (relating to nonresident contractors); and 61 Pa. Code § 46.8 (relating to industrialized housing).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.14 Taxes paid purchases resold (TPPR).

(a) If a contractor later resells a particular item to a nonexempt customer with respect to which he has paid sales tax at the time of purchase, he shall nonetheless collect the full sales tax upon his retail price from his customer, and he shall report the tax collected to the Department. He may, at the time he reports the tax, take a credit on account of ‘‘Taxes Paid—Purchases Resold’’ (TPPR) against the tax which he has collected equal in amount to the tax which he paid to his supplier, provided that he paid the tax to his supplier within 3 years of the date of resale. He shall indicate upon his return the amount of tax which he has paid to his suppliers upon items sold which he is crediting against the tax collected from his customer on account of TPPR. It is not sufficient merely to report and remit tax upon the ‘‘markup’’ without indicating to the Department upon his return the amount of credit which he has taken.

Example: ‘‘X’’ Company purchases 100 sinks during the month of August at $70 per sink. ‘‘X’’ pays tax to its supplier upon all of the sinks, since ‘‘X’’ does not know or have good reason to know that all or any specified number of them will be sold. Later ‘‘X’’ uses 60 of the sinks in construction activities, and sells 40 of them over-the-counter at a retail price of $100 per sink. ‘‘X’’ collects sales tax of $240 upon the sale of these sinks.

(b) In reporting the tax upon its return, ‘‘X’’ Company shall show the following with respect to these transactions:

(1) Total Gross Sales…$4,000.00

The TPPR figure represents the amount of tax paid to ‘‘X’’ Company’s supplier upon the sinks which ‘‘X’’ resold (40 X $70 X 6%). Item (8) shall be inserted upon the return form on the ‘‘Total Tax Due’’ line, the TPPR amount being inserted in front of the total amount in the rules column, thus:

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.15 Reciprocal credit for taxes paid other states.

(a) A contractor may be entitled to a tax credit against tax owed to the Commonwealth upon property used or consumed in this state. To be entitled to such credit, the following conditions shall be met:

(1) Purchase and possession of the property shall be made in a state other than this Commonwealth; and

(2) Sales tax shall have been legally paid upon the property to the other state; and

(3) The sales tax law of the other state must grant substantially the same tax credit for sales tax paid to the Commonwealth. A list of states granting tax credit is available from the Department, attention Legal Bureau.

(b) A contractor who is entitled to tax credit against sales tax owed to the Commonwealth may do so at the time he files his sales or use tax return. He shall indicate upon the return the amount of tax which he owes and the amount of tax credit he is taking in a similar manner to the taking of TPPR credit outlined in § 31.14 (relating to taxes paid purchases resold (TPPR). A contractor taking reciprocal tax credit shall maintain supporting records as justification for tax credit taken on his tax return.

The provisions of this § 31.15 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667.

This section cited in 61 Pa. Code § 31.11 (relating to definitions); 61 Pa. Code § 46.3 (relating to construction contractor installing stained glass windows); 61 Pa. Code § 46.7 (relating to nonresident contractors); and 61 Pa. Code § 46.8 (relating to industrialized housing).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.16 Contractors acting as agents for their exempt customers.

A contractor who, under a binding agreement with his customer, acts in the capacity as an agent is subject to this chapter in the same manner as he would if the agency relationship did not exist.

Example: ‘‘X’’ Contractor and ‘‘Y’’ Public Utility enter an agency contract for the construction of an electrical generation station. The agency contract provides that ‘‘X’’ Contractor shall purchase all equipment, materials and supplies as agent for ‘‘Y’’ Public Utility. The exemption available to ‘‘X’’ Contractor is limited to the purchase of machinery, equipment and parts thereof which upon installation are directly used in generating and transmission of electricity. ‘‘X’’ Contractor is not entitled to the same exemption as that of ‘‘Y’’ Public Utility.

The provisions of this § 31.16 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667.

This section cited in 61 Pa. Code § 31.11 (relating to definitions); 61 Pa. Code § 46.3 (relating to construction contractor installing stained glass windows); 61 Pa. Code § 46.7 (relating to nonresident contractors); 61 Pa. Code § 46.8 (relating to industrialized housing); and 61 Pa. Code § 58.13 (relating to carpeting and other floor coverings).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.21 Advertising agencies.

(a) Purchases. Purchases by advertising agencies shall be taxed in accordance with the following:

(1) Materials used or consumed in rendering professional services. Advertising agencies that provide professional services are the ultimate consumers of tangible personal property used or consumed by them in the preparation and placing of advertising in magazines, newspapers, and on radio and television when no tangible personal property is tranferred to the purchaser other than proofs or samples for his approval, comment, criticism, information or other similar purposes. Purchases of office supplies, paper, ink, paint, art work from independent artists, engraver’s charges for metal plates, mats and other materials used or consumed in this type of work is subject to tax. For example, an advertising agency is the ultimate consumer of the mats and all other tangible personal property it uses or consumes in the preparation of the mats.

(2) Tangible personal property purchased on behalf of specific clients. Advertising agencies rendering professional services, (that is, market and public relations counseling, copy writing, art or creative direction, placement and supervision of media and graphic arts purchases on behalf of specific clients) shall pay sales tax on all purchases of tangible personal property for specific client accounts to the exact degree that the respective client would be liable if purchasing the materials directly from primary suppliers. Certification that the authorized purchase of specific tangible property falls within any exempt category can originate only with the client and shall be furnished to the agency in writing stating the basis on which exemption is claimed. The agency may then inform the pertinent supplier or suppliers on the client’s behalf, providing a duly executed exemption certificate indicating the basis for the exemption.

(3) Materials purchased for resale. Advertising agencies are entitled to claim the resale exemption on purchases of tangible personal property which they directly resell or incorporate into products which they resell. Circulars, signs, mats, show cards, posters and other similar tangible personal property are deemed to be resold by advertising agencies. For example, when an advertising agency prepares and sells signs to a client, it shall collect tax on the purchase price, but is entitled to claim a resale exemption on materials which become part of the signs. Similarly, when an advertising agency contracts to provide mats to a client who in turn will forward the mats to its dealers throughout the country, the advertising agency shall collect tax on the price charged for the mats, but is entitled to claim a resale exemption on the purchase of the mats from the mat maker. The exemption does not apply to the purchase of the art work, paper and ink, which is used by the agency in preparing the mock-up of the mat for the mat maker since the materials used in preparing the mock-up are not resold to the client.

(4) Limited application of printing exemption. Printing engaged in as a business is included in the definition of manufacturing. See section 201 of the TRC (72 P. S. § 7201) and § 32.32 (relating to manufacturing; processing). The sale of taxable property to an advertising agency is not subject to a claim of exemption on the theory that the purchased property is to be directly used in printing operations unless the agency itself is actually engaged in the business of printing. The exemption is not applicable to purchases by advertising agencies of tangible personal property such as paper, ink, mats, plates and similar property which are used in the preparation of or form a part of mock-ups or similar items which are transferred to printers or other persons for use in reproduction.

(b) Sales. Sales by advertising agencies shall be taxed in accordance with the following:

(1) Advertising agencies shall collect tax from their customers on sales of circulars, signs, mats, show cards, posters and similar tangible personal property. If the sale of the property includes a charge for services such as consultant fees or market research fees, and the charge for such services is not separately stated, tax shall be charged on the total purchase price. For example, if an advertising agency contracts to conduct a market research program for a client and supply him with 1,000 advertising displays based on the findings of the research, the charge for the market research program is subject to tax if it is not separately stated from the charge for the displays. Similarly, advertising agencies are not required to collect the tax on services performed in preparing and placing advertising in magazines, newspapers, or on radio and television when no tangible personal property is transferred to the purchaser other than samples for his approval.

(2) Professional services do not include labor, even though it be skilled, which is performed in the preparation of tangible personal property which is sold at retail by the advertising agency. For example, when an advertising agency prepares signs for its clients, a deduction is not permitted for the salary paid to its painter. Similarly, when an advertising agency employs a commercial artist, a deduction for his salary is not permitted from the purchase price charged for his art work which is sold at retail to another advertising agency or person.

(3) Sales of direct mail advertising materials are exempt from tax. See § 31.29 (relating to books, printed matter and advertising materials). Property used or consumed in production of direct mail advertising is subject to tax unless it qualifies for the printing or resale exemption.

(4) The sale at retail of advertising items to persons who distribute them free of charge is subject to tax since the persons are considered the ultimate consumers of the advertising items. For example, when an advertising agency contracts to prepare counters and window displays for a client who distributes the displays free of charge to persons marketing its products, the advertising agency shall collect tax from its client.

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.22 Duplicating.

(a) Sale at retail of taxable property. Persons engaged in the process of accurately duplicating, reproducing or forming a durable medium for the reproduction of an original document are vendors of copies purchased by their customers, whether or not produced to the special order of the customer. Duplicating includes, but is not limited to, the production of photostatic copies or blueprints. Sales tax applies to all charges for the products sold at retail, including charges for the making of copies out of materials furnished by the customer. The purchase price may not be reduced on account of expenses incurred, such as rentals of equipment, or salaries or wages paid to assistants whether or not such expenses are itemized in billings to customers.

(b) Purchase of supplies and equipment. The purchase of items, such as chemicals, film, proof paper or other supplies used or consumed in the process of duplicating, reproducing or forming a durable medium for the reproduction of an original is subject to tax. Vendors may claim the resale exemption on purchases of tangible personal property which they directly resell or incorporate into products which they resell.

The provisions of this § 31.22 amended January 18, 1974, effective January 19, 1974, 4 Pa.B. 92.

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.23 Auctioneers.

(a) Sales by auctioneer. An auctioneer selling his own tangible personal property shall collect and remit the tax. When he is engaged by another to sell tangible personal property and the sale at auction takes place on premises of the auctioneer, the tax shall also be collected and remitted to the Commonwealth by the auctioneer.

(b) Sales on premises other than auctioneer’s. When the owner of tangible personal property sold at auction, other than on auctioneer’s premises, is regularly engaged in selling the property, the auctioneer shall be deemed to be the agent of the owner and the owner is responsible for the collection of the tax on the transaction. If the owner is not regularly engaged in selling property, the transactions are not taxable.

(c) Sales for out-of-State owners. An auctioneer selling tangible personal property within this Commonwealth shall collect the tax notwithstanding the fact that the property belongs to an out-of-State owner.

(d) Computation of tax. The tax shall be computed upon the total purchase price of each transaction without deduction for the auctioneer’s commission.

This section cited in 61 Pa. Code § 32.4 (relating to isolated sales).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.24 Florists.

(a) Sale or rental of floral products. Florists shall collect the tax upon sale or rental of flowers, wreaths, bouquets, potted plants and property of a like nature.

(b) Telephone or telegraphic orders. On all telephone or telegraph orders to be transmitted by one florist located within this Commonwealth to another florist who shall make delivery, either within or without this Commonwealth, the florist taking the order shall collect and report the tax on the gross amount of the order. Effective March 4, 1971, the tax applies to telegraph or telephone charges whether or not they are separately stated. A florist receiving telephone or telegraph orders from another florist may not collect tax on the orders.

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.25 Licensing of club plan secretaries and other independent vendors.

(a) Every person operating a club or similar merchandising plan, or operating as an independent vendor representing a particular supplier selling taxable property shall obtain a license from the Department and collect tax on merchandise sold by him, unless the one supplying the merchandise has been authorized by the Department to register and precollect tax from the club secretaries or independent vendors based upon the purchase price of the merchandise to the ultimate consumer. When the person supplying the merchandise registers to collect the tax, the club secretaries or vendors shall reimburse themselves for the tax paid to the supplier by adding the tax, as such, to the purchase price and collecting it from their customer.

(b) For a supplier to collect tax on behalf of club secretaries or independent vendors, he shall make application to and receive authorization from the Department.

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.26 Financial institutions.

(a) Purchases by financial institutions. A financial institution shall pay the tax at the time of purchase of all tangible personal property to be used by it in the conduct of its business. This includes all tangible personal property gratuitously furnished by the financial institutions to its customers, such as passbooks, check books, deposit slip books or similar items.

(b) Sales by financial institutions. A financial institution selling personalized check books, coin banks or other items of tangible personal property subject to tax may do one of the following:

(1) Obtain a license, collect the tax from its customers and remit the tax collected along with its monthly returns.

(2) Elect not to register and file returns, if in the latter case it pays tax to its suppliers based upon the price at which the merchandise is to be sold by the financial institution to its customers and reimburse itself for the tax so paid by collecting the tax from its customers.

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.27 Morticians and funeral directors.

(a) Taxable sales to funeral directors. Sales to morticians and funeral directors of tangible personal property to be used or dispensed in the operation of their business are sales at retail and subject to the tax imposed by the act. Taxable equipment, materials and supplies include, but are not limited to: hearses, limousines and flower cars; shrouds; clothing specially designed and only usable for burial purposes; chairs; gloves; cosmetics; embalming supplies; embalming equipment; flowers and floral decoration.

(b) Exemption. The sale or use of caskets, movable burial vaults, and markers and tombstones for human graves shall be exempt from tax.

(c) Rentals of property to funeral directors. Rentals of property such as limousines, hearses and flower cars to morticians and funeral directors to be used by them in rendering of services in conjunction with a funeral shall be taxable and the funeral director shall pay a sales tax on the rentals in the manner provided in § 31.4 (relating to rentals or leases of tangible personal property).

(d) Rentals of property by funeral directors. Morticians and funeral directors who rent property to others shall register and collect tax with respect to such rentals. Use of property in conjunction with a funeral service performed by the person owning the property shall not be deemed to be a rental. If a separate charge is made for rental of specific items, the tax applies.

Example: A funeral director who on occasion rents a hearse or other equipment to another funeral director shall register and collect tax upon the rental. The funeral director shall also pay tax when he purchased the hearse since it was not purchased for use predominantly in a rental business.

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.28 Vending machines and automatic sales devices.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Juice beverage—A liquid beverage containing at least 25% by volume natural fruit or vegetable juice. Meal—A variety of foods prepared for immediate consumption and sold as a single item. Operator—A person who makes sales of tangible personal property, including food or beverages, primarily through a vending machine. Selected food and beverage items—Soft drinks; meals; hot or cold sandwiches, including cold meat sandwiches, cheese sandwiches, hoagies, hot dogs, hamburgers and similar sandwiches; brewed coffee; hot beverages such as hot chocolate, hot tea and similar items; food from salad bars; pizza, soup and other food items dispensed from the vending machine in a heated form or which are served in cold form and normally heated in an oven or microwave provided by the operator. Soft drink—

(i) All nonalcoholic beverages, whether carbonated or not, such as soda water; ginger ale; Coca Cola; lime cola; Pepsi Cola; Dr. Pepper; fruit juice when plain or carbonated water, flavoring or syrup is added; carbonated water; orangeade; lemonade; root beer or all preparations, commonly referred to as ‘‘soft drinks’’ of whatsoever kind, and are further designated as including all beverages, commonly referred to as ‘‘soft drinks,’’ which are made with or without the use of any syrup.

(ii) The term does not include a juice beverage. Vending machine—A device which mechanically dispenses tangible personal property, including food and beverages, for a purchase price.

(b) Registration. An operator who sells taxable tangible personal property or selected food and beverage items through a vending machine is required to obtain a Sales, Use and Hotel Occupancy Tax License for the purpose of collecting and remitting tax to the Department. One license is sufficient for any number of machines operated by the same operator.

(c) Identification requirement. A sign or a sticker setting forth the name and address of the operator shall be conspicuously displayed on the vending machine.

(d) Scope.

(1) General. The sale of food or beverages from a vending machine may be taxable or exempt depending upon the type of food or beverage or upon the basis of the location from which the food or beverage is sold. Since a vending machine does not qualify as an eating establishment, only the sale of selected food and beverage items as defined in subsection (a), is taxable when sold from a vending machine. Taxable tangible personal property, other than food and beverages, is also subject to tax when sold from a vending machine.

(2) Sales of taxable tangible personal property, other than selected food and beverage items.

(i) Imposition. The sale of taxable tangible personal property, such as cigarettes, combs, toys, pencils and similar items is subject to tax upon the purchase price of each individual item.

(ii) Collection of tax. The vending machine operator is required to collect tax upon the purchase price of each individual taxable item of property. The amount to be inserted in the machine is presumed to include the amount of tax to be collected for each item. If, however, the Department determines upon audit that the vending machine operator has not reported and remitted tax in accordance with this section and the TRC, the presumption will not apply, and the Department will assess the vending machine operator as though the amount inserted into the machine was the purchase price without the tax.

Example 1: ‘‘A’’ operates a vending machine from which pencils may be purchased. To obtain a pencil, the purchaser is required to insert 35¢ into the machine. The tax is properly reported and remitted as follows: the purchase price is 33¢ and tax is 2¢.

Example 2: ‘‘A’’ operates a vending machine from which pencils may be purchased. To obtain a pencil, the purchaser is required to insert 35¢ into the machine. ‘‘A’’ reports and remits no Sales Tax. When ‘‘A’’ is audited by the Department, he is assessed as follows: purchase price 35¢, tax 3¢.

(3) Sales of selected food and beverage items.

(i) Imposition. The sale of selected food and beverage items, as defined in subsection (a), from a vending machine is subject to tax upon the total receipts from the sale of the items.

(ii) Collection of tax. An operator of a vending machine from which selected food and beverage items are sold is required to collect and remit Sales Tax at the rate of 6% upon the sale of the selected food and beverage items. Sales Tax shall be computed by the following formula: (Total receipts from the sale of selected food and beverage items ÷ 1.06) x .06 = Sales Tax due.

Example:

‘‘A’’ operates a vending machine from which milk, coffee and crackers are sold. ‘‘A’’ removes $100 from the machine representing the following sales: milk—$50, coffee—$25 and crackers—$25. Coffee is a selected food and beverage item. Milk and crackers are not. ‘‘A’’ remits tax in the amount of $1.42 calculated as follows: ($25 ÷ 1.06) x .06 = $1.42.

(4) Sales of food and beverages other than selected food and beverage items.

(i) The sales of food and beverages of the type described in this paragraph are not subject to Sales Tax when sold from a vending machine.

(ii) Examples of exempt food and beverages include:

(A) Baked goods, such as cakes, pies, cookies.

(B) Potato chips.

(C) Corn chips.

(D) Cheese balls.

(E) Pretzels.

(F) Crackers.

(G) Milk products, such as plain milk, chocolate milk, malted milk.

(H) Ice tea and iced coffee.

(I) Juice beverages.

(J) Unflavored water.

(K) Prepackaged ice cream products, such as ice cream cakes and pies, popsicles, sundaes and novelties.

(L) Prepackaged frozen water-based products, such as ice pops, fudge pops, fruit ice, bomb pops and similar items.

(M) Candy and gum.

(N) Other food and beverages not defined as a selected food and beverage item, including cold food for which heating facilities are not provided.

(e) Vending machine sales on school or church property.

(1) Sales of selected food and beverage items dispensed by means of a vending machine located on the premises of a school or church are exempt from tax.

(2) Sales of tangible personal property, other than food or beverages, which are dispensed by means of a vending machine located on the premises of a school or church, are subject to tax.

(f) Remitting tax to the Department. Sales Tax collected by the operator upon the sale of taxable tangible personal property, including selected food and beverage items, shall be reported and remitted to the Department.

(g) Purchase or lease of vending equipment and supplies.

(1) The purchase or lease of vending equipment, including parts, accessories, such as tables, chairs, microwaves, straw and napkin dispensers and other similar items, and supplies, such as straws, napkins, stirrers, eating utensils and similar items, is subject to tax.

(2) Wrapping supplies, such as plastic, paper and styrofoam cups, bowls or similar containers used to wrap property which is sold, are exempt from tax.

The provisions of this § 31.28 amended under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 31.28 amended September 14, 1984, effective September 15, 1984, 14 Pa.B. 3366; amended March 1, 2002, effective March 2, 2002, 32 Pa.B. 1213. Immediately preceding text appears at serial pages (265200) to (265201).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.29 Books, printed matter and advertising materials.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Advertising insert—Printed advertising material that is circulated with another publication. Advertising literature or materials—Tangible personal property that is intended to promote business interest, create goodwill or engage the attention or interest of a recipient.

(i) The term includes printed matter, brochures, matchbooks, calendars, price lists, video and audio tapes, computer disks, investment prospectuses, financial and corporate annual reports, electoral literature or materials, playing cards, envelopes, address labels, reply envelopes, application forms, pens and similar promotional materials.

(ii) The term does not include proxy materials. Circulated among the general public—Made available for purchase from a retail outlet, such as a newsstand or bookstore, or made available for purchase by subscription. In the case of an organizational publication, the publication will be considered to be circulated among the general public only if there are regular sales of the publication to purchasers other than members of the organization. Direct mail advertising literature or materials—Advertising literature or materials that are distributed directly to intended recipients through the United States Postal Service. The term does not include advertising literature or materials that are distributed in a manner other than by the United States Postal Service. Magazine—A publication that is published at regular intervals not exceeding 3 months, that is circulated among the general public, and contains matters of general interest and reports of current events that are published for the purpose of disseminating information of a public character or is devoted to literature, the sciences, art or some special industry. The term does not include loose leaf information services. Mail order catalogue—A publication that contains a listing of items with descriptive details and includes a mail order form and is distributed through the United States Postal Service. Newspaper—A ‘‘legal newspaper’’ or a publication containing matters of general interest and reports of current events that qualifies as a ‘‘newspaper of general circulation’’ authorized to carry a ‘‘legal advertisement’’ as those terms are defined in 45 Pa.C.S. § 101 (relating to legal notices). The term does not include magazines. Publication—Information transferred by means of tangible media.

(i) Examples include printed material, such as books; financial and corporate annual reports; investment prospectuses; proxy materials; shopping guides; magazines; tabloid newspapers; and printed material that may supplement, explain, amend, revise or otherwise alter, expand or render current a looseleaf information service, or a book or bound volumes of books previously issued, including a supplement or pocket part, whether the additional material is periodically distributed or purchased independently of the basic book to which it is applicable.

(ii) The term also includes video and audio tapes, computer disks and similar items. Religious publication—Religious commentaries and other publications primarily devoted to religious instruction, promotion or information. Shopping guide—A publication primarily devoted to consumer awareness, promotion or information and that is generally provided to a consumer free of charge. Subscription—The advance purchase of a series of issues of a magazine delivered by the publisher to an address designated by the purchaser.

(i) The term includes a series of magazines provided by an organization to its members in consideration of the payment of membership dues, provided the magazine is also sold by subscription or by individual copy to the public.

(ii) The term does not include a purchase of an issue or series of issues of a magazine from a person other than the publisher. Textbook—A new or used book that is required or approved for use in conjunction with an educational curriculum provided by an institution of learning recognized by the Department of Education.

(b) Scope.

(1) Except as otherwise provided in this subsection, the sale at retail or use of publications, advertising inserts, Bibles, religious publications, including religious publications sold by religious organizations and advertising literature or materials is subject to tax when delivered to a location within this Commonwealth.

(2) The sale at retail or use of the following items is exempt from tax:

(i) Mail order catalogs.

(ii) Direct mail advertising literature or materials. See § 32.36 (relating to printing and related businesses).

(iii) Textbooks.

(iv) Newspapers.

(v) Magazines sold by subscription.

(vi) Advertising inserts that become a part of a newspaper or magazine.

(vii) One time license fees paid for the use of a listing of names and mailing addresses for each delivery of direct mail advertising literature or materials.

The provisions of this § 31.29 amended under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 31.29 amended March 29, 1974, effective March 30, 1974, 4 Pa.B. 581; amended April 5, 1985, effective April 6, 1985, 15 Pa.B. 1260; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322; amended March 24, 2000, effective March 25, 2000, 30 Pa.B. 1654. Immediately preceding text appears at serial pages (179232) to (179233).

This section cited in 61 Pa. Code § 31.21 (relating to advertising agencies); and 61 Pa. Code § 32.36 (relating to printing and related businesses).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.33 Prebuilt housing.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Prebuilt housing—Housing which qualifies either as:

(i) Manufactured housing, including mobile homes, which bears the label required by and referred to in the Manufactured Housing Construction and Safety Standards Authorization Act (35 P. S. § § 1656.1—1656.9).

(ii) Industrialized housing as defined in the Industrialized Housing Act (35 P. S. § § 1651.1—1651.12).

(iii) The term includes all components or accessories transferred at the time of the sale of the prebuilt housing. Prebuilt housing builder—A person, including a prebuilt housing manufacturer, that makes a prebuilt housing sale to a prebuilt housing purchaser. Prebuilt housing manufacturer—A person who manufactures prebuilt housing for sale to a prebuilt housing builder or prebuilt housing purchaser. Prebuilt housing manufacturer’s selling price—

(i) The total value of anything paid or delivered or promised to be paid or delivered, whether it be money or otherwise, by a prebuilt housing builder to a prebuilt housing manufacturer, for prebuilt housing, add-ons, insurance, seals, deposits, dues, optional equipment and similar charges whether or not the charges are separately stated on one or more purchase agreements.

(ii) The prebuilt housing manufacturer’s selling price does not include amounts representing delivery charges, erection charges or set-up fees. Prebuilt housing purchaser—A person who purchases prebuilt housing in a transaction and who intends to occupy the unit for residential purposes in this Commonwealth. Prebuilt housing sale—A sale of prebuilt housing to a prebuilt housing purchaser, including a sale to a landlord, without regard to whether the person making the sale is responsible for installing the prebuilt housing or whether the prebuilt housing becomes real estate on installation. Temporary installation by a prebuilt housing builder for display purposes of a unit held for resale will not be considered occupancy for residential purposes. Purchase price—The purchase price of prebuilt housing shall be 60% of the prebuilt housing manufacturer’s selling price. A prebuilt housing manufacturer of prebuilt housing that elects to precollect tax from the prebuilt housing builder shall have the option to collect tax on 60% of the prebuilt housing manufacturer’s selling price or on 100% of the actual cost of the supplies and materials used in the manufacture of prebuilt housing. Used prebuilt housing—Prebuilt housing that was previously subject to a prebuilt housing sale to a prebuilt housing purchaser.

(b) Imposition of tax.

(1) Prebuilt housing builder sales. A prebuilt housing builder is required to pay tax on his purchase price of prebuilt housing sold to a prebuilt housing purchaser within this Commonwealth, if the prebuilt housing builder has not paid the applicable tax to the prebuilt housing manufacturer. The prebuilt housing builder is required to pay tax without regard to whether the prebuilt housing is sold as tangible personal property or as real estate. The prebuilt housing builder’s written contract with the prebuilt housing purchaser shall clearly indicate that the prebuilt housing builder paid applicable tax.

(2) Trade-in. The value of a trade-in by a prebuilt housing purchaser to a prebuilt housing builder in connection with the purchase of housing may not be used to reduce the purchase price on which the prebuilt housing builder is required to pay tax.

(3) Used prebuilt housing. Sales Tax is not imposed on the purchase price of used prebuilt housing.

(c) Prebuilt housing manufacturer’s election to collect tax.

(1) Although section 202(f) of the TRC (72 P. S. § 7202(f)) requires the prebuilt housing builder to pay tax directly to the Department, this statute also provides that the prebuilt housing manufacturer has the option to collect tax from the prebuilt housing builder at the time of the purchase of the prebuilt housing by the prebuilt housing builder from the prebuilt housing manufacturer. If the prebuilt housing manufacturer elects to collect tax, the prebuilt housing manufacturer is required to use either of the following to establish the purchase price:

(i) Sixty percent of the prebuilt housing manufacturer’s selling price.

(ii) One hundred percent of the actual cost of the supplies and materials used in the manufacture of prebuilt housing.

(2) If a prebuilt housing manufacturer is also acting as a prebuilt housing builder, the purchase price of the prebuilt housing shall be 60% of the prebuilt housing manufacturer’s selling price.

(3) A prebuilt housing manufacturer is not permitted to alternate between these two methods of calculation without prior written notification to the Director of the Department’s Bureau of Audits.

(d) Exemptions. No exemptions apply to the sale of prebuilt housing. Prebuilt housing manufacturers are therefore not required to obtain exemption certificates from prebuilt housing builders. Unless the prebuilt housing manufacturer elects to precollect the tax, the prebuilt housing builder is obligated to remit tax to the Commonwealth on its sale of prebuilt housing to a prebuilt housing purchaser.

(e) Prefabricated buildings and components which do not qualify as prebuilt housing. The sale and installation of prefabricated buildings, components and accessories which do not qualify as prebuilt housing are governed by § 31.12 (relating to imposition of tax). Sales of prefabricated buildings, components and accessories, which do not include installation, qualify as sales of tangible personal property. Examples include construction site trailers, travel trailers and modular space units.

(f) Repair and maintenance of prebuilt housing. This section relates only to prebuilt housing sales and does not apply to the repair and maintenance of prebuilt housing. The application of tax on charges made for the repair and maintenance of prebuilt housing is governed by of § 31.12.

The provisions of this § 31.33 issued under section 270 of the Tax Reform Code (72 P. S. § 7270).

The provisions of this § 31.33 adopted May 26, 2006, effective May 27, 2006, 36 Pa.B. 2525.

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.41 Definitions.

The following words and terms, when used in this section and § § 31.42—31.50, have the following meanings, unless the context clearly indicates otherwise: Fair rental value—The amount which would be charged for the rental of a vehicle in the open market for a similar period of time and place. When the actual fair rental value is unknown, the Department will recognize 3% of the purchase price as a monthly fair rental value of a vehicle if the purchase price is the fair market value of the vehicle. Motor vehicle—A vehicle which is self-propelled except one which is propelled solely by human power or by electric power obtained from overhead trolley wires but not operated upon rails.

Prevailing market price—The price which the vehicle will bring if offered for sale in the open market at the time and place of the taxable transfer or use of the vehicle.

Purchase price—The total value of anything paid or delivered or promised to be paid or delivered, whether in money or otherwise, including an encumbrance or other obligation assumed by the transferee.

Registered dealer—A person who has secured a license as a vehicle dealer with the State Board of Motor Vehicle Manufacturers, Dealers and Salesperson, or who is a dealer of motorcycles and is registered with the Bureau of Motor Vehicles, Department of Transportation.

Trailer or semitrailer—A vehicle which is designed to be towed by a motor vehicle and which does not exceed the maximum size and weight for operation on the highway as a licensed vehicle.

Transfer of registration—The procurement from the Bureau of Motor Vehicles, Department of Transportation of a certificate of title or license registration under 75 Pa.C.S. § § 101—9821.

Vehicle—Every device in, upon, or by which a person or property is or may be transported or drawn upon a highway except devices used exclusively upon rails or tracks and mobile homes.

The provisions of this § 31.41 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816; amended January 30, 1981, effective January 31, 1981, 11 Pa.B. 500. Immediately preceding text appears at serial pages (40240) and (40241).

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41a (relating to scope); 61 Pa. Code § 33.2 (relating to scope); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.41a Scope.

Sections 31.41, 31.42—31.50 and this section apply to the sale or use of vehicles. Transactions involving the rental or lease of motor vehicles are governed by § 47.17 (relating to lease or rental of vehicles and rolling stock) and not by § § 31.41, 31.42—31.50 and this section.

The provisions of this § 31.41a adopted January 30, 1981, effective January 31, 1981, 11 Pa.B. 500.

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41 (relating to definitions); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.42 Tax incidence.

Generally, any sale at retail or use of a vehicle within this Commonwealth is subject to tax. This shall include the isolated sale or use of a vehicle required to be licensed or registered under either Federal or State law.

The provisions of this § 31.42 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816.

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41 (relating to definitions); 61 Pa. Code § 31.41a (relating to scope); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.43 Collection of tax.

(a) Transfers for which a Certificate of Title is obtained. When there has been a taxable transfer or use of a vehicle and a Certificate of Title is obtained from the Bureau of Motor Vehicles (Bureau) of the Department of Transportation, the applicable tax shall be paid as a prerequisite to the obtaining of a Certificate of Title. When the purchaser permits another person or firm to pay the tax and that person’s or firm’s check is uncollectible, the purchaser shall remain personally liable for the tax. All transfers for registration shall be accompanied by a Form MV-4ST ‘‘Vehicle Sales and Use Tax Return,’’ whether or not the transfer is subject to tax.

(b) Transfers by registered dealers for which a Certificate of Title is not obtained. When there has been a taxable transfer of a vehicle, by a registered dealer, and the dealer knows or has reason to know that a Certificate of Title will not be obtained or required from the Bureau, the dealer shall be registered with the Bureau and collect and remit the applicable tax upon the purchase price of the vehicle. The failure of a dealer to have evidence which establishes the securing of a Certificate of Title for or by the customer presumptively shall make the dealer liable for any tax applicable to the transfer. When the Registered Dealer collects the applicable tax from his customer, he shall insert upon the customer’s purchase invoice the amount of tax which he has collected.

The provisions of this § 31.43 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816.

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41 (relating to definitions); 61 Pa. Code § 31.41a (relating to scope); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.44 Computation of tax.

(a) Purchase price. The tax is computed upon the full amount of the purchase price of a vehicle less the trade-in deduction. A deduction from the purchase price shall be permitted for an amount equal to the amount of a trade-in allowed on the purchase, if the trade-in occurs at the same time of the sale. A separate or independent sale of a vehicle is not considered a trade-in, even if the proceeds of the sale are immediately applied by the seller to a purchase of a vehicle from the buyer. The following items are included in the amount of the purchase price:

(1) Federal Excise Tax, since it is not a tax at the retail level.

(2) Financing and insurance charges, unless the charges are separately stated as a separate item upon the customer’s invoice.

(3) Delivery or freight charges for delivery of a vehicle from a manufacturer or distributor to a dealer whether or not they are separately stated upon the customer’s invoice. Delivery charges from the dealer to the customer whether or not they are separately stated upon the customer’s invoice.

(4) Warranty or ‘‘service’’ charges.

(5) Charges for preparation of or additional work upon a vehicle.

(6) Additional accessories or equipment placed in or upon the vehicle by the dealer even though the charge may be separately stated upon the customer’s invoice.

(b) Transactions not at arm’s length. When because of affiliation of interests between the seller and purchaser, or for another reason, the purchase price stated is not indicative of the true value of the vehicle, the purchase price shall, for purpose of the imposition of this tax, be determined as the prevailing market price of the vehicle.

(c) Alternate imposition of tax. Alternate imposition of tax shall conform with the following:

(1) Registered dealers of motor vehicles, trailers or semitrailers. A person may elect to pay tax equal to 6% of the fair rental value of a new or used vehicle, if the following exist:

(i) The person is registered as a Registered Dealer with the Bureau of Motor Vehicles.

(ii) The person acquires the motor vehicle, trailer or semitrailer for the purpose of resale.

(iii) The person uses the motor vehicle, trailer or semitrailer for a taxable use during a period not exceeding 1 year from the date of acquisition to the date of resale.

(iv) The motor vehicle is not used as a wrecker, parts truck, delivery truck, or courtesy car.

(2) Time limits. If the motor vehicle, trailer or semitrailer is used for a taxable use beyond 1 year from the date of acquisition, the taxpayer shall be liable for a tax on the prevailing market price of the vehicle at the time of acquisition. The taxpayer will be allowed a credit equal to the tax paid due to the taxpayer’s election to pay alternate tax. Dealers actively and principally engaged in the business of selling new or used motor boats, aircraft or similar tangible personal property may not utilize this election to pay alternate tax.

(3) Persons not establishing permanent residence or business. A person, including a resident of this Commonwealth or a member of the military service who designates an address in this Commonwealth as the person’s home of record, may elect to pay tax equal to 6% of the prevailing market price of a vehicle if the person purchased the vehicle 6 months or longer prior to its first taxable use in this Commonwealth.

The provisions of this § 31.44 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (59259) to (59260).

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41 (relating to definitions); 61 Pa. Code § 31.41a (relating to scope); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.45 Credit against tax.

A credit shall be granted with respect to vehicles purchased for use outside of this Commonwealth equal to the tax paid to another state by reason of a tax similar to the tax imposed by the Commonwealth. Credit may not be granted unless the other state grants similar tax relief to persons who have paid tax to the Commonwealth. A listing of other states granting similar tax relief may be obtained from the Department of Revenue (Attn: Legal Bureau) upon request.

The provisions of this § 31.45 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816.

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41 (relating to definitions); 61 Pa. Code § 31.41a (relating to scope); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.46 Transfer of registrations which are not subject to tax.

Transfer of registrations which are not subject to tax are as follows:

(1) Transfers to registered dealers who have purchased the vehicle for purposes of reselling it in the ordinary course of the registered dealer’s business operations. The registered dealer’s license number shall be inserted on the reverse side of Form REV-191.

(2) Transfers to persons engaged in the rental or lease of vehicles in the ordinary course of their business operations. Persons claiming this exemption are required to be registered with the Department of Revenue. The lessor’s sales tax license number shall be inserted on the reverse side of Form REV-191.

(3) Transfers to nonresidents of this Commonwealth for use outside of this Commonwealth and registered in a state other than this Commonwealth within 20 days after delivery to the buyer.

(4) Transfers in connection with the establishment of a permanent resident or place of business provided the vehicle was purchased more than 6 months prior to entering the Commonwealth. Military personnel whose home of record is an address in the Commonwealth at the time of the purchase of the vehicle are not entitled to this exemption. Vehicles purchased within 6 months of establishing a permanent residence or business shall be subject to tax upon the original purchase price.

(5) Transfers to persons engaged in the business of rendering a common carrier public utility service. A contract carrier is not entitled to an exemption. The common carrier’s Pennsylvania Public Utility Commission (PUC) or Interstate Commerce Commission (ICC) number shall be inserted on the reverse side of Form REV-191. To be exempt from the payment of tax, the following requirements shall be met:

(i) The vehicle shall be used directly in rendering the service.

(ii) The person shall be registered with the PUC or the ICC as a common carrier public utility.

(6) Transfers to organizations qualifying as the following:

(i) Religious organizations.

(ii) Nonprofit education institutions.

(iii) Charitable organizations.

(iv) Volunteer firemen’s organizations.

(7) The exemption applies only to vehicles used by the organization in its related activities. It does not include vehicles primarily used to maintain real estate such as lawn tractors, snow plows, and the like. The exemption does not apply to modular or mobile homes which constitute an improvement to real estate even though they may qualify as a vehicle under 75 Pa.C.S. § § 101—9821 (relating to the Vehicle Code). To claim the exemption, the organization or institution shall be registered as an exempt organization with the Bureau of Sales and Use Tax and, in the case of charitable organizations, must have obtained a Charitable Exemption Number which shall be inserted on the reverse side of Form REV-191.

(8) Transfers to organizations which are exempt from the payment of tax as a result of legislative statutes other than the TRC (72 P. S. § § 7101—8203) such as: Municipal authorities created under the Municipal Authorities Acts of 1935 or 1945 (53 P. S. § § 301—322), or similar acts. Organizations claiming exemption as a result of a particular statute shall cite the section of the applicable law providing for exemption at line 9 on the reverse side of Form REV-191.

(9) Transfers to persons engaged in the business of manufacturing, processing, mining, farming, dairying and rendering public utility services, other than common and contract carriers, when such vehicles shall not be required to be licensed under the Vehicle Code and are directly used in the operations. See also § 31.49 (relating to limited exemption to certain businesses).

The provisions of this § 31.46 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816.

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41 (relating to definitions); 61 Pa. Code § 31.41a (relating to scope); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.47 Transfers of registrations which are presumed to be for a purchase price.

The following are examples of transfers of vehicles which are presumed to be for a purchase price and, therefore, are subject to tax:

(1) Purchase of vehicle intended as a gift or as a raffle prize. The purchase of a vehicle which the owner intends to give to another is nonetheless subject to tax. Tax is not imposed on the subsequent transfer of the vehicle from the donor to the donee. See also § 31.48(7) (relating to transfer of registrations which are presumed not to be for a purchase price).

(2) Foreign purchase of vehicle intended as a gift. When a vehicle is purchased outside of this Commonwealth and the purchaser brings it into this Commonwealth with the intention of giving it to another, the purchaser shall pay use tax thereon. Thus, if a husband, having purchased a vehicle in Maryland, registers it in this Commonwealth in his wife’s name, a use tax shall be paid by the husband upon the use of the vehicle in this Commonwealth, even though he subsequently gives the vehicle to his wife.

(3) Transfer from partner to partnership or from partnership to partner. A transfer of a vehicle from a partner to the partnership, or from a partnership to a partner, is a taxable transfer, and is presumed to be made in consideration of an increased interest in the partnership, or for services rendered the partnership or for other value passing between the parties.

(4) Transfer to or from a corporation. A transfer of a vehicle to a corporation in exchange for stock is a taxable transfer, even though the transferor is the sole stockholder of the corporation. A transfer of a vehicle to or from a corporation for any purpose is presumed to be a taxable transfer, regardless of the reason or motive for which the transfer is made, and the taxpayer has the burden of overcoming this presumption by showing clear and sufficient evidence that there was in fact no consideration for the transfer.

(5) Transfer between parent corporation and wholly owned subsidiary. The transfer of a vehicle by a parent corporation to a wholly owned subsidiary corporation or by a subsidiary corporation to the parent shall be a taxable transfer unless such transfer is the result of a corporate merger or consolidation under the Business Corporation Law (15 P. S. § § 1001—2914).

The provisions of this § 31.47 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816.

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41 (relating to definitions); 61 Pa. Code § 31.41a (relating to scope); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.48 Transfers of registrations which are presumed not to be for a purchase price.

The following are examples of transfers of vehicles which are presumed not to be for a purchase price and, therefore, are not subject to tax:

(1) Transfer as a gift. The transfer by a donor to a donee, without consideration, and with an intention on the part of the donor that the transfer be a gift, is not be a taxable transfer.

(2) Transfer by inheritance. A transfer to an heir or legatee made under a provision of the law applicable to the inheritance or devise of property by intestacy or will is not a taxable transfer.

(3) Transfer from sole proprietorship business to owner. A transfer from a business operated as a sole proprietorship, whether or not operated under a fictitious name, to the actual owner thereof is not a taxable transfer.

(4) Transfer from husband to wife or wife to husband. A transfer from a husband to his wife or from a wife to her husband is not a taxable transfer unless the transfer was made in accordance with a property settlement between the parties. When the transfer has been made pursuant to a property settlement it is presumed to be made with consideration and the burden of proving that no consideration was given for the transfer is upon the taxpayer.

(5) Transfer from husband and wife to husband or to wife—transfer from husband or from wife to husband and wife. A transfer from a husband and wife, as joint owners; to the husband or the wife; or a transfer from a husband or a wife to the husband and wife as joint owners; is not a taxable transfer.

(6) Transfer from trustee, administrator or executor to a trust beneficiary. A transfer from a trustee, administrator or executor, to a beneficiary of a trust, is not a taxable transfer, if no consideration passes from the beneficiary, or the trust settlor. If a consideration has passed, or if the transfer of the vehicle is made in contemplation of the passing of this consideration, the transfer is taxable.

(7) Transfer to winner of drawing or raffle. A transfer to a winner of a drawing or raffle is deemed to be a gift to the winner, and is not a taxable transfer. The purchase of a vehicle by the person who will transfer it to the winner is subject to tax.

The provisions of this § 31.48 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816.

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41 (relating to definitions); 61 Pa. Code § 31.41a (relating to scope); 61 Pa. Code § 31.47 (relating to transfers of registrations which are presumed to be for a purchase price); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.49 Limited exemption to certain businesses.

(a) Persons engaged in the business of manufacturing, processing, mining, farming, dairying or rendering a public utility service, other than common carriers, shall pay tax upon the transfer of a vehicle required to be licensed under 75 Pa.C.S. § § 101—9821 (relating to the Vehicle Code). When the person purchases a vehicle for which he obtains a Certificate of Title which is not required to be licensed under the Vehicle Code; and is directly used by the purchaser in his business of manufacturing, processing, mining, farming, dairying or rendering his public utility service, other than a common carrier, the use of the vehicle is exempt from tax.

(b) Persons who may qualify for this exemption are required to pay the applicable tax as a prerequisite to registration of the vehicle, but may file a Petition for Refund with the Department (Attention: Secretary, Board of Appeals) for a refund of the tax they have paid provided the use of the vehicle qualifies for exemption.

The provisions of this § 31.49 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816.

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41 (relating to definitions); 61 Pa. Code § 31.41a (relating to scope); 61 Pa. Code § 31.46 (relating to transfer of registrations which are not subject to tax); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

61 Pa. Code § 31.50 Taxable services rendered on vehicles.

(a) A person who maintains a place of business in this Commonwealth, and repairs or services vehicles, or sells equipment, parts or accessories therefor, shall register with the Department for the collection and remission of tax. The person shall collect and remit tax upon the transactions.

(b) When a Registered Dealer installs parts upon a new or used vehicle which was purchased from him, and makes no charge for the parts because they are furnished under a warranty given in conjunction with original purchase of the vehicle, he need not collect tax upon the furnished parts. When a partial warranty was given, and the dealer makes a charge based upon a percentage of the charge which he normally would ask for the parts, tax shall be collected by the dealer upon the amount actually charged the purchaser, since with respect to that portion of the transaction which is not consummated under the warranty, the transfer is deemed to be a sale.

The provisions of this § 31.50 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816.

This section cited in 61 Pa. Code § 31.7 (relating to use tax); 61 Pa. Code § 31.41 (relating to definitions); 61 Pa. Code § 31.41a (relating to scope); 61 Pa. Code § 33.2 (relating to purchase price); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 31.
• Source: The provisions of this § 31.

Chapter 32 Exemptions

61 Pa. Code § 32.1 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Blasting—The use of a combustible or explosive composition in the removal of material resources, minerals and mineral aggregates from the earth, including the separation of the dirt, waste and refuse in which they are found.

Charitable organization—

(i) An organization whose primary activities meet the following criteria. The organization:

(A) Advances a charitable purpose. An organization advances a charitable purpose if it makes gifts of services or property for general public use which are designed to benefit an indefinite number of persons from an educational, religious, moral, physical or social standpoint.

(B) Donates or renders gratuitously a substantial portion of its services. A substantial portion of the organization’s services shall be provided without charge to the subjects of the charity or to persons or entities that are directly providing the service on its behalf. The Department will determine whether the portion donated or rendered is substantial on an organization by organization basis. The word ‘‘substantial’’ does not imply a magical number.

(I) In calculating the gratuitous rendering of a substantial portion of services, an organization may include services to the same person, some of which are given without charge and some for which a charge is made. To qualify under this criteria, an organization may charge for some of its services but must render a substantial portion of its services without charge. This provision is not meant to exclude an organization that would otherwise meet this criteria if it charges some recipients on a sliding scale or graduated fee basis.

(II) To determine if an organization meets this criteria, the Department will examine the remuneration paid to its director and staff, the organization’s budget and the percentage of income used to provide charitable services in addition to other factors. In examining these factors, the Department will consider the type of charitable services provided, the location of the organization, the length of time the organization has been in operation and the cost of providing its charitable services.

(C) Benefits a substantial and indefinite class of persons who are legitimate subjects of charity. An organization’s gratuitous activity shall be ‘‘purely public,’’ in that the public must be the beneficiary of the gift conferred by the organization. The scope of the recipients can be limited to a particular group of the public, so long as the group is a legitimate subject of charity. Legitimate subjects of charity are those that are unable to provide for themselves what the organization provides. Examples include the handicapped, the aged, the sick, children and the poor.

(D) Relieves the government of some of its burden.

(E) Operates entirely free from private profit motive. An organization is not deemed to have a private profit motive merely because it hires employes and pays them reasonable compensation, or otherwise purchases at market rates other services that are required to carry out the charitable activity. The fact that an organization’s charitable activities generate surplus funds will be deemed by the Department to constitute evidence of a private profit motive, unless the surplus funds are reinvested to aid legiti-mate subjects of charity. Surplus funds reapplied to the maintenance and operation of a facility or to retire outstanding debt is not evidence of a private profit motive. Examples of operating entirely free from a private profit motive and not operating free from a private profit motive are as follows:

(I) A nursing home receives Medicaid reimbursements for a substantial number of its residents. The nursing home has a commitment to serve all applicants without regard to their financial means. The nursing home accepts the government reimbursement as full payment for its services. This government reimbursement does not cover the patient costs. The nursing home makes up the difference. This nursing home operates entirely free of a private profit motive.

(II) A corporation produces publications concerning the biological sciences and gives free seminars designed to educate the public. However, it also requires its clients to pay a fee for services rendered and charges clients for computer searches of its library. This organization does not operate entirely free of a private profit motive.

(ii) The term includes trust forms of community chests, funds or foundations and private charitable foundations which hold funds from contributions, such as grants, endowments, gifts and gratuitous donations and which then distribute substantially all of the funds to exempt organizations that qualify as purely public charities and that will use the funds for charitable purposes.

(iii) The term does not include an organization if any part of its funds may inure to the benefit of private shareholders or individuals other than for the payment of reasonable compensation for actual services rendered by the organization’s employes.

(iv) An organization’s primary purpose cannot involve the promoting or sponsoring of a noncharitable fund raising event such as an athletic or other special event. However, a charitable organization will not lose its status merely because it hires a promoter to run an event to raise funds to support the organization’s charitable purpose. Examples of noncharitable fundraising events and charitable fundraising events are as follows:

(A) An organization which exists for the primary purpose of sponsoring athletic events hires a promoter to run a professional golf tournament. The money raised by the event is used to pay the promoter for his services or to pay the event participants with any remaining funds distributed to exempt organizations. This is a noncharitable fundraising event.

(B) A hospital which qualifies as a charitable organization conducts a carnival as a fundraising event. Money raised, other than reasonable payment to the employes or a promoter running the event, is used in the hospital’s charitable activities. This is an exempt charitable fundraising event.

(v) An organization is not a charitable organization if a substantial part of its activities consists of carrying on propaganda or otherwise attempting to influence legislation. Examples are as follows:

(A) An organization’s main activity is directed at influencing public opinion and enacting legislation against the use of animals in scientific experimentation. A substantial portion of the organization’s activities involves the dissemination of propaganda which is favorable to its tenets and beliefs or lobbying for legislation which supports the organization’s activities and causes. A substantial portion of this organization’s activities are considered to be attempting to influence legislation.

(B) An organization in addition to other activities holds an annual legislative breakfast and invites members of the State House and Senate. This event is not considered to involve a substantial portion of the organization’s activities and would not disqualify the organization from receiving charitable status. Common carrier—A public utility which is organized to perform, and which does perform, services which are affected with a public interest, and which holds itself out to the general public to carry goods or persons, without discrimination, for compensation. The term does not include an independent contractor who reserves the right to refuse to serve any person at his discretion and the right and power to fix his rates or charges by individual contract with the person with whom he contracts. Dairying—The business of converting raw milk and other raw materials into milk and milk products which meet the requirements imposed by law for sale of the products to the general public, including the bottling or other packaging of the milk and milk products. Dairying does not include the business of producing raw milk and activities associated therewith, such as the breeding, feeding and raising of cattle or other milk-producing animals, the production of feed for the animals, or the collection of raw milk from producers. With regard to the breeding, feeding and raising of milk animals, and the production of food for the animals, see § 32.33 (relating to farming). Dairying operation—Any of the series of production activities, beginning with the first production operation, clarifying and ending with the packaging of the product for the ultimate consumer, including the following activities: the transportation and storage of property between the first and last production operations; the measuring and testing of the dairy product and its ingredients; and the washing, sterilization and inspecting of bottles. The term does not include activities prior to the first production stage, such as collecting, weighing and storing raw milk or pumping raw milk into a clarifier, or activities following the last production stage, such as casing, loading or delivery to the consumer. Dairy product—Packaged milk and milk products which meet the requirements imposed by law for sale to the general public. Direct mail advertising literature or materials—Tangible personal property which is intended to promote business interest, create good will or engage the attention or interest of the prospective purchaser to whom it is distributed through the United States mails. The property includes but is not limited to, printed matter, brochures, price lists, matchbooks, playing cards, calendars, pens and similar materials, including envelopes and address labels used in sending the literature and materials through the mails. Exempt organization—An organization which has a current valid exemption number issued by the Department for a charitable, volunteer firemen’s or religious organization or a nonprofit educational institution. Exploring—The examination and investigation of the earth, waste or stock piles, pits or banks by drilling, digging, boring, sinking shafts or driving tunnels. Extracting—The removing of natural resources, minerals and mineral aggregates from the earth, waste and stock piles, pits or banks, including blast furnace slag. Farmer—A person engaged in the business of farming. Farming—The following activities when engaged in as a regular business, are farming:

(i) Agriculture. The business of producing food products or other useful or valuable growths or crops by tilling and cultivating the soil, and by breeding, raising and feeding cattle, livestock, bees, poultry or other animals which produce a food product or which are themselves a food product. For example, the commercial raising of mushrooms is farming, but gardening and similar noncommercial activities are not farming. The following are not included within the definition of agriculture:

(A) The breeding or raising of dogs, cats and other pets; game animals, birds or fish. See subparagraph (vi), or other animals which are intended for use in sporting or recreational activities such as, but not limited to, hunting, fishing, show competition and racing.

(B) The operation of stockyards or slaughter houses.

(ii) Horticulture. The business of producing vegetables, vegetable plants, fruits and nursery stock, including the operation of commercial vegetable greenhouses and nurseries. Horticulture does not include the business of servicing plants owned by other persons.

(iii) Floriculture. The business of producing flowers and decorative or shade trees, plants and shrubs, in the field, nursery or greenhouse, but not including the raising of trees as timber, or lumbering, logging or sawmill operations.

(iv) Dairy farming. The business of breeding, feeding and raising of cattle and other milk producing animals, and the production by the owner of the animals of feed for them, but not including operations such as pasteurizing or homogenizing or the making of butter, cheese and ice cream. Reference should be made to § § 32.31 and 32.32 (relating to dairying; and manufacturing; processing).

(v) Fur-ranching. The propagation and raising of ranch raised fur-bearing animals.

(vi) Propagation of game birds. The propagation of game birds for commercial purposes by holders of propagation permits issued under 34 Pa.C.S. § § 101—2965 (relating to Game and Wildlife Code).

(vii) Propagation of aquatic animals. The propagation of fish and other aquatic animals for commercial use as a food or food product by holders of propagation permits issued under 30 Pa.C.S. § § 101—7314 (relating to Fish and Boat Code). Farm products—The final natural products of farming operations. Products are considered to be farm products only while they are on the farm premises, and in an unprocessed state. Products such as butter, sausage, pasteurized milk, flour, canned goods, jellies and juices, are not farm products as defined herein, but may be manufactured products within the meaning of § 32.32. Isolated sales—Sales of taxable property or services which:

(1) Occur no more frequently than three times nor for more than a total of 7 days in any 1-calendar year.

(2) Are not made from a location at which other businesses are making similar sales of the same taxable property or services upon which tax is required to be collected. Manufacturing—The performance as a business of an integrated series of operations which places personal property in a form, composition or character different from that in which it was acquired whether for sale or use by the manufacturer. The change in form, composition or character shall result in a different product having a distinctive name, character and use. Operations such as compounding, fabricating or processing are illustrative of the types of operation which may result in a change although any operation which has that result may be manufacturing. Mere changes in chemical composition or slight changes in physical properties are not sufficient. For example, the C Company, as its business operation, takes coffee beans and thereafter, by mechanical and hand labor cleans them, removes the outer skins and roasts the beans. The roasted coffee, resulting from the C Company’s activities, is not a manufactured product, notwithstanding the fact that there has been a change in color, weight and size of bean. Manufacturing operations—Any one of the series of production activities, beginning with the first production operation and ending with the packaging of the product for the ultimate consumer. The term does not include activities prior to the first production stage, such as collecting, weighing and storing raw materials or activities following the last production stage, such as casing, loading or delivery to the consumer. Mining—Commercial mining both deep and strip mining, quarrying, gas and oil drilling, and other commercial removal of natural resources, minerals or mineral aggregates from the earth or from waste or stock piles or from pits or banks including blast furnace slag. Water well drillers shall be considered to be engaged in mining and shall be entitled to the mining exemption. Mining operation—Any of the activities set forth in the definitions of ‘‘mining,’’ ‘‘exploring,’’ ‘‘extracting,’’ ‘‘blasting,’’ and ‘‘refining’’ whether performed solely or collectively with one of the other activities. Multiple copies—Fifty or more copies. Nonprofit educational institution—

(i) A charitable organization, as defined in this section, which is created and which exists by law or by public authority predominantly for the purpose of education without pecuniary profit to an officer, member or shareholder except as reasonable compensation for services actually rendered to the institution. Public schools which are governed by the Public School Code of 1949 (24 P. S. § § 1-101—27-2702) qualify as political subdivisions rather than nonprofit educational institutions. Reference should be made to § 32.23 (relating to sales to the Commonwealth or its political subdivisions).

(ii) The term does not include groups which merely support or encourage the cause of education in general or a specific educational institution, or disseminate information on safety, or which are concerned with the welfare of persons engaged in educational work, including groups such as PTA, alumni groups, scholastic groups, professional associations and contributor groups even if the groups are sponsored by or affiliated with a nonprofit educational institution, and even if the groups benefit or generally inform the public. Photofinisher—A person who is engaged in producing printed pictures from developed or undeveloped film is a photofinisher. Photographer—A person engaged in the business of performing the total photography operation of picture taking, development of exposed film and the finishing and printing of pictures. The term also includes a person engaged in the business of performing a photography operation using microfilm, videotape, videocassettes or the like. Photo-refinisher—A person engaged in the business of tinting, coloring or altering of finished photographic prints, microfilm, videotape, videocassettes or the like, in any form. A photo-refinisher is to be distinguished from a photographer engaged in the finishing segment of the photography operation on the basis that a photo-refinisher performs an activity which is not in conjunction with the photography operation and which, in fact, occurs subsequent to the completion of the photography operation. Printed matter—The term includes but is not limited to books, booklets, letterheads, billheads, printed envelopes, folders, printed packages and packaging materials, advertising circulars, programs, newspapers, magazines, periodicals and similar items. Printer—A person engaged in the business of printing. Printing—The term includes the following:

(i) The performance of an integrated series of operations engaged in as a business which is predominantly and directly related to the production of multiple copies of substantial similar printed matter upon which a sales or use tax is due or for which an exemption exists. Based upon a 12-month period, property is predominantly used in printing when multiple copies are produced for 50% or more of the time or the total copies of printed matter, divided by the number of orders for substantially similar items, exceeds 50 or more copies.

(ii) When part of an integrated series of operations, the process of organization and arrangement of graphic material into page or other final format, whether by manual operation, computer operation or otherwise. It does not include data processing, word processing, photocopying or automatic typewriters, except where the activities are part of the integrated series of operations. Where equipment is used for both exempt and nonexempt purposes, the predominant use test shall determine its tax status. Processing—The following operations when engaged in as a business enterprise have been defined by the General Assembly as processing:

(i) The cooking or freezing of fruits, vegetables, mushrooms, fish, sea food, meats or poultry, when the person engaged in business packages such property in sealed containers for wholesale distribution.

(ii) The scouring, carbonizing, cording, combing, throwing, twisting or winding of natural or synthetic fibers, or the spinning, bleaching, dyeing, printing or finishing of yarns of fabrics when the activities are performed prior to the sale to the ultimate consumer.

(iii) The electroplating, galvanizing, enameling, anodizing, coloring, finishing, impregnating or heat-treating of metals or plastics for sale or in the process of manufacturing.

(iv) The rolling, drawing or extruding of ferrous and nonferrous metals.

(v) The fabrication for sale of ornamental or structural metal or of metal stairs, staircases, gratings, fire escapes or railings, not including fabrication work done at the construction site.

(vi) The preparation of animal feed or poultry feed for sale.

(vii) The production, processing and bottling of nonalcoholic beverages for wholesale distribution.

(viii) The operation of a saw mill or planing mill for the production of lumber or lumber products for sale.

(ix) The milling for sale of flour or meal from grains.

(x) The slaughtering and dressing of animals for meat to be sold or to be used in preparing meat products for sale, and the preparation of meat products, including lard, tallow, grease, cooking and inedible oils for wholesale distribution.

(xi) The processing of used lubricating oils.

(xii) The broadcasting of radio and television programs of licensed commercial or educational stations. Public utility—A person engaged in the performance of public utility service, as that term is defined in this section. Public utility service—The performance of services for compensation for the general public, without discrimination, which is subject to regulation by a governmental agency rather than determined by contract with the person for whom the services are performed; provided that the services so performed shall be affected with a public interest. Purchase price—The total value of anything paid or delivered, or promised to be paid or delivered, whether it be money or otherwise, in complete performance of a sale at retail, without any deductions on account of expenses incurred, such as travel time, rentals of rooms or equipment, salaries or wages paid to assistants or models, and charges for the developing of negatives, even though the expenses are separately itemized in billings to customers. Refining—The collective operation of cleaning, grading, cracking, crushing and similar processing of natural resources, minerals and mineral aggregates after their extraction from the earth, waste or stock piles, pits or banks including blast furnace slag. Religious organization for religious purpose—A group or body of persons which is created and which exists for the predominant purpose of regularly holding or conducting religious activities or religious education, without pecuniary benefit to an officer, member or shareholder except as reasonable compensation for actual services rendered to the organization. It is not sufficient that one of the purposes of an organization is to support or encourage religious activities or education. Mere sponsorship by or affiliation with a church or other religious organization for a religious purpose does not, of itself, render the sponsored or affiliated group a religious organization for a religious purpose. For example, the First Church sponsors a Men’s Bible Class and a bowling team. The Bible Class has as its predominant purpose the holding of classes in religious education. It is, therefore, a religious organization for a religious purpose. The bowling team, although sponsored by the church, is not a religious organization for a religious purpose. Returnable containers—Containers which are designed to deliver property more than one time, including containers which require cleaning, repair or refurbishing prior to their subsequent use. Volunteer firemen’s organization—A group or body of persons which is created and which exists for the purpose of fighting fires for the protection of the public without reimbursement or an organization which is formed under the Volunteer Firemen’s Relief Association Act (53 P. S. § § 8501—8508). The organization shall be operated without pecuniary profit to an officer, member or shareholder, except as reasonable compensation for actual services rendered to the organization. The term does not include a fire company’s auxiliary or similar group composed of persons who merely support or sponsor the work of a fire company but which, as a group, does not fight fires. Wrapping equipment—Property used in the operation of packaging which collectively includes conveying, inserting, packing, crating, binding, sealing, coding, weighing and addressing of personal property which is delivered to another person. Wrapping supplies—The term includes property, except for returnable containers as defined in this section, which is used as an outside covering or internal packing in order to deliver personal property to a purchaser. The term also includes items such as nonreturnable containers, mailing labels, envelopes and packing slips attached to the covering transferred with the personal property, instruction sheets, warranty cards, material for preservation of the property, paper and plastic plates, cups and similar items. The term does not include napkins, wooden or plastic spoons, forks, straws and similar items and these items are therefore subject to tax when sold to restaurants or other eating places. The sale or use of wrapping supplies, equipment and services for residential use is explained in § 58.1 (relating to publication of list of taxable and exempt tangible personal property).

The provisions of this § 32.1 amended April 5, 1985, effective April 6, 1985, 15 Pa.B. 1261; amended June 28, 1985, effective June 29, 1985, 15 Pa.B. 2389; amended June 29, 1990, effective June 30, 1990, 20 Pa.B. 3600; amended March 29, 1991, effective March 30, 1991, 21 Pa.B. 1288; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322; amended December 23, 1994, effective December 24, 1994, 24 Pa.B. 6437. Immediately preceding text appears at serial pages (184049) to (184050), (179253), (149561) to (149564), (179255) to (179256) and (190177).

Charitable Organization

The Court of Common Pleas committed an error of law when it concluded that corporations formed to promote golf tournaments and conduct charitable activities met the burden of proving that they were institutions of purely public charity simply because they provided funds to organizations that were tax exempt under federal law, where the corporations employed another corporation, which specializes in managing golf tournaments, to promote its 1996 and 1997 golf events, and where the record establishes that the overwhelming majority of revenue generated, after operating expenses, went to fund the purse for the participants of the golf tournament. Betsy King LPGA Classic, Inc. v. Richmond Township, 739 A.2d 612 (Pa. Cmwlth. 1999); appeal denied 760 A.2d 856 (Pa. 2000).

The trial court properly determined that the drug and alcohol treatment facility advances a charitable purpose, where the nature of the facility’s activity is that of helping to restore lives broken by addiction to alcohol or other drugs, and this is clearly a gift of services or property for general public use which are designed to benefit an indefinite number of person from a physical and social standpoint, and where the facility rendered services at below cost in many instances, particularly to in-patients of State agencies such as the Department of Corrections. Gateway Rehabilitation Center, Inc. v. Board of Commissioners of the County of Beaver, 710 A.2d 1239 (Pa. Cmwlth. 1998).

The record supported the trial court’s determination that the drug and alcohol treatment facility provides a substantial portion of its services gratuitously, where the facility receives Medicaid payments for eligible in-patients but that the amount received does not cover the cost of treatment; the facility has operated at a loss since 1990 or 1991; and the facility provides other services free of charge, including evaluations of prospective patients (always free regardless of ability to pay) and education programs for staffs of other facilities that treat alcohol and drug dependent patients. Gateway Rehabilitation Center, Inc. v. Board of Commissioners of the County of Beaver, 710 A.2d 1239 (Pa. Cmwlth. 1998).

Although the definition of ‘‘charitable organization’’ was not binding in the instant case, it was generally supportive of court’s conclusion that historical society, while performing good works, did not serve a purely public and charitable purpose and thus was not entitled to tax exempt status. In re Salem Crossroads Historical Restoration Society, Inc., 526 A.2d 1257 (Pa. Cmwlth. 1987).

Nonprofit corporation providing statistical analysis services to hospitals and other health care providers was not entitled to tax exempt status as a ‘‘purely public charity’’ required by Article VIII, Section 2 (a)(v) of the Pennsylvania Constitution of 1968 nor as a ‘‘charitable organization’’ defined in this section. Since its computer services could not be deemed a gift for general public use, it did not donate any of its services, all clients had to pay fees to cover costs, its beneficiaries were limited in number and were not legitimate objects of charity, and it failed to demonstrate operation completely free of profit motive. Hospital Utilization Project v. Commonwealth, 487 A.2d 1306 (Pa. Super. 1985).

The fact that an organization is involved in activities which attempt to educate or motivate the general populace toward community improvement and is devoid of private gain does not characterize such an organization as a ‘‘purely public charity’’ in the legal sense. Commonwealth v. The American Anti-Vivisection Society, 377 A.2d 1378 (Pa. Cmwlth. 1977).

Manufacturing

A laboratory’s analysis, research and testing of client-provided products did not constitute a transformation of property or otherwise satisfy the definition of ‘‘manufacturing’’ as would entitle it to an exclusion from use tax. Lancaster Laboratories, Inc. v. Commonwealth, 578 A.2d 988 (1990); vacated in part 611 A.2d 815 (Pa. Cmwlth. 1992); affirmed in part 631 A.2d 739 (Pa. Cmwlth. 1993).

Freezing of water into ice constitutes only superficial change and cannot be considered to come within the ‘‘manufacturing exclusion’’ from use taxation, 72 P. S. § 7201(o)(4); Commonwealth v. Air Products and Chemicals, Inc., 380 A.2d 741 (1977) (customer stations transforming liquid to gas are used in manufacturing) distinguished. Marweg v. Commonwealth, 513 A.2d 525 (Pa. Cmwlth. 1986).

Nonprofit Educational Institution

Since the nonprofit corporation’s seminars and group study programs existed primarily for the benefit of individuals with an occupational interest in the accounting profession, it was not entitled to a sales tax refund as a nonprofit educational institution although its programs were open to the public. PICPA Foundation for Education and Research v. Commonwealth, 598 A.2d 1078 (Pa. Cmwlth. 1991); affirmed 634 A.2d 187 (Pa. 1993).

Public Utility; Conflict with Statute

Taxpayer, a provider of cellular telecommunications, asserted it was entitled to exclusion from sales and use tax on the grounds that it was a public utility as defined in the Department of Revenue’s regulations; however, where the definition contained in the statute under which the regulation was promulgated provides otherwise, the statute controls. Bell Alantic Mobile Systems, Inc. v. Commonwealth, 799 A.2d 902 (Pa. Cmwlth. 2002); affirmed 845 A.2d 762 (Pa. 2004).

This section cited in 61 Pa. Code § 60.9 (relating to premium cable services); 61 Pa. Code § 32.21 (relating to charitable, volunteer firemen’s and religious organizations, and nonprofit educational institutions); 61 Pa. Code § 32.33 (relating to farming); 61 Pa. Code § 38.1 (relating to imposition and computation of tax); 61 Pa. Code § 60.7 (relating to sale and preparation of food and beverages); 61 Pa. Code § 60.8 (relating to secretarial and editing services); 61 Pa. Code § 60.17 (relating to sale of food and beverages by nonprofit associations which support sports programs); and 61 Pa. Code § 60.20 (relating to telecommunications service).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.2 Exemption certificates.

(a) When exemption certificates are required. A person who is required by the act to collect tax upon sales or rentals of tangible personal property or taxable service shall, in every case in which he has not collected tax, have available for Departmental inspection a valid, properly executed exemption certificate which was accepted in good faith or, in lieu of the certificate, the following:

(1) Evidence that the property sold or rented is not tangible personal property or a taxable service as defined by the act.

(2) Documentary evidence that his customer is the United States or an instrumentality thereof, the Commonwealth, or a political subdivision or instrumentality of the Commonwealth.

(3) Documentary evidence that he was required to deliver the property sold, rented or serviced to a destination outside this Commonwealth for use outside this Commonwealth, and that he did, in fact, so deliver the property.

(b) Relief from tax liability. A seller or lessor who accepts in good faith an exemption certificate which discloses a proper basis for exemption upon its face is relieved of liability for collection or payment of tax upon transactions covered by the certificate.

(1) Disclosure of proper exemption basis. For a certificate to disclose a proper basis for exemption, it shall meet the following requirements:

(i) The certificate must be an officially promulgated exemption certificate form, or a substantial and proper reproduction thereof.

(ii) The certificate shall be dated and executed in accordance with the instructions published for use therewith, and must be complete and regular in every respect.

(iii) The certificate shall state a proper exemption reason.

(2) Acceptance in good faith. An exemption certificate to be accepted in good faith shall also meet the following requirements:

(i) The certificate shall contain no statement or entry which the seller or lessor knows, or has reason to know, is false or misleading. A certificate accepted by a seller or lessor, in the ordinary course of his business, which on its face discloses a valid basis of exemption consistent with the activity of the purchaser and character of the property or service being purchased, shall be presumed to be taken in good faith.

(ii) A seller or lessor is presumed to be familiar with the law and regulations regarding the property in which he deals. When a seller or lessor has accepted a blanket exemption certificate, each transaction between the parties is considered a separate claim for exemption thereunder, and the seller or lessor shall, therefore, exercise good faith in each transaction, in order to avoid liability for the tax.

(iii) The certificate shall be in the physical possession of the seller or lessor, and available for Departmental inspection, on or before the 60th day following the date of the sale or lease to which the certificate relates. When a certificate is not made available for Departmental inspection on or before that time, the seller or lessor shall prove to the satisfaction of the Department, by means of evidence other than an exemption certificate, that the sale or lease in question is, in fact, exempt. In the absence of proof the transaction will be deemed taxable and assessed as such.

(c) Penalties for misuse of exemption certificates. False or fraudulent statements made upon an exemption certificate by a person, whether a seller, lessor, buyer, lessee or a representative or agent of the persons, is a misdemeanor, upon each separate conviction of which the offender may be sentenced to imprisonment not exceeding 1 year, a fine not exceeding $1,000, or both, together with costs of prosecution. In addition, severe civil penalties are provided by law for misuse of exemption certificates by any person. Reference should be made to section 268(b) of the TRC (72 P. S. § 7268(b)).

(d) Forms of certificates. The following exemption certificate forms and instructions have been promulgated by the Department:

(1) Forms for general use. The Department form entitled Sales and Use Tax Exemption Certificate may be used for:

(i) Unit exemption. This exemption shall be used for all single sales or leases of tangible personal property.

(ii) Blanket exemption. This exemption shall be used for claims of exemption upon sales and leases of tangible personal property in a series of transactions between parties.

(2) Forms for purchase of motor vehicles. The following form is designed for purchase of motor vehicles, and is not valid for purposes other than that for which it is designed: Form REV-191 Vehicles Sales and Use Tax Return. This form shall be used for claims of exemption upon the purchase or lease of a motor vehicle, trailer, semitrailer or tractor which is required by law to be registered with the Bureau of Motor Vehicles, and shall accompany the application for title.

The provisions of this § 32.2 issued under section 6 of The Fiscal Code (72 P. S. § 6).

The provisions of this § 32.2 amended November 5, 1982, effective November 6, 1982, 12 Pa.B. 3905; corrected December 19, 2003, effective January 4, 2003, 33 Pa.B. 6222. Immediately preceding text appears at serial pages (293450), (267691) and (215825).

The Sheraton Hotel was required to obtain documented proof of an occupant’s entitlement to the hotel occupancy tax exemption in order to obtain the exemption. Egner v. Commonwealth, 557 A.2d 1157 (Pa. Cmwlth. 1989).

This section cited in 61 Pa. Code § 32.22 (relating to sales to the United States Government or within areas subject to the jurisdiction of the Federal Government); 61 Pa. Code § 32.25 (relating to steam, gas, electricity, fuel oil and kerosene); 61 Pa. Code § 33.3 (relating to cancellations, returns, allowances and exchanges); and 61 Pa. Code § 34.4 (relating to direct payment permit).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.3 Sales for resale.

(a) Sales for resale exempt. A transfer for a consideration of the ownership, custody or possession of tangible personal property or the rendition of taxable services for the purpose of resale is exempt from tax. Transfer for the purpose of resale shall include the following:

(1) The transfer of tangible personal property or rendition of taxable services on, or purchase of, repair parts for property which is:

(i) To be sold, rented or leased in the regular course of business. However, the sale of malt or brewed beverages or liquor to a person who is a retail dispenser or a holder of a retail liquor license under The Liquor Code (47 P. S. § § 1-101—9-902), does not qualify for the resale exemption.

(ii) To be physically incorporated as ingredient or constituent into other personal property which is to be sold in the regular course of business or transported in interstate commerce to a destination outside of this Commonwealth.

(2) Personal property purchased or having a situs within this Commonwealth solely for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into personal property and thereafter transported outside of this Commonwealth for use exclusively outside the Commonwealth.

(b) Presumption of taxability. Every sale of tangible personal property is presumed to be at retail and therefore subject to tax. A purchaser claiming the resale exemption shall therefore establish that the specific property purchased is to be resold. A purchaser who uses or consumes property purchased for resale or who disposes of property purchased for resale in a manner other than by resale becomes the ultimate consumer or user of the property and shall pay a use tax with respect to the taxable use.

(c) Use by vendor of property in the conduct of business subject to tax. A vendor who consumes or otherwise uses tangible personal property in the conduct of the vendor’s business is the ultimate consumer or user of the property, and sales made to him for the consumption or use is subject to tax. For example, the tax is applicable to the sale of display cases and similar merchandising equipment to hotels, food markets, stores and similar persons using the property in the conduct of their business. Similarly, the sale of a carbonator to a soda fountain operator for making soda or carbonated water is subject to tax. The sale of carbon dioxide to a soda fountain operator is considered a sale for resale and is not considered taxable.

(d) Withdrawal from stock for vendor’s own use subject to tax. The withdrawal by a vendor for personal use of goods in stock held for resale is a taxable use and is subject to tax.

This section cited in 61 Pa. Code § 32.4 (relating to isolated sales); and 61 Pa. Code § 47.1 (relating to coin-operated amusement devices).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.4 Isolated sales.

(a) Isolated sales. Subject to subsection (b) the following transactions are considered to be isolated sales:

(1) Infrequent sales of a nonrecurring nature made by a person not engaged in the business of selling tangible personal property, such as the following:

(i) The sale of a used vacuum cleaner by a housewife.

(ii) Isolated sales by executors, administrators, trustees and other fiduciaries in the liquidation of an estate.

(iii) Sales or execution sales under a court order or by a court officer.

(2) Infrequent sales of a nonrecurring nature of tangible personal property acquired for use or consumption by the seller, and not sold in the regular course of the business of the person, such as:

(i) The sale of a typewriter by an insurance company which does not regularly dispose of such equipment.

(ii) The sale of used machinery, fixtures, equipment and similar items by a person engaged in a business or occupation such as manufacturing or operating a retail store, when the person does not sell the items in the regular course of its business.

(iii) The sale of an entire business by the owner thereof except that the value of a motor vehicle, trailer, semitrailer, motor boat or similar property constituting part of the sale may not be exempt. The transfer of inventory or stock in trade constituting part of the sale may not be exempt as an isolated sale but may be exempt as a sale for resale. Reference should be made to § 32.3 (relating to sales for resale).

(b) Transactions which are not isolated sales. The following are examples of transactions which shall not be considered isolated sales:

(1) The sale of property held primarily for sale to customers in the ordinary course of a trade or business.

(2) The sale of stock in trade or other property of a kind which would properly be included by a manufacturer, wholesaler, retailer, jobber or other vendor in inventory even though the sales are infrequent and only comprise an insignificant fraction of the vendor’s total business.

(3) Sales which constitute an integral part of a business even though the sale of the tangible personal property is not the primary business of the seller, as the sale of repossessed property by a finance company.

(4) The sale of by-products, waste and scrap by a person engaged in a business, when the sales are regularly made to dispose of these items.

(5) The sale of food for on-premises consumption by a company operating a cafeteria for employes. The sale of meals may not be considered isolated merely because the activity is not the principal business of the seller.

(6) The sale of a property by a charitable, volunteer firemen’s or religious organization or nonprofit educational institution as a fund raising activity, if the following is applicable:

(i) The sales or series of sales is conducted more than three times or more than a total of 7 days in any year.

(ii) The organization or institution is making sales of taxable property other than food or beverages sold at or from a school or church, on the same premises in competition with other vendors required to collect tax.

(7) The sale of motor vehicles, trailers, semi-trailers, motor boats, aircraft, snowmobiles or other similar tangible personal property required under Federal law or the laws of the Commonwealth to be registered or licensed.

(8) The sale of a tangible personal property on the same premises in competition with vendors required to collect tax, even though the sale may otherwise qualify as an isolated sale.

(c) Sales involving auctioneers. Sales involving auctioneers shall be exempt from tax as isolated sales if they qualify as exempt sales under the provisions of § 31.23 (relating to auctioneers).

The provisions of this § 32.4 amended through December 20, 1975, 5 Pa.B. 3277.

This section cited in 61 Pa. Code § 32.21 (relating to charitable, volunteer firemen’s and religious organizations, and nonprofit educational institutions).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.5 Multi-state sales.

(a) Transactions where delivery is made to locations within this Commonwealth. Where delivery of taxable property or services is made to locations within this Commonwealth, the transactions shall be subject to tax. Delivery in this Commonwealth to a nonresident purchaser does not make the transaction exempt.

(b) Transactions where delivery is made to locations outside this Commonwealth. When tangible personal property is sold, leased or serviced within this Commonwealth and the vendor, lessor or serviceperson is obligated to deliver it to a point outside of this Commonwealth, or to deliver it to a carrier or to the mails for transportation to a point outside this Commonwealth, sales tax does not apply. However, where tangible personal property under a sale, lease or service is delivered in this Commonwealth to the buyer or lessee or their agent, other than an interstate carrier, the tax applies, notwithstanding that the buyer or lessee may subsequently transport the property out of this Commonwealth.

Examples:

Henrietta Higgins, a speech pathologist, purchased disposable laboratory supplies from a Commonwealth retailer. The retailer delivers the supplies (cost and freight) to Providence, Rhode Island. Title to the supplies passed to Higgins at the Commonwealth point of shipment, but sales tax does not apply because delivery is made out-of-State.

Ahab Inc., a maker of specialized steel in this Commonwealth, supplies harpoons to Neptune Inc., a Massachusetts fishing concern. The harpoons are delivered to Neptune Inc.’s agent (freight on board) Harrisburg, Pennsylvania for ultimate delivery in Massachusetts. Sales tax applies to this transaction because delivery is made and title passes in this Commonwealth.

(c) When vendor, lessor or serviceperson shall collect tax. A vendor, lessor or serviceperson engaged in business activity within this Commonwealth shall collect the tax imposed by the act with respect to the following transactions:

(1) Where property is shipped from a point outside this Commonwealth to a point within this Commonwealth.

(2) Where property is shipped from a point within this Commonwealth to another point within this Commonwealth by a route a portion of which is outside this Commonwealth.

(3) Where property is purchased and delivered within this Commonwealth even though the purchaser subsequently transports the property to a location outside this Commonwealth with the following exceptions:

(i) Property purchased or having a situs within this Commonwealth solely for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into personal property and thereafter transported outside this Commonwealth for use exclusively outside this Commonwealth shall be deemed to be a resale and therefore is not subject to tax.

(ii) The sale at retail or use of motor vehicles, trailers or semitrailers, or bodies attached to the chassis thereof sold to a nonresident of this Commonwealth to be used outside this Commonwealth which are registered in a state other than this Commonwealth within 20 days after delivery to the vendee is not subject to tax.

(d) Maintenance of records. A vendor, lessor or serviceperson making sales of tangible personal property exempt from the tax set forth in this section shall maintain records of the transactions, together with documents evidencing the delivery of the tangible personal property to a destination outside this Commonwealth. The documents include waybills, bills of lading, insurance or registry receipt issued by the United States Post Office, mail orders, shipping orders or other data pertinent to the purchase and delivery.

(e) Property is not exempt by reason of being used in interstate and foreign commerce. Unless property is otherwise exempt by reason of this section or this chapter, the sale or use of tangible personal property in this Commonwealth shall be subject to the tax notwithstanding the fact that the purchaser is engaged in interstate or foreign commerce or that the property may be intended for use in interstate or foreign commerce.

(f) Interim storage of property to be used exclusively outside this Commonwealth. Effective March 4, 1971, the interim storage in this Commonwealth of property purchased outside this Commonwealth for use outside this Commonwealth and upon which no work or services are performed is a taxable use. The use tax shall be based upon the original purchase price of the property. The storage charges are exempt from tax.

The provisions of this § 32.5 issued under section 270 of the Tax Reform Code (72 P. S. § 7270).

The provisions of this § 32.5 amended November 8, 1985, effective November 9, 1985, 15 Pa.B. 4038. Immediately preceding text appears at serial pages (40262) to (40264).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.6 Wrapping supplies, equipment and services.

(a) Wrapping supplies.

(1) The purchase or use of wrapping supplies by a person engaged in the business of selling personal property is entitled to an exemption from tax upon the person’s purchase or use of wrapping supplies when the use is incidental to the delivery of property which he sells.

(2) The sale or use of returnable containers is taxable unless the purchaser is engaged in the business of manufacturing, processing, dairying or farming and the returnable container is used in the delivery of the product to the ultimate consumer.

(b) Wrapping equipment. The purchase or use of wrapping equipment is subject to tax, unless the following apply:

(1) The wrapping equipment is used by a person engaged in the business of manufacturing, processing, farming or dairying.

(2) The wrapping supplies pass to the ultimate consumer along with the exempt user’s product.

(c) Services. If a vendor makes a charge for wrapping property, whether the vendor has sold the property wrapped or not, the vendor shall be deemed to have made a sale of the wrapping services which the purchaser receives. The vendor shall collect tax upon the purchase price of the wrapping services without deduction for labor, service or handling charges. If a vendor is required to collect tax under this subsection on charges made for the service of wrapping property, the vendor is entitled to a resale exemption on the purchase of wrapping supplies.

The provisions of this § 32.6 amended under section 270 of the Tax Reform Code (72 P. S. § 7270).

The provisions of this § 32.6 amended March 29, 1991, effective March 30, 1991, 21 Pa.B. 1288. Immediately preceding text appears at serial pages (149574) to (149575).

This section cited in 61 Pa. Code § 41.3 (relating to dry ice for packaging ice cream); 61 Pa. Code § 52.1 (relating to purchases of medicines, medical supplies, medical equipment and prosthetic or therapeutic devices); and 61 Pa. Code § 57.5 (relating to sale of equipment to restaurants).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.21 Charitable, volunteer firemen’s and religious organizations, and nonprofit educational institutions.

(a) Purchases for use by exempt organizations. The exemption to which an exempt organization shall be entitled is limited and does not extend to all purchases by the exempt organization. The Department may issue an assessment against an exempt organization for sales and use tax owed on nonexempt purchases, whether or not an exemption certificate or declaration of sales tax exemption was tendered to the vendor. Moreover, the exemption is personal and is not transferable to another. Individuals making purchases of tangible personal property on behalf of the exempt organization are not entitled to claim the organization’s exempt status.

(1) Payments. The purchases referred to in subsection (a) shall be billed to, and paid for by, the exempt organization.

(2) Taxable and exempt purchases. The exemption applies to the purchase and use of tangible personal property or services billed directly to the exempt organization, including office supplies, motor vehicles, food and beverages, fund raising supplies, utilities and furniture with the exception of the following:

(i) Unrelated trade or business. Tangible personal property used in the performance of an unrelated trade or business. Examples of taxable purchases are the following:

(A) The purchase of kitchen equipment by a hospital in operating a cafeteria for use by the general public.

(B) The purchase of tables, chairs and a refrigerator by a volunteer fire company in operating a bar or restaurant.

(C) The purchase of liquor or malt beer by an exempt organization which is licensed by the Liquor Control Board.

(ii) Materials and supplies. Materials, supplies and equipment used and installed in the construction, reconstruction, remodeling, repair and maintenance of real estate so as to become a permanent part thereof. However, materials and supplies used for routine maintenance and repair of real estate are exempt from tax. ‘‘Routine maintenance and repair’’ means minor repairs and regular maintenance performed to restore or preserve real estate or to prevent deterioration resulting from ordinary wear and tear.

(A) Examples of taxable purchases are the following:

(I) A church’s purchase of a furnace which will be installed by its membership.

(II) A volunteer fire company’s purchase of building blocks which will be used by the organization to construct a new firehouse.

(III) A hospital’s purchase of five light fixtures to replace the existing fixtures in the administrative offices.

(IV) A private school’s purchase of wall-to-wall carpeting which the school will have installed by someone other than the seller.

(B) Examples of materials and supplies qualifying as routine maintenance and repair are the following:

Paint, paint brushes

Light bulbs

Floor wax

Carpet shampoos

Replacement window panes

Cement to repoint bricks

Patch asphalt

Roofing tar

Expendable mops, brushes

(C) Tools and equipment for routine maintenance and repair are taxable.

(iii) Equipment. Equipment used but not installed in the construction, reconstruction, remodeling, repair and maintenance of real estate. Examples of taxable purchases are the following:

(A) A school’s purchase or repair to a lawn mower or snowblower.

(B) A church’s purchase of a hammer and saw.

(C) A hospital’s purchase or repair of a floor polisher.

(iv) Hotel and motel occupancies. Charges for occupancy of a hotel, motel or similar establishment. Example: Church ‘‘A’’ is billed $100 for 2 days use of a conference room at Motel ‘‘X.’’ Church ‘‘A’’ would be required to pay Hotel Occupancy Tax upon the $100.

(v) Purchases on behalf of others. Purchases by an exempt organization acting as a collection agent for its membership. An example of a taxable purchase is as follows:

College ‘‘B’’ engages the services of Photographer ‘‘Y’’ to photograph the individual members of the senior class. Photograph ‘‘Y’’ bills College ‘‘B’’ which, in turn, bills each senior. College ‘‘B’’ shall be required to pay tax to Photographer ‘‘Y’’ unless College ‘‘B’’ itself is licensed with the Department for the collection and remission of sales tax upon its billing to each senior.

(b) Procedures for claiming exemption. Use of the exemption shall conform with the following:

(1) Identity of purchaser or user. The person claiming the exemption shall be an authorized agent or representative of the exempt organization which is entitled to the exemption, and shall make the purchase in the name of and from funds of the exempt organization. The purchase of property by an individual upon his own account shall be subject to tax, even though the purchaser intends to later donate the property purchased to an exempt organization which would have been entitled to exemption if it purchased the property directly. For example, the purchase of flowers by and in the name of a church, to decorate the altar, shall be exempt from tax. However, the purchase of flowers by a church member on his own account shall be taxable, even though the purchaser intends to donate the flowers to the church.

(2) Exemption numbers. An organization desiring to qualify as an exempt organization shall file with the Department a completed Application for Sales Tax Exempt Status form, together with related documentation and other information required by the Department. The Department will not consider the application unless the organization is actively performing the activities upon which it bases its claim for exemption. The Department will review the application and documents, and if in its opinion the activities of the organization qualify it as an exempt organization, will issue an exemption number, prefixed by the number ‘‘75,’’ to the organization. The Department may issue an exemption number to the parent organization for use by member organizations. Only organizations which are registered with the Department and hold an exemption number are permitted to make tax free purchases for use by the organization. Once issued, an exemption number continues to be valid and remains in effect until it is revoked by the Department. For the purpose of insuring that the organization is entitled to its exemption and to update the Department’s records, the Department may require the organization to reapply for the exemption and submit another application together with other required documentation every 3 years. The Department may require an organization to reapply for this status at any time if the Department has reasonable cause to believe that the organization’s activities do not meet the criteria established for exemption including those in § 32.1 (relating to definitions). The Department may revoke an exemption number issued to an organization which does not qualify for exempt status or fails upon request to submit an application, related documentation and other information requested by the Department.

(3) Appeals. If the Department denies an Application for Sales Tax Exempt Status or revokes an exemption number, the organization may file an appeal with the Board of Appeals within 90 days of the mailing date of the notice of the action complained of under § 7.4 (relating to filing of special petitions).

(4) Exemption certificates. A purchase by an exempt organization shall be supported by a valid, properly executed Sales and Use Tax Exemption Certificate which is to be retained by the vendor. The exemption number, prefixed by the digits 75, together with the following language shall be inserted on the face side of the exemption certificate: ‘‘Property and/or services are being purchased for use and not for resale by purchaser holding exemption number 75-.’’ An exempt organization is not permitted to use its exemption number in connection with the purchase of tangible personal property or services, which the organization intends to resell, whether or not its sales are for fund raising purposes.

(5) Exempt organizations.

(i) Exemption not transferable. The exemption to which an organization is entitled is not transferable to another, such as a construction contractor. For example, College ‘‘E’’ engages the services of Repairman ‘‘Z’’ to supply and replace a broken window pane. While College ‘‘E’’ is entitled to claim an exemption upon the purchase of the window pane, Repairman ‘‘Z’’ is required to pay tax upon his cost of the window pane since he is a contractor.

(ii) Declaration of sales tax exemption. To claim an exemption on taxable purchases of $200 or more, an exempt organization shall furnish to the vendor a Declaration of Sales Tax Exemption. The ‘‘Declaration Form’’ shall contain the organization’s exempt status number and indicate a usage which is nontaxable. The obtaining of a completed declaration form relieves the vendor of the ‘‘good faith’’ requirement in accepting an exemption certificate and the burden of proving otherwise is on the Department. The ‘‘Declaration Form’’ does not relieve the exempt organization of its tax liability if the purchase from the vendor is later determined to be taxable.

(c) Sales by exempt organizations.

(1) General. An exempt organization making sales of tangible personal property or services has the same responsibility as another vendor under the sales tax law, even though sales are made to members, students, patients, employes or other persons directly associated with the organization. If taxable property is sold, the fact that the organization selling it made no profit from its sale, or if payment is called a donation, will not excuse the selling organization from collecting and remitting the tax, or from registering with the Department.

(2) Isolated sale. An exempt organization need not collect and remit tax upon the sale of property in an isolated sale as defined in § 32.1 (relating to definitions).

(3) Food and beverages. An exempt organization which is either engaged in the business of catering or the operation of a restaurant, cafe, lunch counter or other eating place for the purpose of selling prepared food or beverages is required to obtain a sales tax license number and collect and remit tax upon its sales of food or beverages unless the sales of food or beverages:

(i) Qualifies as an isolated sale as defined by § 32.1.

(ii) Are made on the premises of a school or church in the ordinary course of its activities.

Example: F, a volunteer firemen’s organization sells fish dinners regularly on Friday evenings in order to raise money to build a new firehouse. As F is operating an eating place and does not qualify for the isolated sale exemption, F shall obtain a sales tax license and collect and remit tax on its sale of food.

(4) Purchases of property for resale. An exempt organization purchasing property for resale in connection with fundraising activities is required to hold a Pennsylvania sales tax license number for the purpose of collecting tax, unless the sale qualifies as an isolated sale as defined in § 32.1.

(i) The organization’s sales tax license number shall be inserted on a sales and use tax exemption certificate along with the required wording that the property being purchased will be resold. The 75 exemption number which is only issued to exempt organizations, is not a sales tax license number and may not be used by the organization in purchasing tax free property for resale.

(ii) If the sale of the property qualifies as an isolated sale, a sales tax license number is not required. The organization shall tender to the vendor a unit exemption certificate setting forth the dates of sale of the property being purchased. A separate unit exemption certificate shall be tendered by the exempt organization for each purchase which will be resold by the exempt organization as an isolated sale and shall be retained by the vendor. Vendors who sell property to an exempt organization claiming the isolated sale, on four or more occasions or wherever the property will be sold in excess of 7 days in a calendar year are required to collect the applicable Pennsylvania sales tax from the exempt organization. An example of this type of transaction is as follows:

Example: Exempt organization E makes purchases of property for resale on three separate occasions during the calendar year. E files a unit exemption certificate for each purchase. Set forth on each certificate is an explanation that the property will be sold during a period of 2 days. Thereafter, E makes a fourth purchase of property and tenders an exemption certificate to the supplier. The attachment to the certificate indicates that the property will be sold in an isolated sale during a period of 2 days. The supplier is not permitted to accept the exemption certificate in good faith. Unless E has a sales tax license number entitling it to purchase the property for resale, the supplier is required to charge Pennsylvania sales tax on this sale of the property to E since the fourth sale does not qualify as an isolated sale.

(5) Sales tax licenses. An exempt organization which makes taxable sales shall obtain one of two types of sales tax licenses.

(i) Permanent license. If the organization anticipates making taxable sales on a continuing basis, it shall obtain a permanent sales tax license which shall be obtained by filing an application with the Department, Attn: Registration Division. See also § 34.3 (relating to tax returns).

(ii) Temporary license. If the organization anticipates making taxable sales only within a 90-day period, it shall obtain a temporary license which requires the filing of one return for the total period of the sale. Temporary sales tax licenses shall be obtained from a district office of the Department.

(6) Returns. Failure of the exempt organization to file the sales tax return or to provide the required information requested therein may result in the revocation of the organization’s exempt status.

The provisions of this § 32.21 issued under The Fiscal Code (72 P. S. § 6); and the Tax Reform of 1971(72 P. S. § § 7270 and 8291); amended under The Fiscal Code (72 P. S. § 6).

The provisions of this § 32.21 amended February 15, 1985, effective February 16, 1985, 15 Pa.B. 576; amended January 9, 1987, effective January 10, 1987, 17 Pa.B. 186; amended December 23, 1994, effective December 24, 1994, 24 Pa.B. 6437; corrected March 17, 1995, effective December 1, 1990, 25 Pa.B. 954. Immediately preceding text appears at serial pages (179259) to (179260), (149577) to (149578), (184055) to (184056) and (190179).

This section cited in 61 Pa. Code § 32.25 (relating to steam, gas, electricity, fuel oil and kerosene); 61 Pa. Code § 42.5 (relating to nonprofit educational stations); 61 Pa. Code § 47.17 (relating to lease or rental of vehicles and rolling stock); 61 Pa. Code § 60.7 (relating to sale and preparation of food and beverages); 61 Pa. Code § 60.17 (relating to sale of food and beverages by nonprofit associations which support sports programs); and 61 Pa. Code § 60.20 (relating to telecommunications service).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.22 Sales to the United States Government or within areas subject to the jurisdiction of the Federal Government.

(a) Sales to the United States. Sales of tangible personal property or services to the Government of the United States are not subject to tax under the act. Tax need not be collected on the sales to a regular department, such as Defense, Interior, Agriculture, Post Office, Commerce of the United States. Reference should be made to § 32.2 (relating to exemption certificates). Federal Reserve Banks and their branch banks are exempt from the payment of sales and use taxes under the act. Reference should also be made to section 7 of the Federal Reserve Act (12 U.S.C.A. § 290). However, commercial banks which are merely member banks of the Federal Reserve System are subject to sales and use tax. The only banks in the Commonwealth entitled to this exemption are the Federal Reserve Bank of Philadelphia, District No. 3, and the Pittsburgh Branch of the Federal Reserve Bank of Cleveland, District No. 4.

(b) Nonexempt agencies. National Banks, Federal Savings and Loan Associations, Joint Stock Land Banks, National Park Concessionaires, The Atomic Energy Commission, Federal licensees such as warehouses and stockyards, and construction contractors engaged in the improvement of real estate such as buildings, roads, structures, bridges owned by an exempt Federal agency, and similar corporations, companies, institutions or persons may not be exempt.

(c) Sales within Federal areas. Sales of tangible personal property by persons doing business in a Federal area within the borders of this Commonwealth shall be taxable unless specifically exempt by some other regulation. The vendor shall collect the tax at the time of sale.

This section cited in 61 Pa. Code § 47.17 (relating to lease or rental of vehicles and rolling stock); 61 Pa. Code § 58.13 (relating to carpeting and other floor coverings); and 61 Pa. Code § 60.20 (relating to telecommunications service).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.23 Sales to the Commonwealth or its political subdivisions and sales by the Commonwealth and its political subdivisions.

(a) Sales of tangible personal property or services to the Commonwealth, or its instrumentalities or political subdivisions, are not taxable under section 204(12) of the TRC (72 P. S. § 7204(12)). Sales to the individual teachers, school principals or other employes are taxable. The transaction is exempt only when the sale is made and invoiced directly to the exempt entity.

(1) Instrumentalities include departments, boards, commissions of the Commonwealth and public authorities created under the Municipality Authorities Act of 1945 (53 P. S. § § 301—322). Other public authorities claiming an exemption status shall make application to the Department of Revenue, Harrisburg, Pennsylvania. Attention: Office of Chief Counsel.

(2) Political subdivisions include county, city, borough, incorporated town, township, school district, vocational school district and county institution district.

(b) The sale to or use of tangible personal property by construction contractors in the construction, reconstruction, remodeling, repair and maintenance of real estate, including buildings, roads, structures and bridges, for or on behalf of the Commonwealth or its political subdivisions, is subject to tax.

(c) The sale at retail of personal property, which is taxable according to the TRC, is subject to the imposition of tax. These entities are permitted to purchase items for resale using the ‘‘resale’’ exemption and they shall register with the Department for the charging, collecting and reporting of tax.

The provisions of this § 32.23 amended September 14, 1984, effective September 15, 1984, 14 Pa.B. 3366; amended November 15, 1991, effective November 16, 1991, 21 Pa.B. 5345. Immediately preceding text appears at serial pages (149581) to (149582).

This section cited in 61 Pa. Code § 32.1 (relating to definitions); 61 Pa. Code § 47.17 (relating to lease or rental of vehicles and rolling stock); 61 Pa. Code § 58.13 (relating to carpeting and other floor coverings); and 61 Pa. Code § 60.20 (relating to telecommunications service).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.24 Sales to ambassadors, ministers and consular officers of foreign governments.

(a) Diplomatic exceptions. Sales to ambassadors, ministers and other diplomatic representatives of foreign governments are not subject to tax in accordance with provisions established by the Office of Foreign Missions, United States Department of State. The exemption from tax is evidenced by the tax exemption card issued by the United States Department of State. Restrictions on the exemption from tax will be indicated on the exemption card.

(b) Procedural requirements for diplomatic exemptions. A person entitled to the diplomatic exemption from the tax is required to make application to the Office of Foreign Missions, United States Department of State. This Federal agency will issue a Tax Exemption Card to each individual qualifying for exemption from tax. The Department will recognize the exemption from tax granted to these individuals in accordance with the restrictions provided on the tax exemption card.

(c) Sales made to individuals qualifying for diplomatic exemption from tax. A vendor shall retain a completed exemption certificate form which supports the tax exempt transaction. The Federal tax exemption number shall be included on the exemption certificate.

The provisions of this § 32.24 amended June 15, 1990, effective June 16, 1990, 20 Pa.B. 3160. Immediately preceding text appears at serial pages (94375) to (94376).

This section cited in 61 Pa. Code § 47.17 (relating to lease or rental of vehicles and rolling stock); and 61 Pa. Code § 58.13 (relating to carpeting and other floor coverings).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.25 Steam, gas, electricity, fuel oil and kerosene.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Commercial use—The use or consumption within that portion of a structure or other area which is for use other than a residential use. Residential use—The use or consumption within that portion of a structure used as a home, dwelling, private residence, condominium, housing cooperative, mobile home, camper, summer home, motor home or similar place of abode. The term includes the use or consumption by a condominium association or housing cooperative association which acts on behalf of residents who are using the units as their personal residence.

(b) Scope.

(1) The purchase or use of steam, natural and manufactured gas and electricity, through a metered device; bottled gas; fuel oil; or kerosene by a residential purchaser solely for the purchaser’s own residential use is exempt from tax.

(2) The purchase or use of steam, natural and manufactured gas and electricity, through a metered device; bottled gas; fuel oil; or kerosene other than by a residential purchaser for the purchaser’s own residential use, is presumed to be made for a commercial use and is subject to tax, unless the purchaser is entitled to claim an exemption under subsection (d).

(3) The purchase or use of steam, natural and manufactured gas and electricity, through a metered device; bottled gas; fuel oil; or kerosene; by a residential purchaser for both the purchaser’s own residential use and a commercial use is presumed to be made for commercial use and is subject to tax. If the purchaser tenders a ‘‘Sales and Use Tax Exemption Certificate’’ (Form REV-1220) to the vendor indicating thereon, at ‘‘other’’ on the reverse side of the form, the annualized percentage of the total gallons, kilowatt hours, metric feet, and the like, used by the purchaser solely for the purchaser’s own residential use, the seller may accept the certificate in good faith and charge tax only upon the remaining portion of the purchase. Residential purchasers who utilize this procedure are required to tender supplemental exemption certificates to the seller if the annualized percentage of exempt use changes following the filing of the original exemption certificate. The residential purchaser shall retain the information supporting the estimate of taxable and nontaxable use.

(c) Equipment and supplies. The purchase, use, lease, repair or maintenance of equipment and supplies, such as propane tanks, wire, meters, panel boards, switch gear and similar property by either a residential or commercial purchaser for use in connection with the consumption of steam, gas, electricity, fuel oil or kerosene is subject to tax, unless the purchaser is entitled to claim an exemption under subsection (d).

(d) Exemptions.

(1) Resale. The purchase of bottled gas, fuel oil or kerosene by persons who will resell the property to others in the ordinary course of the purchaser’s business is exempt from tax. Likewise, the purchase of steam, natural and manufactured gas or electricity by persons who will resell the steam, natural and manufactured gas or electricity through a metered device in the ordinary course of the purchaser’s business is exempt from tax. The purchase of steam, natural or manufactured gas or electricity which is resold by a method other than through a metered device is not a purchase for resale and the purchaser is not permitted to claim the resale exemption. The purchase or lease of equipment and supplies by persons who will resell or lease tangible personal property in the ordinary course of the purchaser’s business to others is exempt from tax.

(2) Other exemptions.

(i) The purchase of steam, natural and manufactured gas and electricity, through a metered device; bottled gas; fuel oil; or kerosene; by the United States Government, or the Commonwealth, its instrumentalities and political subdivisions is exempt from tax. Other purchasers may be entitled to claim a direct use exemption. Reference should be made to the applicable sections of this title for a more detailed explanation of the exemption as follows:

(A) Exempt organizations—§ 32.21 (relating to charitable, volunteer firemen’s, religious organizations and nonprofit educational institutions).

(B) Dairying—§ 32.31 (relating to dairying).

(C) Manufacturing, processing—§ 32.32 (relating to manufacturing; and processing).

(D) Farming—§ 32.33 (relating to farming).

(E) Public utilities—§ 32.34 (relating to public utilities).

(F) Mining—§ 32.35 (relating to mining).

(G) Printing—§ 32.36 (relating to printing and related businesses).

(H) Photographers, photofinishers—§ 32.37 (relating to photographers and photofinishers).

(ii) The exempt purchaser or lessee shall complete and submit to the seller or lessor an exemption certificate, completed under § 32.2 (relating to exemption certificates), as to that portion of the total purchase qualifying for exemption.

(3) Exemptions provided by statutes other than the sales tax law.

(i) The purchase or use of steam, natural and manufactured gas and electricity through a metered device; bottled gas; fuel oil; or kerosene and equipment and supplies by the following organizations is exempt from tax:

(A) Municipal authorities created under the Municipal Authorities Act of 1945 (53 P. S. § § 301—322).

(B) Electrical cooperative corporations created under 15 Pa.C.S. § § 7301—7359 (relating to electrical cooperative law of 1990).

(C) Agricultural cooperatives under the jurisdiction of the Cooperative Agricultural Association Corporate Net Income Tax Act (72 P. S. § § 3420-21—3420-30).

(ii) An organization claiming an exemption under this paragraph shall insert the section of the applicable statute under which it is claiming the exemption on an exemption certificate, which the organization shall submit to the supplier.

(4) Examples.

(i) The purchase or use of steam, natural and manufactured gas, electricity, bottled gas, fuel oil or kerosene, by a contractor during the construction of a residential home is subject to tax.

(ii) The purchase or use of steam, natural and manufactured gas, electricity, bottled gas, fuel oil or kerosene, by one person for use by another person is subject to tax. This includes the purchase by a corporation for use by a corporate officer, employe or stockholder.

(iii) The purchase or use of steam, natural and manufactured gas, electricity, bottled gas, fuel oil or kerosene, by an apartment complex for use by the tenants is subject to tax, unless the apartment complex resells the property or service through a metering device to the individual tenants.

(iv) The purchase or use of steam, natural and manufactured gas, electricity, bottled gas, fuel oil or kerosene by a condominium association or cooperative housing association for use by the residential owners or tenants is exempt from tax. The exemption also applies to the residential owners or tenants share of ‘‘common area expenses’’ for the entire complex. A condominium association or a cooperative housing association is required to pay tax on that portion of the purchase of steam, natural and manufactured gas, electricity, bottled gas, fuel oil or kerosene purchased for use by commercial businesses and residential owners who lease their premises to others as well as ‘‘common area expenses’’ for the commercial businesses and leased premises.

(v) The purchase and use of electricity and natural gas by an accountant who maintains an office in the accountant’s residence would require an apportionment of the use of the utility service between the residence and the office. To apportion the usage, an analysis of the exempt usage shall be made. Any reasonable method of apportionment may be used. For example, the accountant may estimate the exempt use of gas to heat the residence by comparing the square footage of the residence with the square footage of the office. The accountant may estimate the exempt use of electricity by comparing the consumption of electricity in the residence with the total consumption of electricity in the office. The exemption for gas and electricity, expressed as a percentage, would be claimed by the accountant through the use of an exemption certificate tendered to the vendor.

(vi) The purchase and use of steam, natural and manufactured gas, electricity, bottled gas, fuel oil or kerosene by a person engaged in the business of manufacturing, processing, farming, dairying, printing, mining, rendering a public utility service, photography or photofinishing, may require apportionment between taxable and exempt use if a portion of the purchase is used directly in one or more of these business operations. To apportion the usage, an analysis of exempt usage shall be made. Any reasonable method of apportionment may be used. For example, the purchaser may estimate the exempt use of electricity through each meter by analyzing the electrical consumption of each item of equipment used directly by the purchaser in its manufacturing operation. This analysis should be annualized to reflect consumption during the entire calendar year. The resulting percentage of exempt use may be claimed by the purchaser upon the total monthly purchase of electricity through that meter. The exemption upon the purchase of electricity, expressed as a percentage, would be claimed through the use of an exemption certificate tendered to the vendor.

The provisions of this § 32.25 amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322; amended September 24, 1993, effective September 25, 1993, 23 Pa.B. 4505. Immediately preceding text appears at serial page (179263).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.31 Dairying.

(a) Equipment, machinery, parts and foundations therefor and supplies used directly in dairying. The purchase or use of tangible personal property or services performed thereon by a person engaged in the business of dairying shall be exempt from tax if the property is predominantly used directly by him in dairying operations. Purchases of vehicles required to be registered under 75 Pa.C.S. § § 101—9821 (relating to the Vehicle Code) as well as supplies and repair parts for the vehicles are subject to tax. There is no exemption for maintenance facilities or for materials or supplies to be used or consumed in a construction, reconstruction, remodeling, repair or maintenance of real estate other than machinery, equipment or parts therefor that may be affixed to the real estate. Beginning March 4, 1971, foundations for equipment and machinery became subject to tax and remained taxable until February 9, 1981. Effective February 7, 1981, foundations used to support equipment, machinery and parts used directly in dairying shall be exempt from tax.

(1) Direct use. In determining whether property is directly used, consideration shall be given to the following factors:

(i) The physical proximity of the property in question to the production process in which it is used.

(ii) The proximity of the time and use of the property in question to the time of use of other property used before and after it in the production process.

(iii) The active causal relationship between the use of the property in question and the production of a dairy product.

(iv) The fact that particular property may be considered essential to the conduct of the business of dairying because its use is required either by law or practical necessity does not, of itself, mean that the property is used directly in dairying operations.

(2) Property directly used; predominant use. The purchase or use by a dairyman of property in the following categories, when predominantly used directly in dairying, shall be exempt from tax. Where a single unit of the property is put to use in two different activities, one of which is a direct use and the other of which is not, the property may not be exempt from tax unless the dairyman makes use of the property more than 50% of the time directly in dairying operations.

(i) General. Machinery, equipment, parts and foundations therefor, and supplies which are used in the actual production or to transport, convey, handle or store milk and milk products from the time the raw milk enters the clarifier to the time the milk is bottled and capped, shall be considered to be directly used in dairying operations. The operations include clarifying, homogenization, pasteurization and cooling after pasteurization. Repair parts which are installed and become an integral part of such property shall also be exempt from tax. Effective March 4, 1971, foundations for machinery and equipment shall be subject to tax.

(ii) Testing and inspection. Property used to test raw milk prior to its use, and inspect milk and milk products throughout the production cycle, shall be considered to be directly used in dairying operations.

(iii) Cleaning of returnable containers. Property used to wash, sterilize or inspect returnable containers prior to their being filled shall be exempt when used in packaging a dairy product if the container will be delivered to the ultimate consumer.

(iv) Packaging; preserving. Wrapping equipment and supplies, including internal packing materials and returnable containers, used in packaging which passes to the ultimate consumer are directly used and, therefore, shall be exempt. Property which prevents or deters the occurrence of natural processes which, if not prevented or deterred, would spoil a dairy product shall be exempt from tax. Examples of the property include disinfectants and sterilizing agents used upon milk tanks, milk machinery and equipment and milk containers, refrigerating equipment used to preserve milk products while in production, and chemicals used to control insects, vermin and pests. However, equipment and supplies used to apply such property, including sprayers and brushes, shall be subject to tax.

(v) Research. Property which is used directly in research activities shall be exempt from tax, provided that the object of the research is the production of a new or improved product or method of producing a product. The exemption does not apply to property used in market research or in other research which is conducted with the objective of improving administrative efficiency.

(3) Property not directly used. Property in the following categories is not directly used in dairying operations, and the purchase or use of the property shall be subject to tax.

(i) Real estate. The term dairying does not include the construction, reconstruction, alteration, remodeling, servicing, repairing, maintenance or improvement of real estate. The purchase or use of tangible personal property, by a dairyman for that purpose shall be subject to tax, even though the structure may house or otherwise contain equipment or other facilities used directly in dairying.

(ii) Maintenance facilities. Maintenance, service and repair work is not a dairying operation. Maintenance facilities, including tools, equipment and supplies predominantly used in performing the work. (For example: chain hoists, tire spreaders, welding equipment, drills, sanders, wrenches, paint brushes and sprayers, oilers, absorbent compounds, dusting compounds, air blowers and wipers) shall be subject to tax. However, replacement parts which are used to replace worn parts upon exempt machinery and equipment (For example: motors, belts, screws, bolts or gears) and operating supplies which are actively and continuously used in the operation of exempt machinery and equipment (For example: fuel, lubricants, paint and compressed air) shall be also exempt from the tax. Equipment and supplies, including soaps and cleaning compounds, brushes, brooms, mops, and similar items, used in general cleaning and maintenance of dairy property shall be subject to tax.

(iii) Managerial, sales or other nonoperational activities. Property used in managerial, sales or other nonoperational activities is not directly used in dairying and, therefore, shall be subject to tax. This category includes but is not limited to property used in any of the following activities:

(A) Dairy management and administration. Office furniture, supplies and equipment, textbooks and other educational materials, books and records and all other property used in dairy record-keeping and other administrative and managerial work, whether on or off the production line, is subject to tax. The property includes, but is not limited to, supplies used to record the quality and quantity of work in production or goods in storage, the flow of work, the results of inspection or to instruct workers in routing work or other production activities.

(B) Selling and marketing. Property used in advertising dairy products for sale or in marketing, transporting dairy products to a market or to customers or selling dairy products, is not within the scope of the dairying exemption.

(C) Exhibition of dairy products. Property used in the exhibition of dairy products or of dairy operations shall be subject to tax.

(D) Safety and fire prevention. Property used to prevent or fight fires and equipment and supplies used for the programs as safety, accident prevention or fire prevention shall be subject to tax, even though such equipment or property is required by law, except for drugs, medicines and medical supplies exempted by section 204(17) of the TRC (72 P. S. § 7204(17)).

(E) Employe use. Property used for the personal comfort, convenience or use of employes, are subject to tax. Protective equipment, such as face masks, helmets, gloves, coveralls, goggles and the like worn by production personnel are exempt from tax.

(F) Space heating, cooling, ventilation and illumination. Property, such as machinery, equipment, fuel or power used to ventilate buildings, lighting for general illumination, air conditioning and other space cooling and space heating equipment are subject to tax unless its use is required in order to prevent the spoilage of dairy products.

(G) Preproduction activities. Property used to transport personnel or to collect, convey or transport raw milk and other property, and storage facilities or devices used to store or hold property, prior to its use in the first production stage, clarifying, are subject to tax.

(H) Property used during production. Property used in managerial, sales or other nonoperational activities are subject to tax even though it is used during the production operation. Illustrations of the property include safety, heating and ventilation equipment; planking or grating for crosswalks or platforms and maintenance equipment or facilities.

(I) Postproduction activities. Property used to transport or convey the finished product from the final dairying operation (which includes but does not extend beyond the operation of packaging for the ultimate consumer), and storage facilities or devices used to store the product, are not used directly in dairying and are taxable. For example, casing equipment, which loads glass bottles or paper bottles of milk into cases for ease of handling in delivery, is subject to tax. The cases used for this purpose is likewise taxable. Machinery, equipment, supplies and other property used to convey, transport, handle or store packaged milk shall be taxable.

(J) Waste disposal. Property used for waste handling and removal is not deemed to be directly used and shall be subject to tax.

(b) Materials incorporated as components into dairy products. The sale of personal property which will be physically incorporated by the dairyman as an ingredient or constituent of dairy products which will be sold in the regular course of his business, is a sale for resale. These materials may be purchased by the dairyman free of tax upon his presentation to the vendor of a properly executed exemption certificate certifying that the purchase is for resale. When the dairy is not licensed with the Department it shall be required to explain on the reverse side of the certificate why a sales tax number is not required.

(c) Use of exemption certificate. When a dairyman purchases exempt property under this section, he is required to prepare and deliver to the vendor a properly executed exemption certificate.

The provisions of this § 32.31 amended through March 9, 1984, effective March 10, 1984, 14 Pa.B. 843. Immediately preceding text appears at serial pages (83003) to (83007).

This section cited in 61 Pa. Code § 32.1 (relating to definitions); and 61 Pa. Code § 32.25 (relating to steam, gas, electricity, fuel oil and kerosene).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.32 Manufacturing; processing.

(a) Equipment, machinery, parts and foundations therefor and supplies used directly in manufacturing or processing. The purchase or use of tangible personal property or services performed thereon by a person engaged in the business of manufacturing or processing is exempt from tax if the property is predominantly used directly by him in manufacturing or processing operations. Purchases of vehicles required to be registered under 75 Pa.C.S. § § 101—9821 (relating to the Vehicle Code) as well as supplies and repair parts for the vehicles shall be subject to tax. There is no exemption for maintenance facilities or for materials or supplies to be used or consumed in construction, reconstruction, remodeling, repair or maintenance of real estate other than machinery, equipment or parts therefor that may be affixed to the real estate. Beginning March 4, 1971, foundations for equipment and machinery became subject to tax and remained taxable until February 9, 1981. Effective February 7, 1981, foundations used to support equipment, machinery and parts used directly in manufacturing or processing shall be exempt from tax.

(1) Direct use. In determining whether property is directly used, consideration shall be given to the following factors:

(i) The physical proximity of the property in question to the production process in which it is used.

(ii) The proximity of the time of use of the property in question to the time of use of other property used before and after it in the production process.

(iii) The active causal relationship between the use of the property in question and the production of a product. The fact that particular property may be considered essential to the conduct of the business of manufacturing or processing because its use is required either by law or practical necessity does not of itself, mean that the property is used directly in the manufacturing or processing operations.

(2) Property directly used; predominant use. The purchase or use by a manufacturer or processor of property in the following categories, when predominantly used directly in manufacturing or processing, shall be exempt from tax. Where a single unit of the property is put to use in two different activities, one of which is a direct use and the other of which is not, the property may not be exempt from tax unless the manufacturer or processor makes use of the property more than 50% of the time directly in manufacturing or processing operations.

(i) General. Machinery, equipment, parts and foundations therefor, and supplies which are used in the actual production or to transport, convey, handle or store the product from the first production operation to the time the product is packaged for the ultimate consumer are considered to be directly used in manufacturing-processing operations. Repair parts which are installed and become an integral part of such property shall also be exempt from tax.

(ii) Pollution control devices. Equipment, machinery and supplies designed and used to control, abate or prevent air, water or noise pollution generated in the manufacturing or processing operation shall be deemed to be directly used in manufacturing or processing and, therefore, is not subject to tax. In order for property to qualify as exempt pollution control devices it is not necessary that the pollutants be recycled or used in any manner.

(iii) Testing and inspection. Property used to test and inspect the product throughout the production cycle, shall be considered to be directly used in manufacturing-processing operations.

(iv) Cleaning of returnable containers. Property used to wash, sterilize or inspect returnable containers prior to their being filled shall be exempt when used in packaging the product if the container will be delivered to the ultimate consumer.

(v) Packaging. Wrapping equipment and supplies, including internal packing materials and returnable containers, used in packaging which passes to the ultimate consumer are directly used and therefore shall be exempt.

(vi) Research. Property which is used directly in research activities shall be exempt from tax, provided that the object of the research is the production of a new or improved product or method of producing a product. The exemption does not apply to property used in market research or in other research which is conducted with the objective of improving administrative efficiency.

(3) Property not directly used. Property in the following categories is not directly used in manufacturing or processing operations and the purchase or use of the property shall be subject to tax.

(i) Real estate. The terms manufacturing or processing do not include the construction, reconstruction, alteration, remodeling, servicing, repairing, maintenance or improvement of real estate. The purchase or use of tangible personal property by a manufacturer or processor for the purpose shall be subject to tax, even though the structure may house or otherwise contain equipment or other facilities used directly in manufacturing or processing.

(ii) Maintenance facilities. Maintenance, service and repair work is not a manufacturing operation. Maintenance facilities, including tools, equipment and supplies predominantly used in performing the work (For example: chain, hoists, tire spreaders, welding equipment, drills, sanders, wrenches, paint brushes and sprayers, oilers, absorbent compounds, dusting compounds, air blowers and wipers) shall be subject to tax. However, replacement parts which are used to replace worn parts upon exempt machinery and equipment (For example: motors, belts, screws, bolts, cutting edges, air filters or gears) and operating supplies which are actively and continuously used in the operation of exempt machinery and equipment (For example: fuel, lubricants, paint and compressed air) shall be exempt from tax. Equipment and supplies, including soaps and cleaning compounds, brushes, brooms, mops, and similar items, used in general cleaning and maintenance of manufacturing or processing property shall be subject to tax. Installation and repair of property for others is not manufacturing or processing, whether the work is performed for or by a manufacturer or processor. This is so whether the property installed or repaired is manufactured or processed by the installer or repairman or someone else.

(iii) Managerial sales or other nonoperational activities. Property used in managerial, sales or other nonoperational activities is not directly used in manufacturing or processing and shall be therefore subject to tax. This category includes but is not limited to property used in any of the following activities:

(A) Management and administration. Office furniture, supplies and equipment, textbooks, and other educational materials, books and records, and all other property used in manufacturing or processing record keeping and other administrative and managerial work, whether on or off the production line, shall be subject to tax. The property includes, but is not limited to supplies used to record the quality and quantity of work in production or goods in storage, the flow of work, the results of inspection or to instruct workers in routing work or other production activities.

(B) Selling and marketing. Property used in advertising manufactured or processed products for sale or in marketing, transporting the products to a market or to customers, or selling the products, is not within the scope of the manufacturing-processing exemption.

(C) Exhibition of manufactured or processed products. Property used in the exhibition of manufactured or processed products or of manufacturing or processing operations shall be subject to tax.

(D) Safety and fire prevention. Property used to prevent or fight fires and equipment and supplies used for such programs as safety, accident prevention or fire prevention shall be subject to tax, even though the equipment or property is required by law, except for drugs, medicines and medical supplies exempted by section 204(17) of the TRC (72 P. S. § 7204(17)).

(E) Employe use. Property used for the personal comfort, convenience or use of employes, shall be subject to tax. However protective equipment, such as face masks, helmets, gloves, coveralls, goggles and the like, worn by production personnel shall be exempt from tax.

(F) Space heating, cooling, ventilation and illumination. Property, such as machinery and equipment, fuel or power used to ventilate buildings, lighting for general illumination, air conditioning and other space cooling and space heating equipment, shall be subject to tax unless it is established that the use of such property bears an active causal relationship to the manufacturing or processing operation.

(G) Preproduction activities. Property used to transport personnel or to collect, convey or transport other property, and storage facilities or devices used to store or hold property, prior to its use in the first production stage shall be subject to tax.

(H) Property used during production. Property used in managerial, sales or other nonoperational activities shall be subject to tax even though it is used during the production operation. Illustrations of the property include safety, heating and ventilation equipment, planking or grating for cross-walks or platforms, and maintenance equipment or facilities.

(I) Post production activities. Property used to transport or convey the finished product from the final manufacturing or processing operation, which includes but does not extend beyond the operation of packaging for the ultimate consumer, and storage facilities or devices used to store the product, are not used directly in manufacturing or processing and are taxable. For example, equipment which loads packaged products into cases or cartons for ease of handling in delivery shall be subject to tax. Machinery, equipment, supplies and other property used to convey, transport, handle or store the packaged product shall also be taxable.

(J) Waste disposal. Property used in waste handling and disposal of pollutants shall not be deemed to be directly used and shall be subject to tax unless such property qualifies for exemption under the provisions of subsection (a)(2)(ii).

(b) Materials incorporated as components into manufactured or processed products. The sale of personal property which will be physically incorporated by the manufacturer or processor as an ingredient or constituent of products which will be sold in the regular course of his business, is a sale for resale. These materials may be purchased by the manufacturer or processor free of tax upon his presentation to the vendor of a properly executed Exemption Certificate certifying that the purchase is for resale. When the manufacturer is not licensed with the Bureau he shall be required to explain on the reverse side of the certificate why a sales tax number is not required.

(c) Use of exemption certificate. When a manufacturer or processor purchases exempt property under the provisions of this section, he shall be required to prepare and deliver to the vendor a properly executed exemption certificate.

The provisions of this § 32.32 issued under section 270 of the Tax Reform Code (72 P. S. § 7270).

The provisions of this § 32.32 amended through March 9, 1984, effective March 10, 1984, 14 Pa.B. 843. Immediately preceding text appears at serial pages (83007) to (83011).

Research

A laboratory’s analysis, research and testing of client-provided products did not constitute a transformation of property or otherwise satisfy the definition of ‘‘manufacturing’’ as would entitle it to an exclusion from use tax. Lancaster Laboratories Inc. v. Commonwealth; 578 A.2d 988 (1990); vacated in part 611 A.2d 815 (Pa. Cmwlth. 1992); affirmed in part 631 A.2d 739 (Pa. Cmwlth. 1993).

Property Exempt

Wheel loaders are predominantly directly used in the process of manufacturing asphalt and therefore, qualify for the exclusion from Pennsylvania Sales and Use Tax. Union Paving Co. v. Commonwealth, 611 A.2d 360 (Pa. Cmwlth. 1992).

Research

The extent to which a laboratory used equipment directly in testing and inspection of products in manufacturer’s production cycle brought it within testing and inspection exemption to use tax but use of equipment to develop information to be employed in labelling products is neither within testing and inspection nor research provision of manufacturing exemption. Lancaster Laboratories, Inc. v. Commonwealth, 578 A.2d 988 (Pa. Cmwlth. 1990).

Property Exempt

A pizza franchise was entitled to the manufacturer’s exemption for its equipment, machinery and supplies and therefore was entitled to a use tax refund. Fleet Pizza Inc. v. Commonwealth, 538 A.2d 642 (Pa. Cmwlth. 1988); affirmed 557 A.2d 719 (Pa. 1989).

Computer used only to set up production schedules and not to control the operation of the production line is not considered directly used in manufacturing since the use is mere preparation for the production process and there is no active casual relationship between the computer and the production of finished product and is not exempt from the use tax. W. N. Dambach, Inc. v. Commonwealth, 488 A.2d 96 (Pa. Cmwlth. 1985).

Equipment used by a sanitary landfill for the disposal of industrial hazardous wastes shall be deemed to be directly used in manufacturing and shall not be subject to sales or use tax, while equipment used for the disposal of nonhazardous industrial and residential wastes is not exempt from tax; therefore, in order for such equipment to be deemed directly used in the manufacturing process, at least 50% of its use must be attributable to the disposal of hazardous wastes. Kelly Run Sanitation, Inc. v. Commonwealth, 487 A.2d 58 (Pa. Cmwlth. 1985); affirmed 514 A.2d 1370 (Pa. 1986).

Engineering supplies, which were not used by a corporation more than 50% of the time directly in manufacturing or processing operations and which were also used for ordering and marketing purposes, and were used prior to the commencement of first production stage, were not ‘‘predominantly used’’ directly for manufacturing; therefore, these supplies were not excluded from use tax under this section. Oberg Manufacturing Co., Inc. v. Commonwealth, 486 A.2d 1047 (Pa. Cmwlth. 1985).

Production Process

There is an active causal relationship between the preparation of art work and the photographic conversion of art work into printing plates, such that all essential steps in the process directly constitute part of the production process in printing. Westinghouse Electric Corp. v. Board of Finance and Revenue, 417 A.2d 800 (Pa. Cmwlth. 1980).

This section cited in 61 Pa. Code § 31.21 (relating to advertising agencies); 61 Pa. Code § 32.1 (relating to definitions); 61 Pa. Code § 32.25 (relating to steam, gas, electricity, fuel oil and kerosene); 61 Pa. Code § 32.36 (relating to printing and related businesses); 61 Pa. Code § 41.8 (relating to recapping and retreading of tires); 61 Pa. Code § 44.4 (relating to guns and ammunition); 61 Pa. Code § 52.2 (relating to fabrication of dental prosthetics); 61 Pa. Code § 52.4 (relating to sellers and repairers of eyeglasses); and 61 Pa. Code § 60.9 (relating to premium cable services).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.33 Farming.

(a) Equipment, machinery, parts and foundations therefor and supplies used directly in farming. The purchase or use of tangible personal property or services performed thereon by a person engaged in the business of farming is exempt from tax if the property is predominantly used directly by him in farming operations. Purchases of vehicles required to be registered under 75 Pa.C.S. § § 101—9821 (relating to the Vehicle Code) as well as supplies and repair parts for the vehicles are subject to tax. There shall be no exemption for maintenance facilities or tools, materials or supplies which are used or consumed in the construction, reconstruction, remodeling, repair or maintenance of real estate or farm equipment. Beginning March 4, 1971, foundations for equipment and machinery became subject to tax and remained taxable until February 9, 1981. Effective February 7, 1981, foundations used to support equipment, machinery and parts used directly in farming shall be exempt from tax.

(1) Direct use. In determining whether property is directly used, consideration shall be given to the following factors:

(i) The physical proximity of the property in question to the production process in which it is used.

(ii) The proximity of the time and use of the property in question to the time of use of other property used before and after it in the production process.

(iii) The active causal relationship between the use of the property in question and the production of a farm product. The fact that particular property may be considered essential to the conduct of the business of farming because its use is required either by law or practical necessity does not, of itself, mean that the property is used directly in farming operations.

(2) Property directly used; predominant use. The purchase or use by a farmer of property in the following categories, when predominantly used directly in farming, is exempt from tax. When a single unit of the property is put to use by a farmer in two different activities, one of which is a direct use and the other of which is not, the property is not exempt from tax unless the farmer makes use of the property more than 50% of the time directly in farming operations.

(i) General. Machinery, equipment, parts and foundations therefor, and supplies which are used in actual farm production, or to transport, convey, handle or store the product during the production are considered to be directly used in farming operations. Repair parts which are installed and become an integral part of the property are also exempt from tax.

(ii) Testing and inspection. Property used to test and inspect the product during the actual farm production is considered to be directly used in the farming operations.

(iii) Cleaning of returnable containers. Property used to wash, sterilize, or inspect returnable containers prior to their being filled is exempt when used in packaging the product if the container will be delivered to the ultimate consumer.

(iv) Packaging; preserving. Wrapping equipment and supplies, including internal packing materials and returnable containers, used in packaging which passes to the ultimate consumer are directly used and therefore exempt. Property used to handle and preserve farm products upon the farm premises, and to prevent or deter the destruction, injury or spoilage of farm products, or productive animals or plants, is exempt from tax. Examples of such property include the following:

(A) Chemicals used for crop pest control and equipment used to dispense it.

(B) Property used to groom productive animals so as to preserve their health (including property such as dehorners, debeakers, and hoof trimmers) and harnesses used to control productive animals on the farm premises.

(C) Refrigeration devices, including ice, used upon the farm premises to preserve the farm product prior to the operation of packaging passing to ultimate consumer.

(D) Chemicals and disinfectants used to clean and sterilize equipment with which milk animals come into direct contact, such as milking equipment, so as to prevent their infection, and to clean and sterilize milk cans so as to prevent spoilage of the milk.

(E) Medicines, cleaning solutions, compounds and supplies used to clean and groom productive animals so as to preserve their health.

(v) Research. Property which is used directly in research activities shall be exempt from tax, provided that the object of the research is the production of a new or improved product or method of producing a product. The exemption does not apply to property used in market research or in other research which is conducted with the objective of improving administrative efficiency.

(vi) Farm products; property which becomes a constituent or a part of a farm product. Property which is or becomes a constituent or a farm product is used directly in farming operations. Property consumed by productive animals such as feed and food additives, and property used for plant growth such as seed, fertilizer and chemical additives, is also used directly in farming.

(vii) Planting and tilling; caring for crops or productive animals. Property which is used to cause other property to become a constituent or part of a farm product, or to be consumed by productive animals or to foster plant growth shall be exempt from tax. Examples of property include the following:

(A) Seeders, planters, plows, harrows, cultivators, sprayers and similar equipment used to till the soil, to plant seed and to care for and cause the growth of productive plants.

(B) Portable equipment used to feed and water productive animals and to administer medication to them, such as portable tubs, buckets, cans, feed scoops, feed carts, portable watering devices, portable incubators and brooders and artificial breeding equipment.

(C) Fuel used to heat brooders, incubators and greenhouses.

(viii) Harvesting or collecting farm products. Property which is used to extract or separate a farm product from productive animals, the soil or plants shall be exempt from tax. The property includes harvesters, combines, binders, forage blowers, milking equipment including strainers and strainer discs, egg collecting equipment, corn shuckers, threshers and manure or feed handling equipment such as shovels, scoops, forks, barn brooms and carts.

(3) Property not directly used. Property in the following categories is not used directly in a farming operation and the purchase or use of the property shall be subject to tax.

(i) Real estate. The term farming does not include the construction, reconstruction, alteration, remodeling, servicing, repairing, maintenance or improvement of real estate. The purchase or use of tangible personal property by a farmer for such purpose is subject to tax, even though the structure may house or otherwise contain equipment or other facilities used directly in farming. Constructing, remodeling, repairing or maintaining buildings (including houses, garages, barns, stables, greenhouses, mushroom houses and storehouses), fences and stanchions permanently affixed to real estate, dams, roads, spillways and other improvements to real estate, is not a farming operation, and properly used in the work shall be taxable. Activities such as land reclamation, forestry, land clearing, landscaping and similar activities which are intended to improve or preserve real estate, are not farming operations.

(ii) Maintenance facilities. Maintenance, service and repair work is not a farming operation. Maintenance facilities, including tools, equipment and supplies predominantly used in performing the work (For example: chain hoists, tire spreaders, welding equipment, drills, sanders, wrenches, paint brushes and sprayers, oilers, absorbent compounds, dusting compounds, air blowers and wipers) is subject to tax. However, replacement parts which are used to replace worn parts upon exempt machinery and equipment (For example: motors, belts, screws, bolts, cutting edges, air filters or gears) and operating supplies which are actively and continuously used in the operation of exempt machinery and equipment (For example: fuel, lubricants, paint and compressed air) is exempt from tax. Equipment and supplies, including soaps and cleaning compounds, brushes, brooms, mops and similar items, used in general cleaning and maintenance of farm property shall be subject to tax.

(iii) Managerial, sales or other nonoperational activities. Property used in managerial, sales or other nonoperational activities is not directly used in farming and, therefore, is subject to tax. This category includes but is not limited to property used in any of the following activities:

(A) Farming management and administration. Office furniture, supplies and equipment, textbooks and other educational materials, books and records, and other property used in farming, recordkeeping and other administrative and managerial work is subject to tax. The property includes, but is not limited to, supplies used to record the quality and quantity of work in production or goods in storage, the flow of work, the results of inspection or to instruct workers in routing work or other production activities.

(B) Selling and marketing. Property used in advertising farm products for sale, or in marketing, transporting the products to a market or to customers, or selling the products, is not within the scope of the farming exemption.

(C) Exhibition of farm products. Property used in the exhibition of farm products or of farming operations is subject to tax. The property includes blankets, halters, prods, leads, harnesses, dressing, ribbons, clippers and similar show grooming and display equipment.

(D) Safety and fire prevention. Property used to prevent or fight fires and equipment and supplies used for programs as safety, accident prevention or fire prevention is subject to tax, even though such equipment or property is required by law, except for drugs, medicines and medical supplies exempted by section 204(17) of the TRC (72 P. S. § 7204(17)).

(E) Employe or personal use. Property used for the personal comfort, convenience or use of the farmer, his family, his employes or persons associated with him is subject to tax. Examples of property include the following: beds, mattresses, blankets, tableware, stoves, refrigerators and other equipment used in conjunction with the operation of a migrant labor camp or facilities for farm employes. Protective equipment (such as face masks, helmets, gloves, coveralls, goggles, and the like), worn by farming personnel is exempt from tax.

(F) Space heating, cooling, ventilation and illumination. Property, including machinery, equipment, fuel or power used to ventilate buildings, lighting for general illumination or air conditioning and refrigeration, space heating and similar property, is subject to tax, unless its use is required in order to preserve the health of productive animals or to prevent spoilage of farm products, prior to package passing to the ultimate consumer.

(G) Prefarming activities. Property used to transport personnel or to collect, convey or transport property, and storage facilities or devices used to store property, prior to its use in the actual farming operation, is subject to tax.

(H) Property used during farming operations. Property used in managerial, sales or other nonfarming activities, is subject to tax even though it is used during farming operations. Illustrations of property include safety, heating and ventilation equipment, planking or grating for crosswalks or platforms, and maintenance equipment or facilities.

(I) Postfarming activities. Property used to transport or convey the farm product after the final farming operation which includes but does not extend beyond the operation of packaging for the ultimate consumer, and storage and refrigeration facilities or devices used to store the product, are not used directly in farming and shall be taxable. For example, equipment, which loads packaged products into cases or cartons for ease of handling in delivery shall be subject to tax. Machinery, equipment, supplies and other property used to convey, transport, handle or store the packaged product is also taxable.

(J) Additional processing of farm products. Property used in making butter, sausage, pasteurized milk, canned goods, jellies, flour, juices, cheeses, ice cream and other items which are not ‘‘farm products,’’ as defined in § 32.1 (relating to definitions), is not exempt from tax under the farming exemption.

(b) Use of exemption certificate. When a farmer purchases exempt property under this section, the farmer shall prepare and deliver to the vendor a properly executed exemption certificate.

The provisions of this § 32.33 amended May 22, 1981, effective May 23, 1981, 11 Pa.B. 1806; amended July 1, 1983, effective July 2, 1983, 13 Pa.B. 2066; amended March 9, 1984, effective March 10, 1984, 14 Pa.B. 843. Immediately preceding text appears at serial pages (83011) to (83012), (61206) to (61207) and (83013) to (83016).

This section cited in 61 Pa. Code § 32.1 (relating to definitions); 61 Pa. Code § 32.25 (relating to steam, gas, electricity, fuel oil and kerosene); 61 Pa. Code § 44.4 (relating to guns and ammunition); and 61 Pa. Code § 60.21 (relating to commercial racing activities).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.34 Public utilities.

(a) Equipment, machinery, parts and foundations therefor, and supplies used directly in rendering public utility service. The purchase or use by a public utility of tangible personal property or services performed thereon to be predominantly used directly by it in producing, delivering or rendering of a public utility service or constructing, reconstructing, remodeling, repairing or maintaining facilities directly used in the service is exempt from tax, whether or not the facilities constitute real estate. However, for purposes of this exemption, real estate does not include buildings, roads or similar facilities. Effective March 4, 1971, foundations for exempt machinery or equipment became subject to tax and remained taxable until February 9, 1981. Effective February 7, 1981, foundations used to support equipment, machinery and parts used directly in rendering a public utility service are exempt from tax. The term ‘‘foundations’’ includes sand, gravel, crushed rock, concrete or similar material used as bedding or surrounding pipe used directly in rendering a public utility sanitary sewer or water service. Purchases of any vehicles required to be registered under 75 Pa.C.S. § § 101—9909 (relating to Vehicle Code), except those vehicles used directly by a public utility engaged in business as a common carrier as well as supplies and repair parts for the vehicles, is subject to tax.

(1) Direct use. In determining whether a particular structure or article is used directly in producing, delivering or rendering a public utility service, consideration shall be given to the following:

(i) The physical proximity of the items while in use and the proximity of time of their use to the production, rendition and delivery of the utility service.

(ii) The causal relationship between the use of the item and the production, delivery and rendition of the utility service.

(iii) The character of the item, as to whether it is in the nature of a general improvement to the premises that would serve various users or is particularly designed or constructed for public utility use. The fact that particular property may be considered essential to the rendering of a public utility service because its use is required either by law or practical necessity does not, of itself, mean that the property is used directly by a public utility.

(2) Property directly used; predominant use. The purchase or use by a public utility of property in the following categories, when predominantly used directly in rendering a public utility service, shall be exempt from tax. Where a single unit of the property is put to use in two different activities, one of which is a direct use and the other of which is not, the property shall not be exempt from tax unless the public utility makes use of the property more than 50% of the time directly in public utility operations.

(i) General. Machinery, equipment, parts and foundations therefor, and supplies which are used in the actual producing, delivering, or rendering of a public utility service shall be considered to be directly used in public utility operations. Repair parts which are installed and become an integral part of the property is also exempt from tax.

(ii) Pollution control devices. Equipment, machinery and supplies designed and used to control, abate or prevent air, water or noise pollution generated in the rendering of the public utility services shall be deemed to be directly used in the rendition of a public utility service and, therefore, is not subject to tax. In order for property to qualify as exempt pollution control devices, it shall not be necessary that the pollutants be recycled or used in any manner.

(iii) Realty construction; materials, tools and equipment. Construction materials, tools and equipment used to construct, reconstruct, remodel, repair or maintain facilities which are used directly in the production, delivery or rendition of a public utility service shall be deemed to be directly used and therefore shall be exempt from tax. However, tools and equipment used to maintain the facilities shall be exempt only if installed as a part of the facility.

(iv) Research. Property which is used directly in research activities by a public utility shall be exempt from tax, provided that the object of the research is the production of a new or improved product or utility service or method of producing a product or utility service. The exemption does not apply to property used in market research or in other research which is conducted with the objective of improving administrative efficiency.

(3) Property not directly used. Property in the following categories is not directly used in public utility operations and the purchase or use of the property is subject to tax:

(i) Real estate. Construction materials, tools and equipment used to construct, reconstruct, remodel, repair or maintain facilities not used directly in the production, delivery or rendition of a public utility service is subject to tax. The purchase or use of property for use in construction, reconstructing, remodeling, repairing or maintaining a building, road or similar facility, regardless of its purpose, is subject to tax. The term building does not include machinery and equipment and parts therefor, whether the property is designated as real estate or not. Structures such as railroad watchmen’s shacks, bus terminals, warehouses and toolsheds are considered buildings. However, the machinery and equipment as signal towers, water and fuel tanks, and railroad tracks are not considered buildings.

(ii) Maintenance; tools and equipment. Tools and equipment used but not installed in the maintenance of facilities directly used in the production, delivery or rendition of a public utility service shall be subject to tax. Tools and equipment used in the maintenance of nonexempt facilities shall be subject to tax whether or not they are installed so as to become a component thereof.

(iii) Managerial, sales or other nonoperational activities. Property used in managerial, sales or other nonoperational activities is not directly used in the production, delivery or rendition of a public utility service and is therefore subject to tax. This category includes, but is not limited to, property used in any of the following activities:

(A) Management and administration. Office furniture, supplies and equipment, textbooks and other educational materials, books and records, and other property used by a public utility in recordkeeping and other administrative and managerial work, irrespective of the point of use, is subject to tax. The property includes, but is not limited to, supplies used to record the quality and quantity of work in production or goods in storage, the flow of work, the results of inspection or to instruct workers in routing work or other production activities.

(B) Selling and marketing. Property used in advertising, marketing or selling public utility services or products is not within the scope of the public utility exemption.

(C) Public utility exhibitions. Property used in the exhibition of public utility products or services is subject to tax.

(D) Safety and fire prevention. Property used to prevent or fight fires and equipment and supplies used for programs as safety, accident prevention or fire prevention is subject to tax, even though the equipment or property is required by law, except for drugs, medicines and medical supplies exempted by section 204(17) of the TRC (72 P. S. § 7204(17)).

(E) Employe use. Property used for the personal comfort, convenience or use of employes, is subject to tax. Protective equipment, such as face masks, helmets, gloves, coveralls, goggles, and the like, worn by production personnel is exempt from tax.

(F) Space heating, cooling, ventilation and illumination. Property, including machinery and equipment, fuel or power used to ventilate buildings, lighting for general illumination, air conditioning and other space cooling, space heating and similar property, is subject to tax unless it is established that the use of the property bears an active causal relationship to the production, delivery or rendition of a public utility service.

(G) Activities prior to production, delivery or rendition of services. Property used to transport personnel or to collect, convey or transport other property, and storage facilities or devices used to store or hold property prior to its use in the production, delivery or rendition of a public utility service is subject to tax. Property used to transport, store or hold the actual product which is delivered as a public utility service is directly used and therefore is not subject to tax.

(H) Property used during production, delivery or rendition of services. Property used in managerial, sales or other nonoperational activities is subject to tax even though it is used during the production operation. Illustrations of the property include safety, heating and ventilation equipment, and planking or grating for crosswalks or platforms.

(I) Activities subsequent to production, delivery or rendition of services. Property used to transport or convey personnel or property following the production, delivery or rendition of a public utility service and storage facilities or devices used for that purpose, are not used directly by a public utility and is subject to tax.

(J) Waste disposal. Property used in waste handling and disposal of pollutants is not deemed to be directly used and is subject to tax unless the property qualifies for exemption under subsection (a)(2)(ii). For purposes of this subsection, ash handling equipment used by a public utility electrical generation station is not considered as property used in waste disposal.

(b) Use of exemption certificates. When a public utility purchases exempt property under this section, the public utility shall prepare and deliver to the vendor a properly executed exemption certificate.

The provisions of this § 32.34 amended April 15, 1977, effective April 16, 1977, 7 Pa.B. 1046; amended August 14, 1981, effective August 15, 1981, 11 Pa.B. 2855; amended March 9, 1984, effective March 10, 1984, 14 Pa.B. 843; corrected January 7, 2005, effective December 1, 1990, 35 Pa.B. 256. Immediately preceding text appears at serial pages (233339), to (233340), (215857) to (215858) and (234297).

Direct Use Not Established

Food, nonalcoholic beverages and related nonfood supplies furnished by airliner to passengers and crew members during commercial flights are not ‘‘directly used’’ in the supply of a public utility service and do not qualify for an exclusion under the ‘‘use tax’’ provisions in accordance with 72 P. S. § 7201(o). American Airlines v. Board of Finance and Revenue, 665 A.2d 417 (Pa. 1995).

Food, nonalcoholic beverages and related nonfood supplies furnished to passengers and crew members during flight are directly used in the rendition of a public utility service and are, therefore, exempt from use tax. USAir, Inc. v. Commonwealth, 665 A.2d 417 (Pa. 1995).

Documentation

Taxpayer insisted that the company leased its equipment to other Public Utility Commission entities for use in public utility service, and that such leases would be found in the boxes of documents. However, the taxpayer was unable to identify which boxes, among the many piled in the back of the courtroom, contained these leases and after allowing the taxpayer time to select several boxes as possible sites for these leases and marking these boxes for identification, no leases were identified in the subsequent inventory. Therefore, the taxpayer failed to prove that the assessed equipment was leased to a Commission licensed entity. Fiore v. Commonwealth, 668 A.2d 1210 (Pa. Cmwlth. 1995).

Evidence Supporting Exemption

In order for a taxpayer to prove an entitlement to an exemption from use tax, a taxpayer must establish that the entity using the assessed items of property has public utility authority, and that the assessed items of property were directly and predominantly used in the rendition of a public utility service, or in manufacturing. In the case of those vehicles required to be registered under the Vehicle Code, a taxpayer must prove an entitlement to an exemption by showing that the vehicles were directly used by a business with common carrier authority. Fiore v. Commonwealth, 668 A.2d 1210 (Pa. Cmwlth. 1995).

This section cited in 61 Pa. Code § 32.25 (relating to steam, gas, electricity, fuel oil and kerosene); and 61 Pa. Code § 60.20 (relating to telecommunications service).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.35 Mining.

(a) Equipment, machinery, parts and foundations therefor and supplies used directly in mining. The purchase or use of tangible personal property or services performed thereon by a person engaged in the business of mining is exempt from tax if the property is predominantly used directly by the person in mining operations. Purchases of a vehicle required to be registered under 75 Pa.C. S. § § 101—9909 (relating to Vehicle Code), as well as supplies and repair parts for the vehicles is subject to tax. There is no exemption for maintenance facilities or for materials or supplies to be used or consumed in construction, reconstruction or remodeling of real estate other than machinery, equipment and parts therefor that may be affixed to the real estate. Beginning March 4, 1971, foundations for equipment and machinery became subject to tax and remained taxable until February 9, 1981. Effective February 7, 1981, foundations used to support equipment, machinery and parts used directly in mining are exempt from tax.

(1) Direct use. In determining whether property is directly used, consideration shall be given to the following factors:

(i) The physical proximity of the property in question to the production process in which it is used.

(ii) The proximity of the time of use of the property in question to production processes which precede and follow its use.

(iii) The active causal relationship between the use of the property in question and the production of the mined product. The fact that particular property may be considered essential to the conduct of the business of mining because its use is required either by law or practical necessity does not, of itself, mean that the property is used directly in mining operations.

(2) Property directly used; predominant use. The purchase or use by a mine operator of property in the following categories, when predominantly used directly in mining, is exempt from tax. Where a single unit of the property is put to use in two different activities, one of which is a direct use and the other of which is not, the property is not exempt from tax unless the mine operator makes use of the property more than 50% of the time directly in mining operations.

(i) General. Machinery, equipment, parts and foundations therefor, and supplies which are used in the actual mining production, to transport or convey the product or production personnel, or to handle or store the product during the production are considered to be directly used in mining operations. Repair parts which are installed and become an integral part of the property are also exempt from tax. Exempt property includes:

(A) Digging and extracting equipment, machinery and tools, such as power coal cutting machines, picks, sledges and shovels, and earthmoving equipment and machinery used to remove the overburden in strip mining.

(B) Blasting and dislodging equipment and supplies, such as air compressors, compressed air tubes and dynamite or other explosives.

(C) Drainage pumps, pipes, valves, fittings and packing.

(D) Timber (props), roof-bolts and roof-bolting machines and their accessories, roof jacks, torque wrenches and impact tools used to test roof bolts and make them secure.

(E) Rock dust and rock-dusting equipment.

(F) Trolley and mine telephones used predominantly in mining activities, other than for managerial direction and supervision, such as for dispatching purposes on mine railways and work coordination among production employes of equal authority.

(G) Ventilation equipment used to extract impure air from the mine and extend production operations to the mine face.

(H) Transportation devices and equipment used to haul the ex-tracted product from the mine face or pit to the preparation plant, tipple or breaker, except vehicles required to be registered under the Vehicle Code.

(I) Lighting equipment and supplies used to light production activities.

(J) Protective devices worn by production personnel in their work, such as miners’ lamps and respirators.

(K) Preparation plant machinery and equipment.

(L) Waste extraction and removal equipment and machinery used in the course of production operations.

(M) Water well drilling rigs, bits, drills, casings, casing covers and lubricants.

(N) Machinery and equipment—such as dozers and graders—and materials—such as fill, seedlings, grass seed, shrubs, stone, concrete and soil nutrients—used in backfilling and reclamation of underground shafts, stripping pits and other directly used mining facilities when required by law.

(ii) Pollution control devices. Equipment, machinery and supplies, designed and used to control, abate or prevent air, water or noise pollution generated in the mining operation are deemed to be directly used in mining and, therefore, is not subject to tax. In order for property to qualify as exempt pollution control devices, it is not necessary that the pollutants be recycled or used in any manner.

(iii) Testing and inspection. Property used to test and inspect the product during actual mine production is considered to be directly used in the mining operation.

(iv) Cleaning of returnable containers. Property used to wash, sterilize or inspect returnable containers prior to their being filled shall be exempt when used in packaging the product if the container will be delivered to the ultimate consumer.

(v) Packaging. Wrapping equipment and supplies, including internal packing materials and returnable containers, used in packaging which passes to the ultimate consumer are directly used and therefore shall be exempt.

(vi) Research. Property which is used directly in research activities is exempt from tax, provided that the object of the research is the production of a new or improved product or method of producing a product. The exemption does not apply to property used in market research or in other research which is conducted with the objective of improving administrative efficiency.

(3) Property not directly used. Property in the following categories is not used directly in mining operation, and the purchase or use of the property is subject to tax.

(i) Real estate. The term mining does not include the construction, reconstruction, alteration, remodeling, servicing, repairing, maintenance or improvement of real estate. The purchase or use of tangible personal property by a miner for such purpose shall be subject to tax, even though the structure may house or otherwise contain equipment or other facilities used directly in mining. Equipment, machinery, tools and other property used in logging and timbering activities including property used to remove trees and clear ground preparatory to extraction activities is not deemed to be directly used.

(ii) Maintenance facilities. Maintenance, service and repair work is not a mining operation. Maintenance facilities either underground or surface, including tools, equipment and supplies predominantly used in performing the work (For example: chain hoists, tire spreaders, welding equipment, welding oxygen and acetylene, drills, sanders, wrenches, paint brushes and sprayers, oilers, absorbent compounds, dusting compounds, air blowers and wipers) is subject to tax. However, replacement parts which are used to replace worn parts upon exempt machinery and equipment (For example: motors, belts, screws, bolts, cutting edges, air filters or gears) and operation supplies which are actively and continuously used in the operation of exempt machinery and equipment (For example: fuel, lubricants, paint and compressed air) is exempt from tax. Equipment and supplies, including soaps and cleaning compounds, brushes, brooms, mops and similar items, used in general cleaning and maintenance of mining property is subject to tax.

(iii) Managerial, sales or other nonoperational activities. Property used in managerial, sales or other nonoperational activities is not directly used in mining and therefore shall be subject to tax. This category includes but is not limited to property used in any of the following activities:

(A) Mine management and administration. Office furniture, supplies and equipment, textbooks and other educational materials, books and records, and other property used in mining recordkeeping and other administrative and managerial work shall be subject to tax. The property includes, but is not limited to supplies used to record the quality and quantity of work in production or goods in storage, the flow of work, the results of inspection, or to instruct workers in routing work, or other production activities.

(B) Selling and marketing. Property used in advertising mining products for sale, or in marketing, transporting the products to a market or to customers or selling the products, is not within the scope of the mining exemption.

(C) Exhibition of mine products. Property used in the exhibition of mining products or of mining operations is subject to tax.

(D) Safety and fire prevention. Property used to prevent or fight fires and equipment and supplies used for the programs as safety, accident prevention or fire prevention shall be subject to tax, even though the equipment or property is required by law.

(E) Employe use. Property used for the personal comfort, convenience or use of employes shall be subject to tax. Property used in bath houses and lamphouses is included in this category. However, protective equipment, such as face masks, helmets, gloves, coveralls, goggles and the like, worn by production personnel is exempt from tax.

(F) Space heating, cooling, ventilation and illumination. Property, including machinery, equipment, fuel or power used to ventilate buildings, lighting for general illumination or air conditioning and other space cooling, space heating and similar property, is subject to tax, unless it is established that the use of the property bears an active causal relationship to the mining operation.

(G) Premining activities. Property used to transport personnel or to collect, convey or transport other property, and storage facilities or devices used to store the property, prior to the actual mining operation is subject to tax.

(H) Property used during mining operation. Property used in managerial, sales or other nonmining activities, is subject to tax even though it is used during mining operations. Illustrations of the property include safety, heating and ventilation equipment; planking or grating for crosswalks or platforms; and maintenance equipment or facilities.

(I) Post-mining activities. Property used to transport or convey the mined product after the final mining operation, which includes but does not extend beyond the operation of packaging for the ultimate consumer, and storage facilities or devices used to store the product, are not used directly in mining and is taxable. For example, equipment which loads packaged products into cases or cartons for ease of handling in delivery is subject to tax. Machinery, equipment, supplies and other property used to convey, transport, handle or store the packaged product are also taxable.

(J) Waste disposal. Property used for waste handling and disposal of pollutants other than in the course of production operations is not deemed to be directly used and is subject to tax unless the property qualifies for an exemption under subsection (a)(2)(ii).

(b) Use of exemption certificate. When a miner purchases exempt property under this section, the miner shall prepare and deliver to the vendor a properly executed exemption certificate.

The provisions of this § 32.35 amended April 15, 1977, effective April 16, 1977, 7 Pa.B. 1047; amended August 21, 1981, effective August 22, 1981, 11 Pa.B. 2912; amended July 1, 1983, effective July 2, 1983, 13 Pa.B. 2066; amended March 9, 1984, effective March 10, 1984, 14 Pa.B. 843. Immediately preceding text appears at serial pages (83018), (63094) to (63095) and (83019) to (83020).

Mining

The equipment used by a hard rock extractor in making possible the access to and extraction of bituminous coal is involved in mining for purposes of the sales and use tax exclusion. Commonwealth v. R. G. Johnson Company, 433 A.2d 465 (Pa. 1981).

Residential Use

Purchase of utilities on behalf of tenants and included in the tenants’ monthly rental fee does not constitute a ‘‘residential use,’’ and landlords are not entitled to a refund for taxes paid. Adelphia House Partnership v. Commonwealth, 709 A.2d 967 (Pa. Cmwlth. 1998); exceptions overruled, decision adhered by 719 A.2d 833 (Pa. Cmwlth. 1998).

This section cited in 61 Pa. Code § 32.25 (relating to steam, gas, electricity, fuel oil and kerosene).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.36 Printing and related businesses.

(a) The printing exemption. Printing and related businesses are exempt from sales and use taxes in accordance with the following:

(1) Machinery, equipment, parts and supplies used directly in printing. Printing, when engaged in as a business, is included in manufacturing under the TRC and regulations applicable to manufacturers are also applicable to printers. Equipment, machinery—including components of a computer system, accessories, parts and supplies therefor which are used predominantly and directly in the business of printing, regardless of the technology involved, is exempt from tax. Where equipment is used for both exempt and nonexempt purposes, the predominant use test shall determine its tax status. Effective February 7, 1981, foundations used to support equipment, machinery and parts used directly in printing are exempt from tax. See § 32.32 (relating to manufacturing; processing). With the exception of purchases involving improvements to real estate, directly used property may be purchased free of tax upon the presentation to a vendor of a properly executed exemption certificate certifying that the purchase will be directly used in printing—manufacturing. For example, company X has a computer printer and photocopy machine which predominantly supports administrative operations. Neither device qualifies for the printing exemption. Company Y has a print shop operated as a separate profit-center reproducing multiple copies of substantially identical printed matter. The tangible personal property in this print shop which is predominantly used in printing qualifies for the sales tax exemption.

(2) Related businesses. The exemption also applies to businesses related to the printing industry which, although they themselves are not printing, are ‘‘manufacturing’’ within the meaning of section 201(c) of the TRC (72 P. S. § 7201(c)) and thus are not subject to the multiple copy requirement. Businesses include trade binding, engraving, silk screening, typography, including advertising typographers, plate making, color separating, stereotyping, electrotyping, gravure cylinder making, photographic processing and the business of manufacturing page mechanicals, camera ready copy, image carriers or related or component items for sale to printers for use in their printing operations.

(3) Materials incorporated as components into printed matter. The purchase of personal property which will be physically incorporated by the printer as an ingredient or constituent of printed matter and which will be sold in the regular course of business is a purchase for resale. These materials may be purchased by the printer free of tax upon presentation to the vendor of a properly executed exemption certificate certifying that the purchase is for resale.

(4) Inhouse printing. Where the normal business of an entity is other than the business of printing, but the entity also provides its own full service printing requirements, an inhouse printing operation will qualify for the manufacturing exemption if the following apply:

(i) Inhouse printing is to be conducted in a separate and distinct location, utilizing separate and distinct machinery and supplies, devoted predominantly to printing activities.

(ii) Inhouse printing is the responsibility of employes assigned to the job of inhouse printing and whose duties are predominately related to printing activities.

(iii) Separate accounting or interdepartmental billing is provided to reflect the cost of operating inhouse printing activities and to charge these costs against other business activities conducted by the taxpayer.

(iv) Inhouse printing activities are separate and distinct from other business activities and are not an integrated part of general data processing, word processing, copying or other business activity of the taxpayer.

(v) Inhouse printing activities are of sufficient size, scope and character that they could be conducted on a commercially viable basis separate and distinct from other business activities of the taxpayer.

(b) Sales by printer. Sales by printers shall conform with the following:

(1) Generally. Tax shall be collected by a printer upon the sale at retail of taxable printed matter. See § 31.29 (relating to books, printed matter and advertising materials). The tax applies to the charge for printing services.

(2) Printed matter not qualifying as direct mail advertising literature or materials or mail order catalogs. Generally, printers include as an element of the purchase price to customers’ charges for service or labor pertaining to the printing or preparing of the printed matter. Charges for printing, imprinting, engraving, mimeographing, multigraphing, typesetting, addressing, folding, enclosing, packaging and selling are included in the purchase price, and tax shall be collected with respect to charges. Charges, even though separately stated, made by the printer for the mailing or delivering of the finished product to the customer, or a designee, are included as an element of the purchase price. When the finished product involves the use of the United States postal cards or stamped envelopes purchased by the printer, the tax does not apply to the amount of the United States postage imprinted upon the postal card or envelopes if the printer is not required to mail the printed matter to the customer’s designee. If the printer is required to mail the printed matter to the customer’s designee, the value of the postage is taxable upon the basis that it constitutes a charge for the delivery of the postal cards or stamped envelopes. A charge for tear sheets, clippings, reprints and extra proofs is subject to tax.

Example 1: Printer ‘‘A’’ imprints stamped envelopes and brochures not qualifying as direct mail advertising literature or material for his customer ‘‘B.’’ ‘‘A’’ furnishes stamped envelopes and paper for the brochures. The contract requires ‘‘A’’ to return the completed envelopes and brochures to ‘‘B’’ who in turn will mail them to his customers. ‘‘A’’ is required to collect sales tax upon his services for the envelopes, paper, printing charges and cost of delivering the envelopes and brochures to ‘‘B.’’ ‘‘A’’ may separately state the costs of the postage stamps which are not subject to tax.

Example 2: Printer ‘‘A’’ imprints stamped envelopes and brochures not qualifying as direct mail advertising materials or literature for customer ‘‘B.’’ ‘‘A’’ furnishes the stamped envelopes and paper for the brochures. The contract requires ‘‘A’’ to mail the envelopes and brochures to ‘‘B’s’’ customers. ‘‘A’’ is required to collect sales tax upon charges for the envelopes, paper, printing charges and stamps. The value of the stamps represents the delivery charges in conjunction with the sale.

(3) Printed matter qualifying as direct mail advertising materials or mail order catalogs. A charge for the sale of mail order catalogs and direct mail advertising literature or materials is exempt from tax. A charge incidental to the sale of mail order catalogs and direct mail advertising is also exempt from tax. A charge for the delivery postage or mailing of the items to the customer or the customer’s designee is also exempt from tax.

(4) Printing services.

(i) The exemption relating to the purchase of direct mail advertising literature or materials and mail order catalogs is confined to transactions in which the printer provides both the printing service and the material to be imprinted. If the printer performs printing services upon paper, cardboard or other material furnished by the purchaser of the services or a third party, the charges are subject to tax even though the finished product qualifies as direct mail advertising literature or material or mail order catalog.

Example: Printer ‘‘A’’ imprints paper for customer ‘‘X.’’ ‘‘X’’ supplies the paper. The letters are advertisements which will be mailed directly to ‘‘X’s’’ customers. This printing service does not qualify for the direct mail advertising exemption. Accordingly, ‘‘A’’ shall collect and ‘‘X’’ pay sales tax on the total purchase price of the printing service.

(ii) Copy, artwork, photographs, plates, separations and other preparations and image carriers are items which, if provided by the customer, will not cause a charge for printing to be taxable, if the customer does not also supply the material receiving the printing image.

Example: Printer ‘‘A’’ imprints paper for customer ‘‘Y.’’ ‘‘A’’ supplies the paper. ‘‘Y’’ supplies the plates and artwork. The letters are intended to promote business and will be mailed directly to ‘‘Y’s’’ customers. This material does qualify for the direct mail advertising exemption. ‘‘Y’’ is exempt from tax on the charges by ‘‘A.’’

The provisions of this § 32.36 amended through June 28, 1985, effective June 29, 1985, 15 Pa.B. 2389; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (149607) to (149608), (152595) to (152596) and (149611).

Charges for independent vendor printing taxpayer’s publications were exempt from the use tax under the ‘‘direct mail advertising’’ exemption; the court construed the term ‘‘direct’’ in the direct mail advertising exemption to apply not only to advertising materials mailed by the taxpayer directly to prospective purchasers, but also to materials mailed by the vendor that reaches recipients directly following deposit in the mail. Merion Publications, Inc. v Commonwealth, 890 A.2d 436, 443 (Pa. Cmwlth. 2006).

Where outside printer was contracted to perform printing on taxpayer’s premises using printer’s own equipment and employees to perform the printing, taxpayer could not claim sales tax exemption for in-house printing. SEI Investments v. Commonwealth, 890 A.2d 1130, 1137 (Pa. Cmwlth. 2006).

Engineering supplies used by corporation did not qualify for printing exemption to use tax since corporation limited preparation of prints and drawings was solely in connection with manufacture of dies. Oberg Manufacturing Co., Inc. v. Commonwealth, 486 A.2d 1047 (Pa. Cmwlth. 1985).

A manufacturer of electrical products whose inhouse printing operation produces sales brochures, manuals, and reports for use by its own sales personnel, as well as stationery, books, pricing information, buying data, business forms and meter paper for its own electrical products, is engaged in printing as a business with respect to all materials used or consumed by its inhouse printing operation, but not with respect to items printed by outside independent printers. Westinghouse Electric Corporation v. Board of Finance and Revenue, 417 A.2d 800 (Pa. Cmwlth. 1980).

This section cited in 61 Pa. Code § 32.25 (relating to steam, gas, electricity, fuel oil and kerosene); and 61 Pa. Code § 60.8 (relating to secretarial and editing services).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

61 Pa. Code § 32.37 Photographers and photofinishers.

(a) Scope. Photographers, photofinishers and photo-refinishers are vendors of photographs, materials and services purchased by their customers, whether or not produced to the special order of the customer. The photographer or photofinisher shall collect and remit tax upon the total purchase price charged for the photographs or services, even though the customer may furnish some of the materials. Photo-refinishers shall collect and remit tax upon the total purchase price charged for the rendering of the photo-refinishing service. In determining total purchase price, there may be no deduction for ancillary expenses, including travel time and expenses, telephone calls, salaries or wages paid to assistants, models or narrators, whether or not the expenses are separately stated in billings to purchasers.

(b) Manufacturing exemption. The purchase or use of materials, equipment and supplies by a photographer or photofinisher is exempt from tax if the property is predominantly used directly by him in the photography or photofinishing operation. This exemption is restricted to photographers and photo-finishers and is not available to photo-refinishers.

(1) Property directly used. The following are examples of equipment, parts and accessories, and materials and supplies which when predominantly used directly by a photographer or photofinisher in the operation of photography shall be exempt from tax: cameras, film, camera or flash batteries, processing chemicals, special lighting, tripods, filters, cable release mechanisms, light measuring devices, screens, props, proofing machines, enlargers, developing trays, fixing trays, film and print washing machines, brushes and color crayons, densitometers, enlarging meters and automatic rocker trays.

(2) Property not directly used. The following are examples of equipment, materials and supplies which do not qualify for the manufacturing exemption: camera cases, gadget bags, lens cases, projectors, screens, projection lamps, projection tables, stands, slide files, motion picture reels and cans, viewers, viewing tables, negative files, negative envelopes, bulk film loaders, film cassettes, paper safes and cleaners for film and lenses.

(3) Repairs. The repair of equipment predominantly used directly by the photographer or photofinisher in his photography or photofinishing operation shall be exempt from tax. This exemption also applies to the purchase of replacement parts for the equipment.

(4) Utilities. That portion of the photographers or photofinishers utilities which are directly used in his manufacturing operations shall also be exempt from tax. Fuel or power used to ventilate buildings, for general illumination lighting, air conditioning and other space cooling, and space heating shall be subject to tax unless it is established that the use of these utilities bears an active causal relationship to the photographers or photofinishers manufacturing operations.

(c) Resale exemption. Photographers, photofinishers and photo-refinishers may claim the resale exemption on purchases of tangible personal property which they directly resell or incorporate into products which they resell.

The provisions of this § 32.37 adopted April 26, 1974, effective April 27, 1974, 4 Pa.B. 828; amended June 29, 1990, effective June 30, 1990, 20 Pa.B. 3600. Immediately preceding text appears at serial pages (99666) and (105779).

This section cited in 61 Pa. Code § 32.25 (relating to steam, gas, electricity, fuel oil and kerosene).

History

• Authority: The provisions of this § 32.
• Source: The provisions of this § 32.

Chapter 33 Computation of Tax

61 Pa. Code § 33.1 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Credit sales—Sales in which the purchaser pays part of the total purchase price subsequent to the time of purchase. A sale shall be deemed to be on credit whether by open credit—including the use of a credit card—or a secured transaction such as a chattel mortgage, conditional sale or bailment lease. Layaway sales—A transaction in which a seller agrees to transfer title and possession of tangible personal property to a purchaser for an agreed price, with the transfer of the title and possession conditioned upon payment by the purchaser of the agreed price in a series of deposits to be made within a specified period. Purchase price—The total value of anything paid or delivered or promised to be paid or delivered, whether it be money or otherwise, in consideration of a sale at retail or purchase at retail not including a rental or license to use. See § 31.4 (relating to rentals or leases of tangible personal property).

The provisions of this § 33.1 amended January 14, 1994, effective January 15, 1994, 24 Pa.B. 354. Immediately preceding text appears at serial page (105781).

This section cited in 61 Pa. Code § 46.9 (relating to financial institution security equipment).

History

• Authority: The provisions of this § 33.
• Source: The provisions of this § 33.

61 Pa. Code § 33.2 Scope.

(a) Taxable portion of purchase price. Amounts included in the taxable portion of the purchase price include:

(1) Property or service. The charge for the property or service.

(2) Delivery costs. The charge for handling, delivery or other transportation services, including mailing costs.

(3) Labor and installation services. The charge for labor, service or alteration.

(4) Taxes. The charge for taxes imposed by the Commonwealth.

(5) Restocking. The charges for restocking in connection with the return of merchandise.

(6) Amounts representing costs to vendor. Charges, whether or not separately stated, representing reimbursement to the vendor for expenses paid by the vendor, such as manufacturer’s excise tax, gross receipts tax, fuel adjustment charges, mercantile tax, insurance, meals, lodging, mileage or similar expenses.

(7) Miscellaneous. Other charges which are not exempt from tax.

(b) Exclusions. Amounts which are excluded from the taxable portion of purchase price, if separately stated and identified, include:

(1) Returnable containers. Deposit charges for returnable containers.

(2) Discounts. Amounts representing on-the-spot cash discounts, employe discounts, volume discounts, store discounts such as ‘‘buy one, get one free,’’ wholesaler’s or trade discounts, rebates and store or manufacturer’s coupons shall establish a new purchase price if both the item and the coupon are described on the invoice or cash register tape. An amount representing a discount allowed for prompt payment of bills which is dependent upon an event occurring after the completion of the sale may not be deducted in computing the tax. A sale is completed when there is a transfer of ownership of the property or services to the purchaser.

EXAMPLES:

(i) ‘‘A’’ purchases two hamburgers from ‘‘R’’ restaurant with a ‘‘buy one, get one free’’ coupon. The price of one hamburger is $1. ‘‘R’’ rings up $2 on the cash register. ‘‘R’’ enters a credit in the cash register for the amount of $1 resulting in an adjusted price of $1. The acceptance of the coupon by ‘‘R’’ establishes a new purchase price of $1 which is subject to 6¢ tax.

(ii) ‘‘A’’ purchases 15 grocery items from ‘‘B’’ grocery. All of the items are exempt from tax except a bottle of soft drink. The price of the soft drink is $1. ‘‘A’’ gives ‘‘B’’ a manufacturer’s coupon having a face value of 50¢ for the soft drink. ‘‘B’’ totals the 15 items on the cash register including $1 for the bottle of soft drink. None of the items are described or identified on the cash register tape. ‘‘B’’ reduces the total sale by $1—double the amount of the coupon. The coupon is not described or identified on the register tape. Therefore, the acceptance of the coupon by ‘‘B’’ does not establish a new purchase price. The $1 purchase price of the soft drink is subject to 6¢ tax. The redemption of the coupon represents a refund which does not affect the purchase price of the soft drink.

(iii) ‘‘A’’ purchases a coffee pot from ‘‘C’’ department store. The price of the coffee pot is $30. ‘‘A’’ pays sales tax upon the purchase of the coffee pot in the amount of $1.80. The sale includes a $10 manufacturer’s mail-in-rebate form. ‘‘A’’ completes the form, mails it to the manufacturer and receives a $10 check from the manufacturer. The receipt of the rebate check by ‘‘A’’ does not establish a new purchase price of the coffee pot. ‘‘C’’ properly collected sales tax in the amount of $1.80.

(iv) ‘‘A’’ purchases and accepts delivery of a load of lumber from ‘‘D’’ lumber company. ‘‘D’’ sends ‘‘A’’ a billing invoice which states ‘‘lumber—$1,000, sales tax—$60.’’ The invoice also states ‘‘if invoice paid within 30 days, customer entitled to a 1% discount.’’ ‘‘A’’ pays the invoice within 5 days. ‘‘A’’ is entitled to a discount of 1% of $1,000, but is required to pay the sales tax in the amount of $60 as a new purchase price has not been established.

(3) Trade-in or exchange. The amount allowed by the vendor for the acceptance of tangible personal property taken in exchange at the time of sale.

(4) Finance charges. Reasonable interest or finance amounts charged to the purchaser.

(5) Gratuity. A voluntary payment by the purchaser or a reasonable mandatory charge by the vendor in lieu of the voluntary payment, which is billed to the purchaser for services rendered in connection with the purchase of food or beverages or hotel or motel accommodations.

(c) Constructive purchase price. If a sale at retail or purchase at retail is not at arm’s length, the tax shall be computed upon a constructive purchase price. For the purpose of determining whether a transaction is not at arm’s length, the Department will consider the affiliation of interests between the vendor and the purchaser or whether the purchase price is indicative of the true value of the article sold. The constructive purchase price shall be the prevailing market price of the property sold, that is, the price at which similar property in similar quantity and of similar quality would be sold upon the open market at the time and place of the taxable sale or use of the property.

(d) Optional methods of tax payment. The following optional methods of tax payment are available:

(1) Registered motor vehicle dealers. A registered motor vehicle dealer (See definition of registered dealer in § 31.41 (relating to definitions)), may elect to report tax on the taxable use of certain vehicles using an alternate basis of tax.

(2) Commercial aircraft operators. A person engaged in the charter of aircraft, leasing of aircraft, aircraft sales, aircraft rentals, flight instruction, air freight or other flight activities for compensation may pay tax on the taxable use of aircraft using an alternate method. Refer to § 58.8 (relating to commercial aircraft operators).

(3) Nonresidents establishing a residency or business in this Commonwealth. A nonresident of this Commonwealth, not actually doing business within this Commonwealth, is not required to pay tax on the value of property originally purchased outside this Commonwealth and brought into this Commonwealth for the purpose of establishing a permanent residency or business if the property was purchased 6 months or more prior to either its first use in this Commonwealth or the date on which the permanent residence or business was established, whichever occurs first. Property which has been purchased within 6 months of its first use in this Commonwealth shall be subject to tax on its original purchase price and the amount of tax paid to another state may be applied as a tax credit against the Pennsylvania tax if the amount of credit applied was legally due and paid to the other state and that state has tax credit reciprocity with the Commonwealth.

(4) The purchase of property outside of this Commonwealth by a resident or the purchase of property which was exempt from tax at the time of purchase. Property purchased outside of this Commonwealth by a resident within 6 months of its first taxable use within this Commonwealth is subject to tax upon the purchase price. If the property was purchased more than 6 months prior to its first taxable use in this Commonwealth, a resident may elect to pay tax on the fair market value of the property. This election may be made by filing a tax return and paying the applicable tax, interest and penalties to the Department within 6 months of the return due date following the first use in this Commonwealth. The amount of tax paid to another state may be applied as a tax credit against the Pennsylvania tax if the amount of credit applied was legally due and paid in the other state and that state has tax credit reciprocity with the Commonwealth.

The provisions of this § 33.2 amended January 14, 1994, effective January 15, 1994, 24 Pa.B. 354. Immediately preceding text appears at serial pages (105781) to (105782) and (179279).

Petitioner’s challenge to constitutionality of Department of Revenue’s application of policy to compute sales tax on price of automobile without deducting manufacturer’s rebate failed to exhaust administrative remedies and was not within court’s jurisdiction. Smolow v. Department of Revenue, 547 A.2d 478 (Pa. Cmwlth. 1988); affirmed 557 A.2d 1063 (Pa. 1989).

This section cited in 61 Pa. Code § 31.6 (relating to persons rendering nontaxable services); 61 Pa. Code § 31.12 (relating to imposition of tax); 61 Pa. Code § 46.7 (relating to nonresident contractors); and 61 Pa. Code § 46.9 (relating to financial institution security equipment).

History

• Authority: The provisions of this § 33.
• Source: The provisions of this § 33.

61 Pa. Code § 33.3 Cancellations, returns, allowances and exchanges.

(a) Tax not remitted to the Department. The following deduction is permitted only if the tax has been returned to the purchaser or the purchaser’s account has been credited for the amount of tax. The seller shall deduct from the amount of gross and taxable sales for a reporting period, a sale or allowance, when in the same reporting period as a taxable sale:

(1) The contract of sale has been cancelled.

(2) Property is returned.

(3) Allowance is made by reason of the merchandise being defective.

(4) An exemption certificate, executed under § 32.2 (relating to exemption certificates), is presented by the purchaser to the seller.

(b) Tax remitted to the Department.

(1) If the tax has not been returned to the purchaser or credited to his account, the purchaser may file a claim for credit or refund with the Department for the tax. If the tax has been returned to the purchaser or credited to his account, the purchaser may assign his rights to the seller for the tax remitted to the Department and the seller may file a claim for refund or credit for the tax.

(2) The following deduction is permitted if the sale amount and corresponding amount of tax has been returned to the purchaser or the purchaser’s account has been credited for the sales amount and corresponding amount of tax. The seller shall deduct from the amount of gross and taxable sales for a succeeding reporting period, the amount of a sale or allowance, when in a prior reporting period it was reported as a taxable sale and one of the following applies:

(i) The contract of sale has been cancelled.

(ii) The property is returned.

(iii) An allowance is made by reason of the merchandise being defective.

(iv) An exemption certificate, executed under § 32.2, is presented by the purchaser to the seller.

(3) A seller claiming the credit shall maintain records of transactions for which the credit is claimed. The records shall show the name and address of the person to whom the tax was returned, the reason for the return and the amount of tax returned.

(c) Repossession. The repossession of property by a seller is not considered to be a cancelled or return sale. Therefore, sales tax shall be due upon the full original purchase price within 30 days of the sale whether or not the property was later repossessed by the seller.

(d) Bad debts. A seller may not be permitted to take a sales tax credit for amounts representing bad debts or uncollectible accounts. The tax remains due upon the original purchase price of the property sold.

The provisions of this § 33.3 issued under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 33.3 amended March 14, 1986, effective March 15, 1986, 16 Pa.B. 814. Immediately preceding text appears at serial pages (40300) to (40301).

This section cited in 61 Pa. Code § 33.4 (relating to credit and lay-away sales).

History

• Authority: The provisions of this § 33.
• Source: The provisions of this § 33.

61 Pa. Code § 33.4 Credit and lay-away sales.

(a) Tax collection for credit sales. If a sale, with respect to which a tax is required to be collected, is wholly or partly on credit, the seller shall require the purchaser to pay the full amount of the tax due on the entire purchase price at the time the purchase is made or within 30 days thereafter. The failure of the purchaser to remit the tax due to the seller does not relieve the seller of the obligation of reporting the sale and paying to the Commonwealth the tax he should have collected. The tax shall be remitted by the seller with the tax return covering the period in which either the purchase was made or the tax was or should have been collected.

(b) Tax collection for lay-away sales. The tax shall be due on a lay-away sale when the seller appropriates the tangible personal property for the purpose of the sale. In these transactions, the seller shall collect the full amount of the tax as measured by the full agreed purchase price at the time the first payment following the appropriation is made under the plan or within 30 days following the appropriation, whichever shall first occur. If, within the same reporting period, the purchaser fails to make the agreed payment, or otherwise forfeits his rights to acquire title and possession under the terms of the agreement and receives a refund of the purchase price, he shall likewise be entitled to a refund of a sales tax paid. However, if the purchaser does not receive a portion of the purchase price from the seller, he may not be entitled to a refund of the sales tax applicable to that amount not returned to him. Reference should also be made to § 33.3 (relating to cancellations, returns, allowances and exchanges).

This section cited in 61 Pa. Code § 34.3 (relating to tax returns).

History

• Authority: The provisions of this § 33.
• Source: The provisions of this § 33.

Chapter 34 Registration, Recordkeeping and Returns

61 Pa. Code § 34.1 Registration.

(a) General requirements. Every person who maintains a place of business in the Commonwealth as defined in section 201(b) of the TRC (72 P. S. § 7201(b)) and who effects the sale at retail or delivery to Pennsylvania locations of tangible personal property or taxable services shall be required to register with the Department, collect and remit the applicable tax on the sales.

(b) Solicitors for foreign-based vendors. Where solicitors take orders in this Commonwealth for sales at retail of tangible personal property or taxable services on behalf of a foreign-based vendor, the vendor shall include in his tax return the receipts of taxable sales of his solicitors and pay the taxes collected thereon. However, the solicitor will not be relieved from liability for filing the proper return and paying the tax due if the vendor fails to make the necessary returns and pay the tax or if the vendor is not licensed by the Department.

(c) Leased departments and concessions. Where a licensee leases part of his premises to another to sell tangible personal property or taxable services, the lessor may include in his tax return the receipts of taxable sales of the lessee and pay the taxes collected thereon, if the lessor treats the receipts of the lessee as his own. However, the lessee will not be relieved from the liability for filing the proper returns and paying the tax due if the lessor fails to make the necessary returns and pay the tax due.

(d) House to house solicitation by agents. Where agents do house-to-house selling, the principal may include in his tax return the receipts of taxable sales of the agents and pay the taxes collected thereon, if the principal treats the receipts of the agent as his own. However, the agent will not be relieved from the liability for filing the proper returns and paying the tax due if the principal fails to make the necessary returns and pay the tax due.

(e) License. Upon receipt of an application, the Department will issue each applicant a license for the licensee’s principal place of business. There is no registration fee. The license shall be prominantly displayed at the licensee’s principal place of business in this Commonwealth or, if the licensee maintains no regular place of business, upon his cart, stand, truck or other merchandising device. If the licensee has no merchandising device, the licensee shall carry the license on his person. The licensee shall prepare photostatic copies of the license for each additional place of business he maintains within this Commonwealth. The copies shall be displayed at the licensee’s additional places of business in this Commonwealth together with a statement as to where the original license is displayed. A license is nonassignable and nontransferable and shall be surrendered to the Department immediately upon the licensee’s ceasing to do business in this Commonwealth.

(f) Summary offense. Failure to obtain a license does not relieve the vendor or lessor from his liability to collect the tax and remit it to the Department. In addition to imposing interest, additions and penalties for nonpayment of tax the act also provides that a person required to register thereunder who fails to obtain a license shall be guilty of a summary offense and upon conviction shall be sentenced to pay a fine of not less than $100 nor more than $300, and in default thereof to undergo imprisonment of not less than 5 days nor more than 30 days.

The provisions of this § 34.1 amended November 1, 1991, effective September 6, 1986, 21 Pa.B. 5137. Immediately preceding text appears at serial pages (105787) to (105788) and (91023).

This section cited in 61 Pa. Code § 35.1 (relating to tax examinations and assessments); and 61 Pa. Code § 39.2 (relating to registration).

History

• Authority: The provisions of this § 34.
• Source: The provisions of this § 34.

61 Pa. Code § 34.2 Keeping of records.

(a) General requirements. The act provides that every sale of tangible personal property or services thereon shall be presumed to be at retail and to be subject to sales tax. Therefore, every person who sells or uses personal property or services shall be required to keep the following basic records:

(1) For purposes of accountability for use tax, taxpayers shall be required to retain purchase invoices, requisitions, documents and other records relating to their acquisition of tangible personal property and services. The purchaser shall maintain records showing that the tax was paid where the purchaser has paid the tax to his vendor, and where the purchaser has not paid tax to his vendor but has paid use tax directly to the Commonwealth. Where the purchaser has not paid tax in the above cited instances, he shall create and maintain records showing the reason he considered the purchase as nontaxable, and information concerning the nature, use, price and dates of purchases and use of the property, from which it can be ascertained by the Department, with reasonable facility, whether or not use tax is due thereon and, if due, the amount of tax.

(2) As a minimum for practicable enforcement, the act required the following sales tax records which are amenable to a three-point audit:

(i) With respect to sales, records shall be maintained for each store or other outlet showing the total amount of taxable and nontaxable sales, that is, gross sales, made on each day and during each tax reporting period. Total sales should also be divided as to cash sales and credit sales.

(A) Sales tax records shall be maintained from which it is possible to ascertain the vendor’s compliance with the taxing and exemption features of the act, that is, whether sales made without collection of tax were in fact nontaxable. The records shall describe items sold without tax, and show those sales which were made tax free because the purchase price was less than the amount at which the statute begins to impose tax. This is the first essential for determining the amount of tax incurred in the vendor’s business.

(B) The vendor shall obtain from purchaser and also retain certificates of exemption with respect to sales of a taxable character which are sold tax free on the claim that they are exempt because of the nature of the purchaser’s activity and the use for which they are purchased. In such cases, the identification of items sold as well as the purchaser is necessary because the use of property in many instances is clearly determined by the identification. For example, stationery may not be validly exempt under a certificate stating that it is to be used directly in the production, rendition or delivery of a public utility service.

(ii) The second essential is that sales tax records shall show the tax incurred on each taxable sale so that a so-called effective rate may be determined. Under the bracket schedule established by the TRC the rate of tax incurred varies according to the purchase price of the sale. The overall effective rate of the vendor’s tax incurred cannot be determined unless there are reliable sales records showing the taxable sales price of individual sales.

(iii) Apart from accountability of tax incurred, records of the amount of tax actually collected by the vendor shall be essential for the following reasons:

(A) Since the vendor is a trustee with respect to the taxes he has collected, the keeping of records which will clearly reflect his performance of his responsibilities is basic to this fiduciary relationship. The TRC, in recognition of this, requires that a vendor shall remit the amount of tax due, incurred or the amount actually collected, whichever is greater.

(B) The burden which would be placed on vendors whose businesses involve a large number of mixed sales if they were required to maintain complete records of the tax incurred on every individual sales transaction as described in this paragraph have long been recognized by the Department. Therefore, vendors shall be permitted to keep records of tax incurred on a sample basis under standards discussed in detail in subsection (b).

(C) If a vendor, for his own convenience, computes and reports his tax incurred on the basis of a formula derived from part-time, sample or test check recordkeeping, complete records of the amount of tax actually collected at each outlet together with a record of sales at each outlet, provide a practical basis for comparison with the results of the formula. This continuous check is useful both to the vendor and the tax agency in gauging the reliability of the formula, and the tax consciousness of store personnel.

(iv) A vendor’s duty to collect and remit tax on taxable sales, his liability for tax due if he fails to collect properly, and his duty to keep records from which liability for tax incurred and tax collected can be ascertained, are clearly imposed in the TRC. Reference should be made to sections 208, 237(b) and 271 of the TRC (72 P. S. § § 7208, 7237(b) and 7271).

(3) The memoranda or records required to be created at the time of sale may take the form of sales slips, sales invoices, guest checks, tally sheets, itemized lists, memoranda or other records provided they meet the requirements of this section as to content. Thus, a copy of a cash register tape retained by the vendor may meet the requirements of an auditable sales tax record if it bears sufficient identification of the items sold and other required information.

(i) Within reasonable limits, items may be described by a symbol if the symbol is representative of a class of merchandise or services all of which constantly remains taxable or nontaxable. Thus, if a vendor sells only nontaxable periodicals in his ‘‘Department P,’’ a description of such merchandise as ‘‘Dept P’’ is sufficient provided the vendor uses such symbol consistently in all of his records to describe the same merchandise. However, if a vendor sells several types of merchandise of both taxable and nontaxable merchandise in a single department, his records shall identify individually the types of merchandise which are nontaxable.

(ii) The following shall constitute an example: JOHN DOE STOREMILLVILLE, PA.

(A) It is assumed for the purpose of this example that the Roe Ribbon Mill has furnished the Doe Store a manufacturer’s exemption certificate. Since this exemption covers only items used directly in manufacturing, items 1 and 2 are taxable. Since the exemption does not cover maintenance of realty, item 3 is taxable. No tax is incurred on item 4 because clothing is exempt. No tax is incurred on item 5 since it is covered by the manufacturer’s exemption. Therefore, the total taxable sale price is $24.15. On this price, the tax incurred is computed as follows:

(B) Notice how the sales slip in this example, supported by the exemption certificate, permits an audit of the vendor’s performance in applying tax status rules to arrive at nontaxed items and in computing the tax incurred on the taxable amount of the sale. Had the vendor incorrectly determined the tax at less than $1.45, he would nevertheless be liable for payment of the correct amount. If he had collected more than $1.45 he would be liable to the Commonwealth for the amount collected unless he showed that he had refunded the overcharge to the purchaser.

(b) Part-time recordkeeping. Part-time recordkeeping shall conform with the following:

(1) General considerations. The Department upon application by a vendor may authorize him to use a sample recordkeeping system from which a formula may be derived to account for his tax due with reasonable accuracy and simplicity without the necessity of maintaining full-time detailed records as described in subsection (a). Such authorization is not to be construed as relieving the vendor from remitting the full amount of tax collected. Reference should be made to section 271(e) of the TRC. The Department may revoke the authorization upon 30 days written notice to the vendor. The vendor may terminate the use of the authorized procedure by giving to the Department written notice preceding the proposed termination date by a time period not less than the vendor’s tax reporting period.

(i) No appeal lies directly from the Bureau’s refusal of a vendor’s application for a formula procedure. However, the merits of a proposed formula and the action of the Bureau thereon are reviewable in connection with the hearing and determination of a petition for reassessment from a deficiency arising from the use of the formula. Reference should be made to section 271(e) of the TRC and subsection (c).

(ii) If a vendor wishes to set up a formulary record system without prior concurrence by the Bureau, there shall be nothing to prevent his doing so, but in acting unilaterally he shall proceed at his own risk. Upon audit, the Bureau and subsequent reviewing bodies may find that his sample records and formulary system are not sufficiently representative or adequate. If he operates without a prior agreement, when the time comes for an examination of his accountability his records shall speak for themselves. If the records which he has maintained are such that his nontaxables and rate of tax incurred on taxable sales cannot reliably be ascertained, he shall be in no position to contend that he has kept adequate sales tax records. Rather, he shall be in the same position as another vendor who lacks adequate sales tax records.

(iii) A formula method shall be based upon representation samplings, tests, of the vendor’s transactions and application or projection of the results of the samplings to reliably establish the amount of tax incurred on his sales. Samplings may be employed to determine the percentage ratio of nontaxable and taxable sales to gross sales, and the percentage ratio of tax incurred to taxable sales. Ordinarily, an applicant will be expected to provide for a sample of at least one of each of the normal business days of the week during each calendar quarter. This shall be done by testing all transactions on 2 days a month and rotating the test days to include, in each calendar quarter, all selling days of the week. Vendors operating more than one store or sales outlet shall test all stores or outlets on each test day, and separately apply test results in each store to the sales of that store, except where a vendor demonstrates by experience with sampling that a smaller sample or modified procedure is adequate and reliable, the Department will consider his specific written proposal and may authorize further adjustments on that basis.

(iv) While the act does not specifically mention special recording procedures or formulary methods with respect to use taxes, the Department will accept such applications as are filed and, consistent with the law and the safeguarding of public revenues, will consider the granting of the permission to persons required to remit use tax in particular circumstances where the facts warrant the treatment. Persons holding or desiring to obtain direct pay permits may seek the dual permission (with accompanying responsibilities) of remitting under the direct pay permit provisions and in accordance with an authorized special recording procedure or formula method. Reference should be made to section 237(d) of the TRC.

(2) Conditions of granting of authorization. The granting of authorization to use a special recording procedure or formula method shall be subject to the following requirements and conditions:

(i) The vendor shall submit an ‘‘Application for Special Recording Procedure’’ (Form REV-134) to the Department of Revenue, including a full and description of the material facts and methods of his various operations as they affect his tax liability, and the procedures he proposes to employ. This application shall be accompanied by a detailed written statement of the circumstances which, in his opinion, warrant the use of a special procedure.

(ii) Authorization to employ a special recording procedure for determining tax due may not be construed to relieve the vendor of responsibility for maintaining, with respect to each store or sales outlet, records showing the following:

(A) The actual amount of tax collected and

(B) Gross sales per day and tax reporting period.

(iii) The proposed procedure shall include provision for the following:

(A) A continuing training program for the vendor’s employes in applicable sales and use tax provisions.

(B) Supervision of tests and verification of test results by qualified personnel.

(C) Recording and retention of test data, including work sheets, in such manner and detail that the Department may ascertain, with reasonable facility, the accuracy and validity of the tests.

(D) Maintenance of adequate records of all purchases.

(E) Adequate provision for accounting for tax collection.

(F) Prompt notification of the Department by the vendor of material changes in his business operations or sales, including merchandising and accounting methods and procedures.

(iv) During such time as the authorized procedure agreement is in effect and in the absence of material changes in the vendor’s business operations, including his merchandising and accounting methods and procedures, it shall be used to determine the amount of tax due by the vendor on the transactions covered by the authorization, provided such authorization was not obtained by means of fraud, misrepresentation or nondisclosure of material facts.

(v) A vendor, having represented in his application that a certain sample period is adequate for reporting purposes and having agreed to remit to the Commonwealth the greater of the amount of tax due as shown by his formula or tax collected, cannot state, upon audit by the Department, that the sampling is inadequate for auditing purposes.

(vi) The granting of special authorization may not be deemed a waiver by the Department of its right to audit fully the books, documents, records and transactions of the vendor to determine whether the authorization was properly obtained, whether the vendor has complied with the terms and conditions of the agreement and whether he has accounted to the Department for all tax collected.

(vii) The Department will not revoke retroactively its grant of an authorization that has been obtained and applied in good faith under this section. However, the Department reserves the right to conduct audits to determine whether the authorized formula currently reflects the vendor’s true liability and to revoke a formula agreement prospectively.

(viii) The vendor shall, if directed by the Department, furnish a bond or other security guaranteeing faithful compliance with the authorized procedure and this section.

(3) Conditions under which authorization will not be granted. Authorization to employ a special procedure or formula method will not be granted in the following instances:

(i) Where the nature of the vendor’s business or the value of units of merchandise sold do not make it unreasonable to require full-time employment of the accounting prescribed in subsection (a).

(ii) Where the Department has found that the vendor has failed to comply with requirements of the act or regulations.

(iii) Where, in the opinion of the Department, the best interests of the Commonwealth will not be served by granting the authorization.

(c) Liability of vendor who has not kept auditable sales records. Courts and administrative boards have, in numerous cases where a vendor has failed to keep the records necessary for auditing his tax liability, sustained the right of a tax agency to base an assessment on methods which fairly and reasonably approximate the liability incurred. Where a vendor has not kept complete auditable records or has used an unauthorized formula, evidence of sample data which he has compiled and used in reporting tax on a formula basis is of course admissible. However, under these circumstances the prima facie validity of the tax agency’s test audit is difficult to overcome. Courts and administrative bodies have subjected the evidence to close scrutiny because it was compiled without permission, supervision or verification by the tax agency. Reference should be made to section 271(e) of the TRC.

(d) Accounting for and handling tax collections. Taxes collected by a vendor from purchasers which have not been properly refunded by the vendor to the purchaser shall constitute a trust fund for the Commonwealth. Since the vendor is a trustee with respect to the taxes he has collected, the keeping of records which will clearly reflect his performance of his responsibilities is basic to this fiduciary relationship. The act, in recognition of this, requires that a vendor shall remit the amount of tax due or the amount actually collected, whichever is greater.

(1) Physical segregation of tax where collections are not shown on sales memoranda or cash register tapes. The act provides that a vendor must adopt some method of segregating tax from sales receipts and record such in accordance with proper accounting and business practices. Reference should be made to section 271(e) of the TRC.

(i) If a vendor keeps full-time memoranda of sales showing the amount of tax due and the amount charged to the purchaser as provided in subsection (a), he will not be required to physically segregate his tax collection from sales receipts or create other records of tax collections of individual sales.

(ii) If a vendor uses a register which lists each tax collection on a tape retained by the vendor, or if he makes a list or record manually and retains it for Departmental audit, he will not be required to physically segregate his tax collections, unless the Department, because of special circumstances, notifies him to do so. A vendor may, of course, segregate his tax collection. The fact that tax collections are not physically segregated from sales receipts may not be deemed a waiver of the Department’s procedural rights to enforce the trust which exists with respect to tax collections.

(e) Accessibility of information and records. Records, including sales memoranda and records created at the time of sale and other documents, books or records pertaining to tax liability and tax collections shall be dated, legible, written in the English language and maintained and preserved to disclose in readily accessible and verifiable detail the basis for and accuracy of the vendor’s or user’s entries on his sales and use tax returns.

(1) Persons engaged in separate businesses. A person engaged in business as a retail dealer in taxable items who, at the same time, is engaged in another business or businesses which do not involve the making of taxable sales, shall keep separate books and records of his businesses. For example, a person engaged in business as a retail dealer who is also engaged in business as a construction contractor, shall keep separate records and accounts of his retail business and his construction business. Reference should be made to section 271(d) of the act.

(2) Audit requirement. Upon audit by the Department, or at such other times as the Department requests, the vendor or user shall present his records in an orderly manner, together with the summaries and schedules the Department may request. The vendor or user shall provide the auditors or examiners of the Department with suitable facilities for conducting their audit or examination.

(3) Retention of records. Records required to be maintained under the act or this section shall be retained for a period of at least 3 years from the end of the calendar year to which the records relate. Reference should be made to section 272 of the TRC (72 P. S. § 7272).

(f) Place where records and tax collections shall be kept. Records and tax collections shall be kept in accordance with the following:

(1) Where a person makes sales at or from establishments or locations within this Commonwealth, records relative to the transactions and the sales and use taxes collected at those points shall be retained within this Commonwealth, unless the vendor has written authorization from the Director of the Bureau of Sales and Use Tax to remove them. The authorization shall be revokable by the Director upon 30 days written notice.

(2) Where a person makes sales on which he is liable for the collection of sales or use tax at or from establishments or locations outside this Commonwealth, records relative to the transactions and sales and use taxes collected outside this Commonwealth may be maintained in this Commonwealth or retained at the establishments or locations at or from which the sales were made or at the home office of the vendor. If special problems arise, vendors shall contact the Department of Revenue for advice.

(3) Records created or received by a person within this Commonwealth with respect to his use of property or services on which he is subject to tax shall be retained within this Commonwealth.

(g) Microfilm reproduction of general books of account and supporting records of detail. The Department of Revenue will consider the microfilm, including microfiche, reproduction of general books of account and their supporting records of detail as acceptable books and records when the reproduction satisfactorily complies with the standards and procedures established by the United States Internal Revenue Service and approval of the reproduction is granted by the same. In addition, the taxpayer shall make available necessary codes and equipment to enable the Department to audit the books and records.

The provisions of this § 34.2 amended December 19, 1975, 5 Pa.B. 3277.

Accessibility of Records

The taxpayer failed to produce required records when requested during the audits and again during the evidentiary hearings. Boxes of unsorted invoices, bills of lading, weight slips, drivers’ logs, and other documents do not permit the taxing authority to ascertain with reasonable facility whether tax is due and how much tax is due. The taxpayer has suffered the consequences of inadequate record keeping in that the taxpayer was unable to document use of the assessed equipment in providing public utility services. Fiore v. Commonwealth, 609 A.2d 862 (Pa. Cmwlth. 1992); vacated 633 A.2d 1111 (Pa. 1993); 668 A.2d 1210 (Pa. Cmwlth. 1995); adhered to 676 A.2d 723 (Pa. Cmwlth. 1996); affirmed 690 A.2d 234 (Pa. 1997); cert. denied 118 S. Ct. 181 (U. S. 1997).

Documentation

The taxpayer failed to produce the necessary records when requested during the audits and again during the evidentiary hearings. Boxes of unsorted invoices, bills of lading, weight slips, drivers’ logs, and other documents did not permit the taxing authority to ascertain with reasonable facility whether tax was due and how much tax was due. The taxpayer suffered the consequences of inadequate record keeping in that taxpayer was unable to document use of the assessed equipment in providing public utility services. Fiore v. Commonwealth, 609 A.2d 862 (Pa. Cmwlth. 1992); vacated 633 A.2d 1111 (Pa. 1993); 668 A.2d 1210 (Pa. Cmwlth. 1995); adhered to 676 A.2d 723 (Pa. Cmwlth. 1996); affirmed 690 A.2d 234 (Pa. 1997); cert. denied 118 S. Ct. 181 (U. S. 1997).

The records maintained by the taxpayer were inadequate to show why no use or sales tax was paid. Fiore v. Commonwealth, 609 A.2d 862 (Pa. Cmwlth. 1992); vacated 633 A.2d 1111 (Pa. 1993); 668 A.2d 1210 (Pa. Cmwlth. 1995); adhered to 676 A.2d 723 (Pa. Cmwlth. 1996); affirmed 690 A.2d 234 (Pa. 1997); cert. denied 118 S. Ct. 181 (U. S. 1997).

Evidence Insufficient

A taxpayer who produced no credible evidence to show entitlement to the public utility exclusion it claimed could not avail itself of the exclusion. Fiore v. Commonwealth, 609 A.2d 862 (Pa. Cmwlth. 1992); vacated 633 A.2d 1111 (Pa. 1993); 668 A.2d 1210 (Pa. Cmwlth. 1995); adhered to 676 A.2d 723 (Pa. Cmwlth. 1996); affirmed 690 A.2d 234 (Pa. 1997); cert. denied 118 S. Ct. 181 (U. S. 1997).

General Requirements

A taxpayer who sells or uses personal property or services must: 1) retain all purchase invoices and other documents relating to acquisition of taxable property and services, and 2) if the tax has not been paid, the taxpayer must create or maintain records documenting the nature, use, price, dates of the purchase, etc. from which it can be ascertained ‘‘with reasonable facility’’ whether use tax is due and the amount of the tax. Fiore v. Commonwealth, 609 A.2d 862 (Pa. Cmwlth. 1992); vacated 633 A.2d 1111 (Pa. 1993); 668 A.2d 1210 (Pa. Cmwlth. 1995); adhered to 676 A.2d 723 (Pa. Cmwlth. 1996); affirmed 690 A.2d 234 (Pa. 1997); cert. denied 118 S. Ct. 181 (U. S. 1997).

Rehearing Granted

Although not relieved of the duty to comply with statutes and regulations regarding records of purchases and their use, taxpayer was denied procedural due process and entitled to a new hearing to allow it to address those defenses to taxpayers claim raised by the Commonwealth after the administrative adjudicators and 20 days prior to the evidentiary hearing. Fiore v. Board of Finance and Revenue, 633 A.2d 1111 (Pa. Cmwlth. 1993).

This section cited in 61 Pa. Code § 35.1 (relating to tax examinations and assessments).

History

• Authority: The provisions of this § 34.
• Source: The provisions of this § 34.

61 Pa. Code § 34.3 Tax returns.

(a) Filing procedure. The filing procedure for tax returns shall conform with the following:

(1) Form and content. The tax imposed by the TRC (72 P. S. § § 7101—8203) is due and payable concurrently with the return for any given period. Returns shall be made on forms prescribed by the Department. For the convenience of the licensee, the Department will distribute returns forms. However, a licensee will not be excused from liability for failure to report and pay the tax because he has failed to receive a form. The return may be filed by an authorized agent of the licensee with the same effect as if filed by the licensee himself. Every return filed by a taxpayer shall contain, on the work sheet side of the tax return, a full, complete and accurate disclosure for the reporting period of the taxpayer’s as follows: (Line ‘‘A’’) Total Gross Sales, Rentals and Services, (Line ‘‘B’’) Nontaxable Sales, Rentals and Services, (Line ‘‘C’’) Net Taxable Sales, Rentals and Services, (Line ‘‘D’’) Total Amount of Tax Collected, and (Line ‘‘G’’) Amount of Use Tax Incurred for purchases, services, transfers or imports on which no Pennsylvania tax was charged by vendor. Income from nontaxable services of the type described in § 31.6 (relating to persons rendering nontaxable services) need not be included in the disclosure of sales, rentals and services required by this subsection. The Department may require additional information it deems proper. A return not fully disclosing the required information will be considered incomplete and may be rejected by the Department. Upon receipt of notice that an incomplete return has been rejected, a taxpayer shall immediately complete the return form and file the same with the Department. If the return is not filed with the Department in acceptable form prior to the due date, the additions and interest provided for in the TRC will be added to the amount of tax otherwise due.

(2) Timely filing. Timely filing shall be determined from the following:

(i) Generally. Effective March 13, 1974, the Department of Revenue will consider all mailed returns filed as of the date indicated by the United States Postal Service postmark appearing on the envelope or wrapper, unless the postmark is printed by use of a Postage Meter licensed by the United States Postal Service, as discussed in subparagraph (iv). A return in an envelope or wrapper bearing a Postal Service postmark dated after the last date prescribed for filing the return will be considered to have been filed late, regardless of the date on which the return was deposited in the mail. If the postmark date is not legible, or is otherwise unclear, then if the return is received by the Department more than 5 days after the date prescribed for filing, it shall be presumed that the return was mailed by the taxpayer after the prescribed date. Further, returns which are mailed but which do not contain a postmark on the envelope or wrapper, or which are delivered in any manner other than by the United States Postal Service will be considered filed as of the date of actual receipt by the Department of Revenue. The returns which are received by the Department of Revenue after their due date will be considered as having been filed late.

(ii) Registered mail. If the return is sent by United States registered mail, the date of registration shall be treated as the postmark date under subparagraph (i).

(iii) Certified mail. If the return is sent by United States certified mail and the sender’s receipt is postmarked by the United States Postal Service, the date of that postmark shall be treated as the postmark date of the return under subparagraph (i).

(iv) Meter stamps printed by postage meters licensed by United States Postal Service. If an envelope or wrapper containing a return is postmarked by use of a postage meter licensed by the United States Postal Service, that return received by the Department more than 5 days after the due date of the return is presumed to have been mailed after the due date.

(3) Due dates. Due dates shall conform with the following:

(i) Quarterly licensees. New licensees shall file tax returns on a quarterly basis. Licensees whose total tax reported is less than $600 in the third calendar quarter but more than $75 annually shall continue to file quarterly. Filing dates for quarterly returns are as follows:

(ii) Monthly licensees. A tax return shall be filed monthly with respect to each month by a licensee whose total tax reported for the third calendar quarter of the preceding year equals or is greater than $600. Required filing dates are as follows:

(iii) Semiannual licensees. Upon authorization by the Department a return shall be filed semiannually by licensees whose total tax reported does not exceed $75 annually. Required filing dates are as follows:

(iv) Extension of time for filing returns. The Department, upon written application and for good cause shown, may grant a reasonable extension of time for filing a return required by the TRC. However, the time for filing a return will not be extended for more than 3 months.

(4) [Reserved]

(5) Use tax returns. A person other than a licensee who is liable to pay tax under the TRC shall file a Use Tax Return with the Department on or before the 20th day of the month succeeding the month in which the liability for the tax is incurred. Nonlicensees of the Bureau are not required to file negative returns for the months in which no use tax liability is incurred. Licensees report use tax liability in conjunction with their regular returns.

(6) Other returns. The Department is empowered to require a person by notice served on that person or by regulations to make the returns, render the statements or keep the records the Department deems sufficient to show whether or not the person is liable to pay or collect tax under the TRC.

(b) Remittance of tax with return. Remittance of tax with return shall conform with the following:

(1) Collections. Each licensee shall account to the Commonwealth for the entire amount of taxes collected from purchasers. The taxes so collected shall be remitted to the Department, even though the money collected is in excess of 6% of the total purchase price of the vendor’s sales or leases subject to tax.

(i) Tax collections must be retained within this Commonwealth. No tax collected by a vendor may be sent outside this Commonwealth without the written consent of, and in accordance with conditions prescribed by, the Department.

(ii) Trust funds. Taxes collected by vendors in accordance with the TRC constitute a trust fund for the benefit of the Commonwealth. The trust will be enforceable against the vendor, his representative and any person receiving any part of the fund without consideration or with knowledge that the vendor is committing a breach of trust.

(2) Basis. A licensee shall report on the basis of sales made during the reporting period. In addition, credit transactions must be reported under § 33.4 (relating to credit and lay-away sales).

The provisions of this § 34.3 issued under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 34.3 amended through December 27, 1985, effective December 28, 1985, 15 Pa.B. 4484. Immediately preceding text appears at serial pages (40312), (94389) to (94390) and (96397) to (96398).

Failure to file a tax return which includes gross sales and what is believed by a taxpayer to be nontaxable sales may subject that taxpayer to a late filing penalty. Zimmerman v. Commonwealth, 449 A.2d 103 (Pa. Cmwlth. 1982).

This section cited in 61 Pa. Code § 32.21 (relating to charitable, volunteer firemen’s and religious organizations, and nonprofit educational institutions); 61 Pa. Code § 35.2 (relating to interest, additions, penalties, crimes and offenses); 61 Pa. Code § 47.19 (relating to Public Transportation Assistance Fund taxes and fees); 61 Pa. Code § 58.6 (relating to barbers’ and beauticians’ supplies, materials, tools and equipment); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 34.
• Source: The provisions of this § 34.

61 Pa. Code § 34.4 Direct payment permit.

(a) Generally. Authorization to remit tax under a direct payment permit is limited to taxpayers who acquire tangible personal property or services under circumstances which make it impossible at the time of purchase or other acquisition to predict the manner in which the property or services will be used and, therefore, impossible to determine whether the use of the property or services will be taxable or exempt. Holders of direct payment permits are given the privilege of purchasing property without payment of tax to their suppliers, and later paying the tax directly to the Commonwealth. A tax status determination shall be made and recorded at the time the property or service is actually put to specific use or designated for specific use, or when the proposed use becomes known.

(b) Requirements. To receive a Direct Payment Permit, the following requirements shall be met by the taxpayer:

(1) Application for direct payment permit shall be filed with the Department by each taxpayer on a special form provided by the Department.

(2) The taxpayer’s business activities shall include, in a substantial amount, purchases or other acquisitions of tangible personal property or services, the use of which is impossible to determine at the time of acquisition.

(3) The taxpayer shall substantiate to the Department the adequacy of its recordkeeping system with respect to the accumulation, recordation, reporting of purchases and remittance of tax incurred.

(4) Taxpayer’s business classification shall be of such nature and size that the issuance of a Direct Payment Permit is prerequisite to economical and efficient accounting for tax incurred.

(5) Direct Payment Permit holders are required, as a condition of the issuance of the permission, to provide the Department access to all records maintained to account for the tax due.

(c) Manner in which direct payment permits is to be used by taxpayer. The Direct Payment Permit number shall be inserted on a certificate of exemption and issued in the same manner as any certificate of exemption in lieu of the payment of tax at the time of acquisition of tangible personal property or services except for those transactions enumerated in subsection (e) or except for those cases where the direct payment permit is further restricted at the time of issuance. Reference should be made to § 32.2 (relating to exemption certificates). A tax status determination, and a recordation thereof, must be made with respect to the purchase on the date upon which any of the following shall first occur: the date upon which the actual proposed use is known or designated; the date upon which the use actually occurs. However, it is expected that a tax status determination, and a recordation thereof, shall in all cases be made within 1 year from the date of acquisition of tangible personal property or services. The Department, upon examination of Direct Payment Permit holders, may consider the presumption of taxability to apply to those acquisitions for which tax status determinations have not been properly made and recorded within 1 year from the date of acquisition.

(d) Revocation of Direct Payment Permit. The Department has the authority to revoke a Direct Payment Permit at any time for failure to comply with the conditions under which the authority was granted, or for other reasons constituting misuse of the authority.

(1) Within 30 days after receipt by the permit holder of notice of revocation from the Department, or at least 30 days in advance of unilateral discontinuance of direct payment authority by the permit holder, he shall:

(i) Give notice to each supplier with whom he had transacted business under direct payment authority, that subsequent to an appropriate effective date, he will no longer claim exemption from payment of tax at the time of acquisition under direct payment authority.

(ii) Create and maintain records to evidence receipt of the notice by each such supplier for subsequent inspection by the Department.

(iii) Return to the Department the Direct Payment Permit certificate issued by the Department.

(2) However, where a unilateral discontinuance of direct payment authority is a result of the cessation of business activities, corporate reorganization, corporate merger or similar reasons the Department may waive the requirements in this subsection upon written request for the action by the permit holder, provided, however, that the request shall state the specific reasons for which special consideration is required by the permit holder.

(e) General restrictions upon use of Direct Payment Permit. A Direct Payment Permit may never be used in conjunction with the following transactions:

(1) Purchase of a motor vehicle, trailer, semitrailer or tractor required to be registered with the Bureau of Motor Vehicles.

(2) Purchase of prepared food or beverages at an eating place.

(3) Purchase of occupancy or accommodations subject to tax under the hotel occupancy tax provisions of the TRC.

The provisions of this § 34.4 corrected June 12, 2003, effective February 29, 1992, 33 Pa.B. 2756. Immediately preceding text appears at serial pages (249840) to (249842).

This section cited in 61 Pa. Code § 47.19 (relating to Public Transportation Assistance Fund taxes and fees); 61 Pa. Code § 47.20 (relating to Vehicle Rental Tax); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 34.
• Source: The provisions of this § 34.

Chapter 35 Tax Examinations and Assessments

61 Pa. Code § 35.1 Tax examinations and assessments.

(a) Examinations. Tax examinations shall conform with the following:

(1) Verification of returns, documents, and transactions. The Department, by its authorized agents, has the power to enter upon the premises of a taxpayer or supposed taxpayer, and of an agent, representative, employe, or accountant of the person, or the custodian of the person’s records, for the purpose of making inspections, examinations, and verifications of books, records, papers, and other documents, to ascertain and assess tax imposed by the act. For this purpose, taxpayers are required to admit the Department and its authorized agents upon the premises, and to provide the Department and its agents with the necessary means, facilities and opportunities to make inspections, examinations, and verifications.

(2) Audits. Audits shall be conducted in accordance with Chapter 8a (relating to enforcement).

(3) Examination under oath and compulsory production of documents. The Department by its authorized agents may also, upon reasonable notice, examine a person under oath concerning taxable sales or use by a taxpayer, or concerning another matter which relates to the enforcement or administration of the act. For this purpose, the Department has the power to compel, by legal process, the production of books, papers, records, or other documents, and the attendance of persons, whether as parties or witnesses, whom it believes to have knowledge of the matters. Hearings and examinations for this purpose are conducted in the manner provided by relevant provisions of the Fiscal Code (72 P. S. § § 1—1855).

(4) Retention of records. Records required to be maintained under the TRC or § 34.2 (relating to keeping of records) shall be retained for a period not less than 3 years from the end of the calendar year to which they relate.

(5) Records of nonresidents. A nonresident who maintains records under § 34.2 is required to maintain, keep and retain the records at all times at a place within this Commonwealth, unless authorized by the Department in writing to maintain the records at a place outside this Commonwealth. Authorization to maintain records outside this Commonwealth is conditioned upon agreement to and compliance with those requirements which the Department may impose, including the assumption by the nonresident of an obligation to pay the reasonable expense of examination by the Department or its agents of records located outside this Commonwealth.

(6) Effect of noncompliance. Criminal and other sanctions imposed for failure to register or maintain required records or permit examination of relevant materials or persons are discussed in § § 35.2 (relating to interest, additions, penalties, crimes, and offenses) and 34.1 (relating to registration).

(b) Assessments. Tax assessments shall conform with the following:

(1) Underpayment of tax. Within a reasonable time after a return is filed, the Department will examine it and, if the return shows a greater tax due or collected than the amount of tax remitted with the return, the Department will issue an assessment for the difference, with an addition of 3.0% of the difference, which shall be paid to the Department within 10 days after a notice of the assessment has been mailed to the taxpayer. If the assessment is not paid within 10 days, there shall be added thereto and paid to the Department an additional 3.0% of the difference for each month during which the assessment remains unpaid, but the total of additions may not exceed 18% of the difference shown on the assessment.

(2) Understatement of tax. If the Department determines that the return of a taxpayer understates the amount of tax due, it will determine the proper amount and ascertain the difference between the amount of tax shown in the return and the amount determined. The difference is referred to as the deficiency. A notice of assessment for the deficiency and the reasons therefor will be sent to the taxpayer. The deficiency shall be paid to the Department within 30 days after a notice of the assessment has been mailed to the taxpayer.

(3) Failure to file return. If a taxpayer fails to file a return required by Article II of the TRC (72 P. S. § § 7201—7282), the Department may make an estimated assessment, based on information available, of the proper amount of tax owing by the taxpayer. A notice of assessment in the estimated amount will be sent to the taxpayer. The tax shall be paid within 30 days after a notice of estimated assessment has been mailed to the taxpayer.

(4) Authority to establish effective rates by business classification. The Department is authorized to make the studies necessary to compute effective rates by business classification, based upon the ratio between the tax required to be collected and taxable sales and to use the rates in arriving at the apparent tax liability of a taxpayer.

(5) Interest, additions, penalties, and crimes. When required, interest, additions, penalties or criminal sanctions will be imposed under the TRC. See sections 265—268 of the TRC (72 P. S. § § 7265—7268) and § 35.2 (relating to interest, additions, penalties, and crimes and offenses).

(6) Appeal. An assessment based upon this subsection will be binding upon the taxpayer unless the assessment is altered on appeal to the Board of Appeals, Board of Finance and Revenue or the court.

(c) Period covered by assessment. The period covered by an assessment shall conform to the following:

(1) Underpayment and understatement. Where a return has been filed and the amount of tax is due to either underpayment of tax or understatement of tax, the amount of tax thus imposed shall be assessed within 3 years after the date the return was filed or the end of the year in which the tax liability arose, whichever occurs last. The assessment may be made any time during the period even if the Department has made previous assessments against the taxpayer for the year in question, or for a part of the year. No credit may be given for a penalty previously assessed or paid.

(2) Failure to file return. If a return is not filed, the amount of tax due may be assessed and collected at any time as to taxable transactions not reported.

(3) False or fraudulent return. Where the taxpayer willfully files a false or fraudulent return with intent to evade the tax imposed by the act, the amount of tax due may be assessed and collected at any time.

(4) Extension of limitation. If the taxpayer has consented, in writing, before the expiration of the period prescribed for the issuing of an assessment of tax, that the period be extended, the amount of tax due may be assessed any time within the extended time. The extended period may be extended further by subsequent consents, in writing, made before the expiration of the extended time.

(d) Notice of assessment. Notice of assessment shall conform with the following:

(1) Issuance. Upon making an assessment, the Department will issue a notice of it and will serve the notice upon the person assessed.

(2) Contents. The notice will set forth the reasons for the assessment, the amount and date thereof, the place where and the time within which the person assessed is required by law to petition for review, and will notify the person that upon the failure to do so, the assessment will be binding.

(3) Service. Service of notice shall conform with the following:

(i) Except as provided in this paragraph, as a prerequisite to a valid determination of personal liability, notice shall be served upon the person assessed by sending a copy of the notice by first-class mail to him at the following places:

(A) At the last known business or home post office address of the person.

(B) At the address as the person may have designated, in writing, as the address at which the person desired notice to be sent.

(ii) If the person assessed has no post office address within this Commonwealth known to the Department, notice shall be served upon the person by sending a copy of the notice by registered mail, return receipt requested, to the person assessed at the last known address of the person’s principal place of business, or at another address or in another manner which is reasonably calculated to give the person actual notice of the assessment. This section does not diminish or postpone the right of the Commonwealth to secure a claim it may have with respect to property of the person assessed which is located within this Commonwealth.

The provisions of this § 35.1 issued under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provision of this § 35.1 amended through October 11, 1985, effective October 12, 1985, 15 Pa.B. 3651; amended March 27, 1998, effective March 28, 1998, 28 Pa.B. 1522; corrected April 17, 1998, effective March 28, 1998, 28 Pa.B. 1836. Immediately preceding text appears at serial pages (102547) to (102550).

The regulation governing service of notice requires the Department to mail the essential notice to such address as a person may have designated in writing, even if that address is out-of-State, as well as mailing to the mailing address in Pennsylvania. Evergreen Helicopters, Inc. v. Commonwealth, 516 A.2d 124 (Pa. Cmwlth. 1986).

History

• Authority: The provisions of this § 35.
• Source: The provisions of this § 35.

61 Pa. Code § 35.2 Interest, additions, penalties, crimes, and offenses.

(a) Interest. Interest shall be imposed in conformance with the following:

(1) Rate. Effective January 1, 1982, the annual rate of interest imposed on tax due the Commonwealth is established by section 806 of the FC (72 P. S. § 806). See 61 Pa. Code § § 4.1—4.11 (relating to interest).

(2) Late payment. If an amount of tax imposed by the TRC is not paid on or before the last date prescribed for payment, interest shall be paid under section 806 of the FC. The last date prescribed for payment shall be determined under § 34.3 (relating to tax returns) without regard to an extension of time for payment. In the case of an amount assessed as a deficiency or as an estimated assessment, the date prescribed for payment shall be 30 days after notice of the assessment.

(3) Assessment. If the Department assesses a tax, there shall be added to the amount of the deficiency interest, calculated under section 806 of the FC, for each month or fraction thereof from the date payment of the tax was due to the date of notice of the assessment.

(b) Additions. Additions shall be imposed in conformance with the following:

(1) Failure to file return. In the case of failure to file a return required on the date prescribed therefor, determined with regard to an extension of time for filing, there shall be added to the amount of tax actually due 5.0% of the amount of such tax if the failure to file a proper return is for not more than 1 month, with an additional 5.0% for an additional month or fraction thereof during which the failure continues, not exceeding 25% in the aggregate. In every case, at least $2.00 shall be added.

(2) Underpayment of tax. If a return filed with the Department shows a greater tax due or collected than the amount of tax remitted with the return, the Department will issue an assessment for the difference, together with an addition of 3.0% of the difference, which shall be paid to the Department within 10 days after a notice of the assessment has been mailed to the taxpayer. If the assessment is not paid within 10 days, there shall be added thereto, and paid to the Department, an additional 3.0% of the difference for each month thereof during which the assessment remains unpaid, but the total of all these additions may not exceed 18% of the difference shown on the assessment.

(3) Understatement of tax. If a return filed with the Department understates the amount of tax due, there shall be added to the assessment an addition of 5.0% of the understatement. Where the understatement is in excess of 50% there shall be added to the foregoing 5.0% addition, a further 5.0% of the understatement for each month or fraction thereof that the understatement is outstanding. This further addition may not exceed 25% of the understatement.

(4) Uncollectible checks. Whenever a check issued in payment of a tax or for another purpose is returned to the Department as uncollectible, to cover the cost of its collection a fee of 10% of the face amount thereof, plus protest fees, will be charged to the person presenting the check to the Department. The additions imposed hereby may not exceed $200 nor be less than $10. The additions shall be added to interest, additions or penalties otherwise due under the TRC.

(c) Penalties. Intentional failure on the part of a party to a transaction whether as vendor, purchaser or user to pay, collect or remit to the Department the full tax due under this article may subject the taxpayer to a 50% penalty unless the taxpayer makes a full, accurate and complete good faith disclosure of the occurrence of the transaction. The disclosure shall be made to the Department as an addition to the return for the period during which the transaction occurred. In addition, a person who willfully attempts in any manner to advise or assist a taxpayer to evade or defeat the tax shall be liable for the 50% penalty. An act or omission which occurs after a person has knowledge that an act or omission is not in conformity with this article is presumed to be an intentional act or omission. The presumption exists that every taxpayer is familiar with the provisions of the Code and regulations and rulings. Where an issue of fact is raised in a proceeding for reassessment or refund with respect to whether a return is fraudulent, the burden of proof with respect to an issue is on the Department.

(d) Crimes and offenses. The following shall constitute crimes and offenses:

(1) Crimes under the TRC. Crimes under the TRC are as follows:

(i) Fraudulent return. Any person who, with intent to defraud the Commonwealth, shall willfully make or cause to be made a false return shall be guilty of a misdemeanor and upon conviction thereof, shall be sentenced to pay a fine not exceeding $2,000 or undergo imprisonment not exceeding 3 years, or both.

(ii) Misdemeanor. A fine not exceeding $1,000 or imprisonment not exceeding one year, or both, may be imposed upon conviction of any of the following:

(A) A person who advertises or holds out to the public that the tax will be absorbed by the person, not added to the purchase price or, if added, refunded other than when the property is returned to the vendor.

(B) A person who willfully fails or refuses to collect and remit the tax to the Department.

(C) A person who willfully fails, neglects or refuses to file a return or report required to be filed.

(D) A taxpayer who refuses to pay any tax, interest, additions or penalties imposed.

(E) A taxpayer who willfully fails to preserve his books, papers and records as directed by the Department.

(F) A person who refuses to permit the Department or its agents to examine his books, records or papers.

(G) A person who knowingly makes an incomplete, false or fraudulent return or report.

(H) A person who does anything to prevent the full disclosure of the amount or character of taxable sales, purchases or use of the property.

(I) A person who provides a person with a false statement as to the payment of the tax.

(J) A person who makes or issues a false or fraudulent exemption certificate.

(iii) Summary offense. A fine of not less than $100 nor more than $300, and in default thereof, imprisonment of not less than 5 days nor more than 30 days, shall be imposed upon conviction of: a person who maintains a place of business in this Commonwealth for the purpose of selling or leasing services or tangible personal property, the sale or use of which is subject to tax, without having first been licensed by the Department.

(2) Crimes under the Penal and Crimes Code. Crimes under the Penal and Crimes Code (18 P. S. § 4823) shall be as follows:

(i) Embezzlement—In addition to the offenses already set forth in this subsection, any person who, on or before June 5, 1973, collected and converted or misappropriated the tax may be guilty of embezzlement under the provisions of the Penal Code of 1939 (18 P. S. § 4823). Reference should be made to Commonwealth v. Shafer, 414 Pa. 613 (1964).

(ii) Misapplication of entrusted property and property of Government or financial institutions. In addition to the offenses already set forth in this subsection, any person who, on or after June 6, 1973, collects and converts or misappropriates the tax may be guilty of misapplication of entrusted property and property of government or financial institutions under the provisions of 18 Pa.C.S. § 4113 (relating to misapplication of entrusted property and property of government or financial institutions).

(iii) Theft. In addition to the offenses already set forth in this subsection, any person who, on or after June 6, 1973, collects and converts or misappropriates the tax may be guilty of theft under the provisions of 18 Pa.C.S. § § 3921 or 3927 (relating to theft by unlawful taking or disposition; and theft by failure to make required disposition of funds required).

The provisions of this § 35.2 amended under sections 248.2 and 270 of the Tax Reform Code of 1971 (72 P. S. § § 7248.2 and 7270).

The provisions of this § 35.2 amended August 20, 1976, effective August 21, 1976, 6 Pa.B. 1988; amended April 24, 1987, effective April 25, 1987, 17 Pa.B. 1665. Immediately preceding text appears at serial pages (115259) to (115260) and (102553) to (102554).

This section cited in 61 Pa. Code § 35.1 (relating to tax examinations and assessments); and 61 Pa. Code § 46.7 (relating to nonresident contractors).

History

• Authority: The provisions of this § 35.
• Source: The provisions of this § 35.

61 Pa. Code § 35.3 Lien for taxes.

(a) Lien imposed. If a person liable to pay a tax, interest, addition or penalty neglects or refuses to pay the same after demand, upon entry of record by the prothonotary of the county where the property is situated, the amount shall be a lien in favor of the Commonwealth against real property and personal property—except merchandise regularly sold in the course of the taxpayer’s business—of the person.

(b) Priority and effect of lien. The Commonwealth will have priority from the date of entry of the lien and shall be fully paid and satisfied out of the judicial sale of the property subject thereto before any subsequent obligation attaching to the property. However, the Commonwealth lien is subject to mortgages or other liens existing and recorded at the time of the entry of the tax lien, and local real property taxes and municipal claims against real property. In the case of a judicial sale upon a claim over which the tax lien has priority, the sale shall discharge the tax lien only to the extent that the proceeds are applied to its payment and the lien shall continue in full force as to the balance remaining unpaid. The lien shall continue for 5 years from date of entry and may be revived in the manner now or hereafter provided for renewal of judgments or as may be provided in the FC (72 P. S. § § 1—1855).

(c) Priority of tax. In the distribution, voluntary or compulsory, in receivership, insolvency, assignment for benefit of creditors or otherwise of the property or estate of a person, taxes imposed by the act which are due and unpaid will be paid from the first money available for distribution in priority to unsecured claims and junior lien claims except insofar as the laws of the United States may give a prior claim to the Federal Government. However, in the distribution of a decedent’s estate or bankruptcy, the priority of the tax claim is controlled by the Fiduciaries Act and 11 U.S.C. § § 101—151326, known as the Federal Bankruptcy Act. A person charged with the administration or distribution of the property who violates this chapter will be personally liable for taxes imposed by the act which are accrued and unpaid and are chargeable against the person whose property or estate is being administered or distributed.

History

• Authority: The provisions of this § 35.
• Source: The provisions of this § 35.

Chapter 36 Appeals

61 Pa. Code § 36.11 Board of Finance and Revenue.

(a) Within 60 days after the date of mailing of notice by the Department of the decision on a petition except as to a decision regarding the necessity for filing a bond under section 277 of the TRC (72 P. S. § 7277), the petitioner may further petition the Board of Finance and Revenue to review the action of the Department.

(b) The failure of the Department to notify the petitioner within 6 months of the filing date of the petition, or within the further time as may be stipulated by the Board and the petitioner, not to exceed 6 additional months, shall act as a denial of the petition. A petition for review may be filed with the Board of Finance and Revenue within 120 days of the date prior to which the Department will have mailed to the petitioner its notice of decision.

(c) A petition for review filed shall state specifically the reasons on which the petitioner relies or shall incorporate by reference the petition to the Board of Review in which the reasons are stated. The petition shall be supported by affidavit that it is not made for the purpose of delay and the facts set forth therein are true.

(d) The Board of Finance and Revenue shall act finally in disposing of petitions filed with it within 6 months after they have been received. If the Board fails to dispose of a petition within 6 months, the action taken by the Department on the petition will be sustained.

(e) The Board of Finance and Revenue may sustain the action taken by the Department on the petition or it may redetermine, according to law, either the amount due the Commonwealth or the petitioner. The Board will give notice of its action to the Department and to the petitioner.

History

• Source: The provisions of this § 36.

Chapter 38 Hotel Occupancy Tax

61 Pa. Code § 38.1 Imposition and computation of tax.

(a) Tax imposed upon occupants. An excise tax of 6% of the rent is imposed upon every occupancy by an occupant of a room in a hotel in this Commonwealth. The terms rent and occupancy are defined in § 38.3 (relating to definitions). The tax shall be collected by the operator of the hotel from the occupant at the time the rent is due, whether on a daily, weekly or biweekly rental period basis. In the absence of evidence to the contrary, it is presumed that the rent is due at the expiration of a rental period.

(b) Tax not imposed upon permanent residents. The tax is imposed upon occupants, and not upon permanent residents. Reference shall be made to § 38.3. A hotel operator may not collect tax upon the rent for a rental period during or at the expiration of which the lessee becomes a permanent resident. If a hotel operator collects tax in advance for a rental period which is or becomes exempt from tax by reason of the lessee’s becoming a permanent resident, the operator shall refund the tax so collected to the ‘‘permanent resident,’’ and may not report or remit each erroneously collected tax to the Department.

(c) Taxable rooms and facilities. The occupancy of a room in a hotel is subject to tax, including but not limited to sleeping rooms, living quarters, housekeeping accomodations, sample rooms, display rooms, function rooms, meeting rooms, banquet and dining rooms, ballrooms, theaters, auditoriums, kitchens, offices, lobby space, garage facilities and commercial establishments. The use or possession, or right to use or possess, furnishings, services and accommodations which accompany the use or possession of a room, is also considered occupancy and is subject to tax. Reference should be made to § 38.3.

Example. G rents facilities of the H Hotel for a party. In connection therewith, the hotel renders the following bill:

Rental of ballroom… $500 Food and soft drinks… 200 Liquor… 100 Party favors… 25 Services of hotel orchestra… 200 Service charge… 200

(1) The service charge item includes the furnishing by the hotel of waiters, kitchen help, barmen, checkroom girls and janitors, and the use of the hotel kitchen, checkroom, bar equipment, furniture, janitorial, facilities, glassware and the like.

(2) Hotel Occupancy Tax is due upon the following items: Rental of Ballroom…$500. Service charge… 200.

(3) Although the hotel separately itemizes the service charge for the services of hotel employes and the use of hotel facilities and property other than the ballroom itself, the furnishings, services and accommodations are deemed to accompany the use or possession of the ballroom, and the charge therefor is considered part of the rent. Reference should be made to § 38.3.

(4) With respect to the food, drinks, other than liquor, and party favors, the provisions of the sales and use tax portion of the TRC are applicable and the hotel is required to collect and remit sales tax upon 6% of the purchase price of these items.

(5) The services of the hotel orchestra are not deemed to accompany the use of the ballroom, since services are available to persons other than lessees of the ballroom and the charge made therefor is not less than that made to persons other than hotel occupants or residents. Reference should be made to § 38.3.

(d) Property sold or leased. Tangible personal property which is sold by a hotel operator may be subject to tax under the provisions of the sales and use tax portion of the TRC. Property which is furnished by a hotel operator for use by hotel occupants and residents or other persons, the use of which is not deemed to accompany the use of a room or rooms, so that the charge therefor is not considered part of the rent, may also be subject to sales and use tax. In such case, the operator is required to collect and remit the tax in accordance with the provisions of the sales and use tax portion of the act and to otherwise comply with the provisions of that act and of the regulations promulgated thereunder. Reference should be made to § 38.3.

Example. H hotel rents beach chairs to persons using its swimming pool, charging the same rate to hotel occupants and residents as to other persons. The furnishing of such beach chairs is not deemed to accompany the use of hotel rooms, and the charge made therefor is not rent. Reference should be made to § 38.3. Therefore, Hotel Occupancy Tax is not due upon such charges. However, the rental is subject to sales and use tax under the act, and H must collect the tax, remit it, and otherwise comply with the sales and use tax requirements.

(e) Tax upon meals. The sale of meals by a hotel for consumption upon hotel premises, is subject to tax when the price of the meal exceeds 10¢. This is imposed as a sales and use tax under the act and not as a Hotel Occupancy Tax, and should be so reported to the Department. The tax is due upon meals sold both to hotel occupants and residents and to other persons.

(1) Price of meals included in rental charges. Where the amount charged by a hotel operator or rent includes the price of any meals, the tax upon the meals shall be separately reported. The charges for meals, when not separately stated and itemized by the operator, shall be presumed to be distributed as follows, unless, upon application of a hotel operator, the Department approves a different basis:

(2) Exemptions from tax upon sale of meals. The sales and use tax portion of the TRC makes provision for certain exemptions from the sales and use tax upon the sale of meals. Note that the exemptions do not apply to room rentals. Reference should be made to § 38.2. Those persons who under § 38.2 (relating to exemptions) are exempt from the Hotel Occupancy Tax under § 38.2 are exempt from tax upon their purchase of meals. However, the sale of meals to permanent residents, as that term is defined in § 38.2 is subject to tax even though the permanent resident may be excluded from tax on his room rentals. In addition, the sale of meals to a ‘‘religious organization,’’ ‘‘charitable organization,’’ or ‘‘nonprofit educational institution,’’ as those terms are defined in § 32.1 (relating to definitions) may be exempt from tax provided that the following requirements are met:

(i) The organization or institution shall meet the terms of the definitions of ‘‘religious organization,’’ ‘‘charitable organizations,’’ or ‘‘nonprofit educational institutions,’’ as provided in § 32.1.

(ii) The meals shall be sold to the organization or institution itself, and not to individual members of the organization or institution. The sale of meals to individual members of an organization or institution is subject to tax, even though the organization or institution to which they belong may be entitled to exemption from tax.

(iii) The organization or institution shall furnish the hotel operator a properly executed exemption certificate. In the case of a charitable organization, the form shall contain a charitable exemption number. Provided that all of the foregoing requirements are met, a hotel operator may sell meals to an organization or institution without collection of sales tax. Note, however, that the exemption granted by the sales and use tax portion of the TRC is not applicable to rentals of hotel rooms and facilities by such organizations and institutions. Thus, where a charge is made by the hotel operator for the use of dining or banquet rooms, meeting rooms, auditoriums, ballrooms, and the like, the rental charges are subject to hotel occupancy tax, even though the organization or institution renting the rooms or facilities is exempt from sales tax upon its purchase of meals.

(f) Presumption of taxability. For the purpose of proper administration of the tax, it is presumed that all rents are subject to tax until the contrary is established, and the burden of proving that a rent or occupancy is not taxable is upon the operator.

The provisions of this § 38.1 amended October 24, 1975, effective October 25, 1975, 5 Pa.B. 2844.

This section cited in 61 Pa. Code § 38.3 (relating to definitions); and 61 Pa. Code § 38a.1 (relating to scope and application of Chapter 38—Hotel Occupancy Tax—statement of policy).

History

• Source: The provisions of this § 38.

61 Pa. Code § 38.2 Exemptions.

(a) Permanent residents. A permanent resident defined in § 38.3 (relating to definitions), is excluded from Hotel Occupancy Tax liability upon the occupancy of any room or rooms in a hotel for any rental period during which, or at the expiration of which, he is or becomes a permanent resident. This exclusion does not apply, however, to the purchase of meals or any other taxable purchase which may be made by a permanent resident.

(b) Ambassadors, ministers and consular officers of foreign governments. Ambassadors, ministers and other diplomatic representatives of foreign governments properly accredited to the United States, are exempt from tax upon their occupancy of rooms. This exemption does not apply to consular officers or to officers of foreign governments other than those specified in this section, unless such exemption arises from treaties or reciprocal agreements existing between such foreign governments and the United States.

(1) A person claiming exemption from the tax under this subsection is required to apply in writing therefor to the Bureau of Accounts Settlement, Department of Revenue, Harrisburg, Pennsylvania, Attention: Exemption Unit. Ambassadors, ministers and other diplomatic representatives of foreign governments should submit written proof that they are properly accredited to the United States. Consular officers and officials of foreign governments should submit written proof of the treaty or agreement under which similar exemption is granted by their country to consular officers and officials of the United States together with proof that such treaty or reciprocal agreement is presently in effect and that they are an officer or official entitled to prerogatives thereunder. If exemption has already been accorded under the sales and use tax portion of the TRC the numbered identification card is valid for hotel occupancy tax purposes.

(2) If the request for exemption is approved, a numbered identification card will be issued to the applicant. This card shall be shown by the exempt occupant to the hotel operator whenever a claim for exemption is made.

(c) Occupancy of hotel rooms by United States Government. Occupancy of hotel rooms by the United States Government shall be exempt from tax in accordance with the following:

(1) Occupancy of rooms by the Government of the United States, or its agencies, or by an employe or representative of the Government of the United States or its agencies, when the occupancy is solely for official purposes and the rent is paid by the Government of the United States or its agencies, is exempt from tax.

(2) Occupancy of rooms by National Banks, Federal Savings and Loan Associations, Joint Stock Land Banks, National Park Commissioners, or their employes or representatives, or by Federal licensees such as warehouses, stockyards, construction contractors engaged in the improvement of real estate owned by a Federal agency, or similar corporations, companies, institutions, or persons, or their employees or representatives, regardless of the purpose of the occupancy, is not exempt from the Hotel Occupancy Tax. Members of the Armed Forces are not exempt from tax upon occupancy of rooms unless acting as authorized representatives of the Government of the United States or one of its agencies and are otherwise entitled to exemption under the provisions of paragraph (1).

(d) Occupancy of hotel rooms by other exempt entities. Occupancy of rooms, the charges for which are billed to and paid by the following organizations, shall be exempt from tax. Charges paid by employes or other agents of these organizations shall be subject to tax even though the employe or agent is reimbursed by the exempt organization:

(1) Federal Credit Unions organized under the provisions of the Federal Credit Union Act (12 U.S.C.A. § § 1751—1795k).

(2) Commonwealth credit unions formed and incorporated under Credit Union Act (15 P. S. § § 12301—12333).

(3) Public authorities created under the act of June 28, 1935 (P. L. 463) and the Municipal Authorities Act of 1945 (53 P. S. § § 301—322).

(4) Co-operative agriculture associations required to pay corporate net income tax under the provisions of the Co-operative Agricultural Association Corporate Net Income Tax Act (72 P. S. § § 3420-21—3420-30).

(5) Electric cooperative corporations formed under the Electric Cooperative Corporation Act (15 P. S. § § 12401—12438).

(6) Another organization claiming an exempt status under a particular statute shall make application to the Bureau of Sales and Use Tax, Attn: Legal Division) for approval to use the exemption.

(e) Records of exempt occupancies. The hotel operator shall maintain records to support and identify exempt occupancies. Exemption certificates, letters of exemption, direct payment permits and other documents relating to exemptions from tax issued under the provisions of the sales and use tax portion of the TRC or regulations promulgated thereunder, are of no force and effect with respect to the tax imposed by the hotel occupancy tax portion of the act with the exception noted in subsections (b) and (d).

(f) Others not exempt. No person or entity other than those referred to in this section may be exempt from the Hotel Occupancy Tax. Occupancy by employes or representatives of the Commonwealth, its instrumentalities or political subdivisions, is not exempt from hotel occupancy tax, regardless of the nature of the business upon which the employee or representative is engaged, and regardless of the identity of the person or agency paying for the occupancy. Occupancy by employes or representatives of State credit unions is not exempt from the tax. Exemption from the sales and use tax portion of the TRC granted to persons, organizations or institutions, including exemptions granted to religious organizations, charities, educational institutions and the like, are not applicable to the Hotel Occupancy Tax, and those persons, organizations or institutions are required to pay tax upon their occupancy of hotel rooms.

The provisions of this § 38.2 amended through October 24, 1975, effective October 25, 1975, 5 Pa.B. 2844.

It was improper for the Department to collect State hotel occupancy taxes from Sheraton Hotel guests who were on official United States government business, and it was not necessary that the United States government be billed directly as opposed to the employes paying themselves and receiving reimbursement from the government. Egner v. Commonwealth, 557 A.2d 1157, 1159 (Pa. Commw. 1989).

This section cited in 61 Pa. Code § 38.1 (relating to imposition of computation of tax); 61 Pa. Code § 38.3 (relating to definitions); and 61 Pa. Code § 38a.1 (relating to scope and application of Chapter 38—Hotel Occupancy Tax—statement of policy).

History

• Source: The provisions of this § 38.

61 Pa. Code § 38.3 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Department—The Department of Revenue of this Commonwealth. Hotel—A building in which the public may, for a consideration, obtain sleeping accommodations, including establishments such as inns, motels, tourist homes, tourist houses or courts, lodging houses, rooming houses, summer camps, apartment hotels, resort lodges and cabins and other building or group of buildings in which sleeping accommodations are available to the public for periods of time less than 30 days.

(i) An establishment which has accommodations available to the general public as sleeping quarters for periods less than 30 days, is a hotel within the meaning of this definition, even though the establishment may have other accommodations which are used for purposes other than sleeping quarters, and even though the establishment may have other sleeping quarters which are available only for periods of 30 days or more.

(ii) An establishment such as a public summer camp which has any permanent buildings available to the public for use as sleeping quarters, may be a hotel, even though some of its accommodations may be temporary structures, such as tents.

(iii) A private organization or institution which, in the ordinary course of its activities, provides sleeping accommodations to persons directly associated with it, is not a hotel. Where, however, an organization or institution, offers or makes available sleeping accommodations for the general public for periods less than 30 days, the organization or institution is considered to be operating a hotel with respect to all occupancies.

Example 1. An apartment hotel which rents certain apartments or rooms for occupancy on a week-to-week basis, or for other periods less than 30 days, is a hotel, even though it has other apartments or rooms leased only on a month-to-month basis, or for other periods of 30 days or more. For the purpose of registration, the entire establishment is considered a hotel.

Example 2. A public summer camp or resort which has certain permanent buildings available for occupancy as sleeping quarters, and which also has tents or other temporary structures available for use, may be a hotel if its accommodations are available to the public for less than 30 days. However, where a camp has available only temporary structures for use as sleeping quarters that is, all of its sleeping quarters consist of tents or other temporary structures, it is not a hotel within the meaning of the regulation, even though the camp may have other buildings such as dining halls, meeting rooms and the like, which are permanent structures.

Example 3. Summer camps for children which provide a program of planned instruction or training, including but not limited to physical or mental rehabilitation which the campers are required to pursue under the supervision of trained counselors, are not hotels within the meaning of section 209(1) of the TRC (72 P. S. § 7209). Accordingly, the camps are not required to register, collect or remit hotel occupancy tax.

Example 4. A single building which contains both rooms used as sleeping accommodations and rooms used for other purposes may be a hotel. Thus, where the lower floor of a building is used for rental to commercial establishments, and the upper floors are used for rental as sleeping accommodations to the public for periods less than 30 days, the building is a hotel for tax purposes.

Example 5. A hospital, nursing home, convalescent home, mental institution or other institution dedicated to the care and treatment of the sick under medical supervision, is not a hotel even though it provides sleeping accommodations for patients, doctors, nurses, students, employes and other persons associated with the institution. Similarly, where a private business provides sleeping accommodations for its employes, it is not a hotel. Where, however, an organization or institution provides accommodations to the general public as, for example, the providing of sleeping accommodations by a YMCA, or so-called health resort or spa, for periods less than 30 days, it is operating a hotel.

Example 6. A school, college, university, convent, monastery or other educational or religious institution, which provides sleeping accommodations for the use of persons who are participating in its educational or religious activities, is not a hotel. For example, where a university provides sleeping accommodations to persons who are attending a conference or convention sponsored by the institution, or to parents of students of the institution, it is not a hotel. A public summer camp conducted by an organization enumerated above, where the activity of such organization is carried on as an integral part of the camp life, is not a hotel.

Example 7. A private club which restricts the use of its sleeping accommodations to its own employes and members is not considered to be a hotel within the meaning of the Hotel Occupancy Tax portion of the TRC and need not register nor collect tax from persons. However, where a club permits its sleeping accommodations to be used by nonmembers and the billing for the occupancy is made to and paid by a nonmember, the club is considered to be a hotel and shall collect tax with respect to occupancies, other than permanent residents, including occupancies by its membership. Charges for occupancies shall be billed to club members for the organization to retain its exempt status. Occupant—A person, other than a permanent resident as defined by § 38.2 (relating to exemptions), who, for a consideration, uses, possesses or has a right to use or possess, a room or rooms in a hotel under a lease, concession, permit, right of access, license or agreement. A person may be an occupant as defined herein, even though he does not use and does not intend to use a room or rooms as sleeping accommodations.

Example 1. A salesman who rents a sample room in a hotel is an occupant. An organization which rents a ballroom in a hotel is an occupant. In deciding whether a particular establishment is a hotel, as defined in this section, it is necessary to determine whether the establishment has sleeping accommodations available. But in deciding whether a particular person is an occupant, it is only necessary to find that he uses, possesses or has a right to use or possess a room or rooms in a hotel. It is not necessary that the room or rooms be sleeping accommodations.

Example 2. A public summer camp which has both temporary and permanent sleeping quarters available for occupancy for periods less than 30 days, is a hotel. Persons who occupy camp facilities for periods of less than 30 days are considered occupants, even though they occupy temporary sleeping quarters. Occupancy—The use or possession, or the right to the use or possession by a person, other than a permanent resident of any room or rooms in a hotel for any purpose, or the right to the use or possession of the furnishings, services, and accommodations which accompany the use and possession of the room or rooms. Furnishings include, but are not limited to, property such as furniture, including radios, television sets, and air conditioners, utensils, glassware, linens, towels, athletic and sporting equipment, recreational equipment, stationery and stationery supplies, and other property furnished by the hotel for the use of hotel occupants and maid and porter service, towel and linen service, doormen, bellmen, elevator service, parking service, and any other services, facilities, or accommodations, including secretarial or commercial services, garage accommodations, theater ticket service, transportation service, swimming and athletic facilities, locker rooms, recreational facilities, parcel checking service, delivery service, and health facilities which are offered by the hotel for the exclusive use of hotel occupants and residents without any charge in addition to that normally made for the room or rooms occupied by such persons, or at a rate less than that charged to persons who are not hotel occupants or residents. Operator—A person operating a hotel as defined in this section.

Permanent resident. A person who has occupied or has had the right to occupy a room or rooms in a hotel for 30 consecutive days or more.

(i) After a person has occupied or had the right to occupy for thirty consecutive days, he is no longer an occupant as defined by this section. His status as a permanent resident is effective for the rental period during which, or at the expiration of which, the 30th consecutive day of occupancy is completed, and continues thereafter so long as his occupancy remains continuous and uninterrupted. Thus, if a person completes his 30th day of consecutive occupancy during, or at the expiration of a particular rental period, he is a permanent resident for that entire rental period, even though, during a part of the period, he had not yet established his status as a permanent resident, and for each rental period thereafter in which his occupancy continues uninterrupted. He is not a permanent resident, however, as to any rental period prior to the particular rental period during or at the expiration of which, he completed his 30th day. As to such prior rental periods, he was and remains an occupant. Reference should be made to Example 1 of this definition.

(ii) A rental period, for the purposes of this subchapter, is a period of time, for example, a day, week, month, or the like during which, under and subject to the terms of a legally enforceable contract, an occupant has a continuous right to occupy a room or rooms in a hotel and is legally bound to pay rent therefor. (In the absence of evidence to the contrary, it is presumed that a rental period runs from the date of first occupancy or first payment of rent, to the date of a subsequent payment of rent.) A mere statement of intention to occupy, or to permit occupancy, on the part of an occupant or hotel operator, or both, does not create a rental period unless the period in question is the subject of a legally enforceable contract.

(iii) The occupancy or right of occupancy shall be for 30 consecutive days. A person who merely has a right to use a room or rooms on intermittent days of a week or month cannot become a permanent resident, even though he cumulatively occupies for more than 30 days.

(iv) The status of permanent resident only continues so long as the occupancy or right of occupancy continues uninterrupted. A permanent resident who quits his hotel and breaks his consecutive and continuing occupancy, loses his status as permanent resident, and, with respect to his next occupancy, he does not resume his status as a permanent resident unless and until he again completes 30 consecutive days of occupancy. A transfer from one hotel to another, even though both hotels are owned by the same operator, is a break in occupancy; however, a mere change of rooms in the same hotel is not a break in occupancy.

Example 1. G occupies a room on a week-to-week contract. At the end of each of the first 4 weekly rental periods, G is an occupant, and not a permanent resident, since he has not completed 30 consecutive days of occupancy during or at the expiration of any of those weeks. At the end of the second day of the fifth week, G completes 30 consecutive days and becomes a permanent resident. He is a resident and not an occupant as of the entire fifth week, and for each week thereafter during which he continues to have an uninterrupted right of occupancy. As to the first 4 weeks, however, he was and is an occupant.

Example 2. G occupies a room on a month-to-month contract. At the end of the first monthly rental period, G is a permanent resident, and this status is applicable to the first month, and to every month thereafter during which G continues to have an uninterrupted right of occupancy. Therefore, G is never an occupant.

Example 3. S, a student, takes a room on a week-to-week basis in a rooming house. S tells his landlady he intends to keep the room for a full semester; however, he has no legally enforceable right to do so, and his landlady has no legally enforceable right to have him do so. He therefore occupies upon a weekly rental period; he is a permanent resident as of the fifth week. Reference should be made to Example 1 of this definition. At the end of the semester, S returns to his home, and although S tells his landlady he wishes to resume his occupancy when he returns to school, S pays no rent for the interim period and has no right to occupy the room during that period. Since there is a break in S’s occupancy, S has lost his status as permanent resident, and upon his resumption status as permanent resident, and upon his resumption of occupancy on the same rental period basis, he will again be considered an occupant for the first four weekly rental periods. Person—A natural person, firm, partnership, association, corporation, fiduciary or other entity. Whenever used in any provision of the Hotel Occupancy Tax portion of the TRC which prescribes or imposes a fine or imprisonment, or both, the term person as applied to a firm, partnership or association, shall include the members thereof and, as applied to a corporation, the officers thereof. A firm, partnership, association or a corporation may be subjected as an entity to the payment of a fine. Rent—The consideration received for occupancy as defined in this section valued in money, whether actually received in money or otherwise, including all receipts, cash, credits and property or services of any kind or nature. Also, any amount for which an occupant is liable for occupancy, as defined herein, without any deduction therefrom whatsoever.

(i) The entire amount charged by a hotel operator for occupancy, as that term is defined in this section, constitutes rent under the law. Charges for services, facilities or accommodations which are offered by the hotel for the exclusive use of hotel occupants, or which are furnished by the hotel to occupants without any charge in addition to that normally made for the room occupied by the persons, or at a rate less than that charged to persons who are not hotel occupants or residents, are deemed to be a part of the rent. This is true whether charges for such services, facilities or accommodations are separately stated and itemized or not.

(ii) Services and accommodations which are available to the general public as well as to the hotel occupants or residents, and for which the hotel makes a charge to occupants or residents at lease equal in amount to the charge made to persons who are not hotel occupants or residents, are not deemed to accompany the use or possession of a hotel room, and the charges made for the services and accommodations are not considered part of the rent, if the charges are separately stated and itemized. However, a lump sum is presumed to be rent, even though the lump sum may include charges for services and accommodations which, if separately stated and itemized, would not be considered part of the rent.

(iii) With respect to the computation, collection, reporting and remittance of tax upon rental charges which include a charge for meals, reference should be made to § 38.1 (relating to imposition and computation of tax). Tax—Any tax, interest or penalty imposed or levied under the provisions of Article II of the TRC (72 P. S. § § 7201—7282).

The provisions of this § 38.3 amended April 12, 1974, effective April 13, 1974, 4 Pa.B. 691.

This section cited in 61 Pa. Code § 38.1 (relating to imposition of computation of tax); and 61 Pa. Code § 38.2 (relating to exemptions).

History

• Source: The provisions of this § 38.

Chapter 39 Transient Vendors

61 Pa. Code § 39.1 Definition.

The term ‘‘transient vendor’’ has the following meaning when used in this chapter:

(1) A person who:

(i) Brings into this Commonwealth, by automobile, truck or other means of transportation, or purchases in this Commonwealth, tangible personal property, the sale of or use of which is subject to tax imposed by Article II of the TRC (72 P. S. § § 7201—7282).

(ii) Offers or intends to offer the tangible personal property for sale at retail within this Commonwealth.

(iii) Does not maintain an established office, distribution house, sales house, warehouse, service enterprise, residence from which business is conducted or other place of business within this Commonwealth.

(2) The term does not include a person who does one of the following:

(i) Delivers tangible personal property within this Commonwealth under orders for the property which were solicited or placed by mail or by telephone.

(ii) Handcrafts items. A handcrafted item is one predominately made or created by hand. It generally consists of giving new shapes, new qualities or new combinations to matter.

The provisions of this § 39.1 adopted June 29, 1984, effective June 30, 1984, 14 Pa.B. 2266; amended April 24, 1987, effective April 25, 1987, 17 Pa.B. 1665. Immediately preceding text appears at serial pages (91027) to (91028).

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.2 Registration.

(a) Registration as a transient vendor shall be in addition to the registration requirements of section 208 of the TRC (72 P. S. § 7208).

(b) A person who is a transient vendor shall be required to apply for and obtain a transient vendor certificate from the Department prior to conducting business or otherwise commencing operations within this Commonwealth. Application for a transient vendor certificate shall be a supplement to the Application for Sales, Use, and Hotel Occupancy Tax License Form which may be obtained from the Department. In addition to fully completing the license application form—see § 34.1 (relating to registration)—and any other information the Department might require, a transient vendor shall supply the following information:

(1) A description of the security under § 39.4 (relating to surety bond or other security) that accompanies the application.

(2) The location of intended sales in this Commonwealth.

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.3 Transient vendor certificates.

(a) General. Upon receipt of an application for a transient vendor certificate and the acceptance by the Department of the bond as required under § 39.4 (relating to surety bond or other security), the Department will issue a transient vendor certificate. The certificate shall be prominently displayed by the vendor while conducting sales or other business within this Commonwealth.

(b) Expiration of transient vendor certificate. Certificates shall expire on the last day of January each year except that the initial certificate issued will not expire until the second succeeding January. For example, a certificate initially issued in July 1984, will expire on January 31, 1986.

(c) Renewal. Prior to the annual expiration of the transient vendor certificate, the Department will send an application for renewal to the transient vendor. Upon receiving an application for renewal of the transient vendor certificate and the acceptance by the Department of the bond as required by § 39.4, the Department will issue a new transient vendor certificate unless the Department finds the applicant in violation of Article II of the TRC (72 P. S. § § 7201—7282).

(d) Surrender of transient vendor certificate. A transient vendor may file a request for the voluntary surrender of its transient vendor certificate with the Department. If the Department is satisfied that the transient vendor has complied with Article II of the TRC and the Department has possession of the transient vendor’s certificate, it shall return the posted bond to the transient vendor.

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.4 Surety bond or other security.

(a) At the time of filing for a transient vendor certificate, a transient vendor shall file a surety bond with the Department which is subject to approval by the Department. In lieu of the surety bond, the Department may accept other equivalent security, such as letters of credit or cash.

(b) The bond or other security shall be in the amount of $500 and shall be executed by the transient vendor as the principal and by a corporate surety authorized to engage in business in this Commonwealth.

(c) The bond or other security may be reduced or eliminated entirely if either of the following applies:

(1) Upon review of the annual application, the Department finds that there has been at least a 12-month period of compliance by the transient vendor with Article II of the TRC (72 P. S. § § 7201—7282). In making this determination, the Department will consider the period of compliance prior to passage of sections 201(t), 248 and 248.1—248.5 of the TRC (72 P. S. § § 7201(t), 7248 and 7248.1—7248.5), and will consider, among other factors, the timely filing and remittance of sales tax, the maintenance of records and the displaying of licenses, if applicable.

(2) If the transient vendor provides the license number of a promoter who has notified the Department of a show, under section 248.6(a) of the TRC (72 P. S. § 7248.6(a)).

The provisions of this § 39.4 adopted June 29, 1984, effective June 30, 1984, 14 Pa.B. 2266; amended April 24, 1987, effective April 25, 1987, 17 Pa.B. 1665. Immediately preceding text appears at serial page (91029).

This section cited in 61 Pa. Code § 39.2 (relating to registration); 61 Pa. Code § 39.3 (relating to transient vendor certificates); and 61 Pa. Code § 39.4a (relating to application of cash security to liability of transient vendors).

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.4a Application of cash security to liability of transient vendors.

(a) The Department, upon the written request of a transient vendor, may apply a cash security under § 39.4 (relating to surety bond or other security) to the vendor’s liability for sales and use tax.

(b) The Department’s application of the transient vendor’s security, under subsection (a), will occur as of the date of receipt by the Department of the transient vendor’s request for application.

(c) The Department may, without request, apply a transient vendor’s cash security against his liability for sales and use tax, interest and penalties, if it is determined that the vendor is delinquent. For purposes of this subsection, delinquent means that the transient vendor has failed to collect or timely remit the sales tax due on tangible personal property or services subject to the sales tax, or the transient vendor has failed to timely file a tax return as provided by section 217 of the TRC (72 P. S. § 7217).

The provisions of this § 39.4a adopted April 24, 1987, effective April 25, 1987, 17 Pa.B. 1665.

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.5 Suspension or revocation of transient vendor certificate.

The Department may suspend or revoke a transient vendor certificate if the transient vendor does one of the following:

(1) Fails to notify the Department upon entering this Commonwealth to conduct business under § 39.7 (relating to notice prior to entering Commonwealth).

(2) Provides the Department with false information regarding the conduct of business within this Commonwealth.

(3) Fails to collect and remit to the Department sales tax on tangible personal property or services sold subject to the sales tax.

(4) Fails to file with the Department a tax return as provided by section 217 of the TRC (72 P. S. § 7217).

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.6 Appeal from rejection of application, suspension or revocation of transient vendor certificate.

(a) If the Department rejects the application for renewal or suspends or revokes a certificate, the Department will provide written notice of its decision, mailed to the last known address of the transient vendor.

(b) The transient vendor may appeal the decision by filing a petition to show cause why a certificate should be issued or remain valid. The petition shall be filed with the Department within 30 days of the mailing date of the Department’s decision. Unless the parties mutually agree to waive the time requirements, the Department shall schedule a hearing, to be held not less than 15 days, nor more than 45 days after the filing of the petition, at a specific time and location to be set by the Department. The hearing shall be conducted in accordance with 2 Pa.C.S. § § 101—106 and 501—508 (relating to general provisions and practice and procedure of Commonwealth agencies). Transient vendors aggrieved by the final decision of the Department shall have the right to appeal under 2 Pa.C.S. § § 701—704 (relating to judicial review of Commonwealth agency action).

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.7 Notice prior to entering Commonwealth.

(a) Prior to conducting business in this Commonwealth, the Department shall receive written notice from the transient vendor as to where he intends to conduct business, and the approximate dates of operation. The county, political subdivision and street locations, if known, should be provided. The transient vendor may include this information with his annual application. For example:

Farm Show Building, Harrisburg, Dauphin County, week of January 8, 1984

Jones Flea Market, State College, Centre County, all weekends between Memorial Day and Labor Day

(b) Notice or changes in notice previously submitted shall be mailed to the following address:

Pennsylvania Department of Revenue Strawberry SquareHarrisburg, Pennsylvania 17105 Attention: Licensing and Bonding

This section cited in 61 Pa. Code § 39.5 (relating to suspension or revocation of transient vendor certificate).

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.8 Inspection of records.

While conducting business within this Commonwealth, the transient vendor shall permit authorized employes of the Department to inspect its sales records, including but not limited to, sales receipts and inventory or price lists and to permit inspection of the tangible personal property offered for sale at retail.

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.9 Seizure of property.

(a) If a transient vendor conducting business within this Commonwealth fails to exhibit a valid transient vendor certificate upon demand by the Department, the Department will have the authority to seize without warrant, the tangible personal property, automobile, truck or other means of transportation used to transport or carry that property.

(b) The Department’s representative making the seizure shall issue a receipt to the transient vendor signed by the representative and the transient vendor. If the transient vendor refuses to sign the receipt, another individual may witness the inventory and sign the receipt. The receipt shall contain an inventory of the property seized from the transient vendor and the name and address of the Department’s representative making the seizure.

(c) Property seized shall be deemed contraband and shall be subject to immediate forfeiture proceedings instituted by the Department under § 39.11 (relating to forfeiture proceedings).

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.10 Release of seized property.

(a) Property seized shall be released to a transient vendor upon the occurrence of any of the following:

(1) The transient vendor presents a valid transient vendor certificate to the Department’s representative who made the seizure or to the district administrator for the district in which the seizure occurred. The certificate shall have been issued under an application filed prior to the date upon which the property was seized.

(2) The transient vendor registers with the Department and posts a bond in the amount of $500, either immediately or within 15 days after the property is seized.

(3) The court issues an order directing the release of the seized property.

(b) The district administrator of the area in which the property was seized shall have the authority to release the property to the person from whom it was seized, if presented with satisfactory evidence that the person is not subject to this chapter.

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.11 Forfeiture proceedings.

In order to institute the proceedings to secure an order of forfeiture of the seized property, the Department will within 30 days after confiscation, file a civil complaint in the court of common pleas of the county in which the property was taken. In the event the complaint is not filed within the prescribed time, the tangible personal property seized shall be returned to the person from whom it was seized or its owner.

This section cited in 61 Pa. Code § 39.9 (relating to seizure of property).

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.12 Unclaimed property.

If the court orders property returned to the owner or claimant and the owner or claimant fails to remove the property from Commonwealth property, the Department will give the owner or claimant notice of the court order by mailing it to his last known address. Should the owner or claimant fail to remove the property within 90 days from the mailing date of the notice, the property shall be disposed of under the Disposition of Abandoned and Unclaimed Property Act (72 P. S. § § 1301.1—1301.29), without regard to any other period of limitations.

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

61 Pa. Code § 39.13 Fines.

A transient vendor who conducts business within this Commonwealth while his certificate is suspended or revoked shall be guilty of a misdemeanor of the third degree. Charges can be initiated by the Department or a law enforcement officer. Upon conviction, a transient vendor shall be sentenced to pay a fine not exceeding $2,500 for each offense.

History

• Authority: The provisions of this Chapter 39 issued under sections 248.
• Source: The provisions of this Chapter 39 adopted June 29, 1984, effective June 30, 1984, 14 Pa.

Chapter 41 Manufacturing; Processing

61 Pa. Code § 41.2 Concrete transit mixing unit.

(a) A concrete mixing unit which is mounted on a motor vehicle and used to manufacture transit mix concrete may not be subject to tax since the concrete mixing unit is used directly in an operation of manufacturing.

(b) The motor vehicle upon which the concrete mixing unit is mounted is subject to tax since the motor vehicle is not used directly in an operation of manufacturing.

The provisions of this § 41.2 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 41 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 41.3 Dry ice for packaging ice cream.

The sale of dry ice when purchased for internal packaging in conjunction with the sale of ice cream to others is not subject to tax. The purchaser shall tender an exemption certificate to his supplier setting forth thereon that the property purchased constitutes a wrapping supply for use in wrapping property for delivery to others. Reference should be made to § 32.6 (relating to wrapping supplies, equipment and services).

The provisions of this § 41.3 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 41 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 41.4 Gas used by a manufacturer.

Natural, manufactured or bottled gas used in the actual production process, such as gas used for purpose of manufacturing ceramics, is exempt from tax. Gas used to heat a portion of a manufacturing building such as the administration, production or storage areas is subject to tax since it is not used directly in manufacturing.

The provisions of this § 41.4 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 41 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 41.5 Integrated plants.

(a) Whenever a person is engaged in a recognized integrated business composed of a series of operations which either collectively constitute manufacturing, or individually constitute one or more of the operations specified as manufacturing in section 201(c)(2), (3), (4) or (5) of the TRC (72 P. S. § 7201(c)(2), (3), (4) or (5)), the first production stage is deemed to commence with the first stage of production in the series, and production is not deemed to end finally until the completion of the product in the last operation of the production series.

Example. The X Company is engaged in mining coal and iron, making steel ingots and fabricating various products from steel. The company’s first production stage for the purposes of the tax commences with the first stages of production in the mining of coal and iron, and the final stage of production is the completion of the fabrication of its end products. The exemption applies to the purchase and use of property and services to be used directly in any of the mining, ingot making, and steel fabricating operations in this integrated business.

(b) The operations of manufacturing conducted by the manufacturer include the following:

(1) The production and transmission of electrical power for use in other manufacturing operations.

(2) The production and transmission of gases, air and steam for use in manufacturing operations, including the production of electric power.

The provisions of this § 41.5 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 41 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 41.6 Processing for wholesale distribution.

Section 201(d) of the TRC (72 P. S. § 7201(d)) grants a limited exemption to certain, defined processing activities where the product in question is processed for wholesale distribution. The exemption is limited to the purchase and use of property to be used directly in the specified ‘‘processing’’ activities under the act. It does not apply to property used indirectly in processing, or to motor vehicles required to be registered under 75 Pa.C.S. § § 101—9909 (relating to the Vehicle Code), or to property used in the construction, reconstruction, remodeling, and the like of real estate, or to maintenance items, or property used in sales activities, managerial activities or other nonoperational activities.

The provisions of this § 41.6 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 41 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 41.7 Pump for conveying water prior to production process.

A pump used in conjunction with the conveying of raw river water to a filtration plant where such water is treated prior to use directly in the production of a steel product is not considered to be used directly in a production process.

The provisions of this § 41.7 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 41 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 41.8 Recapping and retreading of tires.

Under the decision of the Commonwealth Court in Commonwealth v. Goodyear Tire & Rubber Company, 88 Dauph. 301 (1967), tangible personal property used directly in the recapping or retreading of tires is exempt from tax under the manufacturing exemption. Reference should be made to § 32.32 (relating to manufacturing; processing).

The provisions of this § 41.8 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 41 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 41.9 Research exemption.

(a) Generally. Section 201(c)(5) of the TRC (72 P. S. § 7201(c)(5)) exempts from tax the purchase and use of tangible personal property and services to be used directly in research having as its objective the production of a new or improved product or utility service or method of producing a product or utility service, but in either case not including market research or research having as its objective the improvement of administrative efficiency. The exemption also applies to taxpayers who undertake research under contract for exempt purposes.

(b) Research operations. Research operations include inquiry, investigation, experimentation and testing, and the analysis, critical study, compilation and development of the results thereof. Generally, the immediate products of research operations are information and knowledge even though incident thereto a researcher produces a salable or usable product or prototype thereof. The exemption provided with regard to research operations applies only to those research operations which have for their ultimate purpose the production of a new or improved product or utility service, or new or improved methods of producing a product or utility service.

(c) Direct use limitation. The direct use limitation shall conform with the following:

(1) The exemption applies only to the purchase and use of tangible personal property and otherwise taxable services to be used directly in research operations as described in this section. In determining whether particular property is used directly in research operations, consideration shall be given to the following factors:

(i) The physical proximity of the property or services to the research activities.

(ii) The proximity of the time of the use of the property or services to the research.

(iii) The active, causal relationship between the use of the property or services and the research development.

(2) In order to meet the direct use test, it is essential that the taxpayer establish that such causal relationship exists. The fact that property is essential to the conduct of the research operations does not of itself mean that the property is used directly in research. On the other hand, the fact that the research operations could be successfully conducted in some manner which does not involve use of the property or service in question is not conclusive that such property or service is not used directly in the research operations.

(3) Examples of things purchased by a research establishment which may be used directly in research operations are testing specimens and samples and components thereof, scientific books and periodicals pertaining to the matters which are the subject of the research in question, analogue or digital computers used to make computations in research operations, laboratory equipment and supplies, and equipment and supplies used for the testing, recordation, analysis, interpretation and development of mathematical, scientific, engineering and other research data. In the case of pharmaceutical and biological research, use of live animals and animal feed, bedding, surgical supplies and cages used in connection with animals is deemed to be directly used in the research operations.

(d) Predominant use test. The exemption applies only to those things which are predominantly used directly in research operations. Where property or services are utilized for purposes to which the exemption applies and for purposes to which the exemption is inapplicable, the predominant purpose shall determine whether the sales transaction or use is covered by the exemption.

(e) Other limitations on the exemption. The exemption does not apply to the purchase or use of property or services to be used indirectly in research operations nor is the exemption applicable to the purchase or use of property or services to be used in managerial activities, sales activities, or other nonoperational activities of a research establishment or project. The exemption does not apply to the purchase and use of vehicles required to be registered under the 75 Pa.C.S. § § 101—9909 (relating to the Vehicle Code), or The Tractor Code. The exemption does not apply to the purchase or use of maintenance tools, equipment, supplies, materials or services or to things which otherwise are used in or become part of the maintenance facilities of the research establishment or project. However, replacement and repair parts which become part of equipment or machinery used directly in research operations are exempt from tax. The exemption does not apply to things used in the construction, reconstruction, remodeling, maintenance or repair of the real estate of the research establishment or project, other than such things which comprise machinery or equipment used directly in researching operations.

The provisions of this § 41.9 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686; amended March 9, 1984, effective March 10, 1984, 14 Pa.B. 844. Immediately preceding text appears at serial pages (40352) to (40354).

A laboratory’s analysis, research and testing of client-provided products did not constitute a transformation of property or otherwise satisfy the definition of ‘‘manufacturing’’ as would entitle it to an exclusion from use tax. Lancaster Laboratories, Inc. v. Commonwealth, 578 A.2d 988 (1990); vacated in part 611 A.2d 815 (Pa. Cmwlth. 1992); affirmed in part 631 A.2d 739 (Pa. Cmwlth. 1993).

The extent to which laboratory used equipment directly in testing and inspection of products in manufacturer’s production cycle brought it within testing and inspection exemption to use tax but use of equipment to develop information to be employed in labelling products is neither within testing and inspection nor research provision of manufacturing exemption. Lancaster Laboratories, Inc. v. Commonwealth, 578 A.2d 988 (Pa. Cmwlth. 1990).

History

• Source: The provisions of this Chapter 41 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

Chapter 42 Broadcasting

61 Pa. Code § 42.1 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Broadcasting—The dissemination of radio or television communications intended to be received by the public, directly or by the intermediary of relay stations. Licensed commercial or educational station—A broadcasting station operating under one of the following Federal Communications Commission licenses is a licensed commercial or educational station:

(i) Standard broadcasting station.

(ii) Frequency modulation station.

(iii) Commercial television station.

(iv) Noncommercial television or FM radio station. See § 42.5 (relating to nonprofit educational stations).

The provisions of this § 42.1 adopted May 24, 1974, effective May 25, 1974, 4 Pa.B. 1032; amended April 24, 1987, effective April 25, 1987, 17 Pa.B. 1665; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial page (176793).

This section cited in 61 Pa. Code § 60.9 (relating to premium cable services).

History

• Source: The provisions of this Chapter 42 adopted May 24, 1974, effective May 25, 1974, 4 Pa.

61 Pa. Code § 42.2 Exemptions.

(a) The purchase, rental or use of equipment, materials and supplies, or services thereon, by a licensed commercial or educational station is exempt from tax, if the property is predominantly used directly by that station in the broadcasting of radio or television programs.

(b) An exemption is not available for maintenance facilities or for materials or supplies to be used or consumed in construction, reconstruction, remodeling, repair or maintenance of real estate other than machinery, equipment or parts therefor that may be affixed to the real estate.

(c) The purchase of a vehicle required to be registered under 75 Pa.C.S. § § 101—9821 (relating to the Vehicle Code) as well as supplies and repair parts for the vehicle are subject to tax.

The provisions of this § 42.2 adopted May 24, 1974, effective May 25, 1974, 4 Pa.B. 1032; amended April 24, 1987, effective April 25, 1987, 17 Pa.B. 1665. Immediately preceding text appears at serial page (40355).

This section cited in 61 Pa. Code § 42.4 (relating to procedure for claiming the exemption).

History

• Source: The provisions of this Chapter 42 adopted May 24, 1974, effective May 25, 1974, 4 Pa.

61 Pa. Code § 42.3 Property.

(a) Property directly used. The following are examples of equipment, parts and accessories, and materials and supplies which, when predominantly used directly by a licensed commercial or educational station in the process of broadcasting are exempt from tax. This exemption applies even though the equipment is part of a mobile unit.

(1) Tower and antenna equipment.

(2) Transmitter equipment, including technical equipment located at transmitter sites.

(3) Studio and technical equipment, including technical equipment located at the studio; such as, cameramen’s lights, equipment for the processing and developing of film, film editing equipment, video tape, microphones and props.

(4) Photograph and film processing equipment, including, but not limited to cameras, film, darkroom equipment and film developers.

(5) Video tape recording equipment.

(6) Studio production equipment; that is, equipment used for the production of commercials or programs for advertisers.

(b) Property not directly used. Property in the following categories is not directly used in the process of broadcasting and the purchase or use of such property is subject to tax:

(1) Furniture and fixtures, other than studio props.

(2) Administrative materials, supplies and equipment.

(3) Mobile units are licensed vehicles and are not considered to be directly used in the process of broadcasting. However, any technical equipment included in subsection (a) would be exempt from tax.

(c) Mixed use of property. Where a single unit of property is put to an operating use in two or more activities, the property is exempt from tax if during more than 50% of its operating use it is directly used in the process of broadcasting.

The provisions of this § 42.3 adopted May 24, 1974, effective May 25, 1974, 4 Pa.B. 1032.

This section cited in 61 Pa. Code § 42.4 (relating to procedure for claiming the exemption).

History

• Source: The provisions of this Chapter 42 adopted May 24, 1974, effective May 25, 1974, 4 Pa.

61 Pa. Code § 42.4 Procedure for claiming the exemption.

(a) A licensed commercial or educational station, other than those which qualify under the provisions of § 42.5 (relating to nonprofit educational stations) may claim an exemption upon its purchase, rental or repair of property set forth under the provisions of § 42.3 (relating to property) together with other items of property which qualify for exemption under the provisions of § 42.2 (relating to exemptions). At the time of making a claim of its exemption, the purchaser shall tender to its supplier a properly executed blanket exemption certificate reflecting the following language on the face thereof: ‘‘Purchaser is a licensed commercial or educational station, call letters

History

• Source: The provisions of this Chapter 42 adopted May 24, 1974, effective May 25, 1974, 4 Pa.

61 Pa. Code § 42.5 Nonprofit educational stations.

Any educational station may apply to the Bureau of Accounts Settlement (Attention: Exemption Unit) for approval as a nonprofit educational institution. Stations approved as nonprofit educational institutions are entitled to the exemptions for such organizations as provided in § 32.21 (relating to charitable, volunteer firemen’s and religious organizations and nonprofit educational institutions).

The provisions of this § 42.5 adopted May 24, 1974, effective May 25, 1974, 4 Pa.B. 1032.

This section cited in 61 Pa. Code § 42.1 (relating to definitions); and 61 Pa. Code § 42.4 (relating to procedure for claiming the exemption).

History

• Source: The provisions of this Chapter 42 adopted May 24, 1974, effective May 25, 1974, 4 Pa.

Chapter 43 Water Well Drillers

61 Pa. Code § 43.1 General.

This chapter is promulgated as a result of the decision involving the Commonwealth v. Tyger & Karl Complete Water Systems Co., Inc., 5 Pa. Commw. 154 (1972), which held that persons engaged in the business of drilling water wells for residential, farming, commercial and industrial use, constitutes that of mining within the provisions of the act.

The provisions of this § 43.1 adopted October 20, 1972, effective October 21, 1972, 2 Pa.B. 1969.

History

• Source: The provisions of this Chapter 43 adopted October 20, 1972, effective October 21, 1972, 2 Pa.

61 Pa. Code § 43.2 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Water well driller—A person who is engaged in the business of water well drilling. Water well drilling—The operation of exploring, drilling and extracting natural water from the earth. Water well drilling includes the extension, widening, or recasing of the original water well.

The provisions of this § 43.2 adopted October 20, 1972, effective October 21, 1972, 2 Pa.B. 1969.

History

• Source: The provisions of this Chapter 43 adopted October 20, 1972, effective October 21, 1972, 2 Pa.

61 Pa. Code § 43.3 Exemption.

A water well driller is entitled to an exemption upon his purchase, rental and repair of equipment, materials and supplies used directly in the operation of water well drilling. However, this exemption does not apply to the purchase, repair or service of a vehicle required to be registered under 75 Pa.C.S. § § 101—9910 (relating to Vehicle Code).

Example 1. Water well driller ‘‘W’’ purchases a back hoe from dealer ‘‘X.’’ ‘‘W’’ registers the back hoe with the Bureau of Motor Vehicles. Even though it will be used directly in water well drilling, ‘‘W’’ is required to pay sales tax on the purchase price.

Example 2. Water well driller ‘‘W’’ purchases a drilling rig from dealer ‘‘Y.’’ ‘‘W’’ mounts the rig on a chassis, purchased from dealer ‘‘Z,’’ which is registered with the Bureau of Motor Vehicles. ‘‘W’’ shall pay sales tax on the purchase price of the chassis, as well as on all repairs and service to the chassis. No tax should be paid on the purchase of, or the repair or service to, the drilling rig.

The provisions of this § 43.3 adopted October 20, 1972, effective October 21, 1972, 2 Pa.B. 1969; amended through February 23, 1973, effective February 24, 1973, 3 Pa.B. 382.

History

• Source: The provisions of this Chapter 43 adopted October 20, 1972, effective October 21, 1972, 2 Pa.

61 Pa. Code § 43.4 Property.

(a) Property directly used. Where a single unit of property is put to use in two different activities, one of which is a direct use and the other of which is not, the property is not exempt from tax unless the water well driller makes use of the property more than 50% of the time directly in mining operations. The following are examples of equipment, machinery, parts and their accessories, and materials and supplies which when predominantly used directly by a water well driller in the operation of water well drilling are exempt from tax:

(1) Equipment, machinery, parts and their accessories are back hoe, compressors, drilling rigs, generators, grout mixers, hand tools, trenching machines, pump hoist, pumps and controls, test and mud pumps, water treatment equipment, welders.

(2) Materials and supplies are casings, chemicals, electrical wiring, grouting materials, lining, pipe, tanks, wire rope and wire screen.

(b) Property not directly used. Equipment, machinery, parts and their accessories and materials and supplies predominantly used by water well drillers in an activity or operation other than water well drilling are subject to tax. Such activities or operations include the repair, maintenance or service to an existing water well system. With respect to these activities, a water well driller is a construction contractor.

Example. Water well driller ‘‘A’’ performs the operation of repairing or replacing a water tank and water pump for customer ‘‘B.’’ In performing these services, ‘‘A’’ is not engaged in the operation of water well drilling. ‘‘A’’ is required to pay a tax upon any materials he transfers or installs in conjunction with his repair activity. ‘‘A’’ is also required to pay a tax upon any equipment he uses to install the tank or pump which is not predominantly used in the operation of water well drilling.

The provisions of this § 43.4 adopted October 20, 1972, effective October 21, 1972, 2 Pa.B. 1969.

This section cited in 61 Pa. Code § 43.5 (relating to procedure for claiming the exemption).

History

• Source: The provisions of this Chapter 43 adopted October 20, 1972, effective October 21, 1972, 2 Pa.

61 Pa. Code § 43.5 Procedure for claiming the exemption.

(a) A water well driller may claim an exemption upon his purchase, rental or repair of property set forth in § 43.4 (relating to property) together with other items of property which qualify for exemption. At the time of making claim of his exemption, he must tender to his supplier a properly executed blanket exemption certificate reflecting the following language on the face thereof: ‘‘Property and/or services will be directly used by the purchaser in his mining—water well drilling operation which is performed as a business.’’

(b) A blanket exemption certificate once tendered to a supplier may be used in lieu of the payment of tax on future exempt purchases. A blanket exemption certificate may not be tendered to a supplier with respect to property which does not qualify for exemption.

The provisions of this § 43.5 adopted October 20, 1972, effective October 21, 1972, 2 Pa.B. 1969.

History

• Source: The provisions of this Chapter 43 adopted October 20, 1972, effective October 21, 1972, 2 Pa.

61 Pa. Code § 43.6 Procedure for collection or payment of tax.

Water well drillers may be engaged in one or more of the following activities: Over-the-counter sales; repairing, servicing or maintaining existing water well systems; and water well drilling. In order that a water well driller may properly collect or pay tax with respect to these activities, he may utilize one of the following procedures depending upon the type of activities in which he is engaged.

(1) Situation where the water well driller is licensed to collect tax. A water well driller who is licensed to collect taxes because he makes over-the-counter sales is permitted to pay tax upon the property which he uses in his repair, service and maintenance activities by utilizing either one of the following two methods:

(i) By the payment of the tax to his supplier rather than claiming an exemption.

(ii) By payment of tax as use tax with his regular sales tax return.

(2) Situation where the water well driller is not licensed to collect tax. A water well driller who makes no over-the-counter sales is not required to be registered with the Bureau of Sales and Use Tax since he does not collect any sales tax. He may, however, pay tax upon any property which he uses in his repair, service or maintenance activities by utilizing either one of the following two methods:

(i) By payment of the tax to his supplier rather than claiming an exemption.

(ii) By payment of tax directly to the Bureau of Sales and Use Tax. This may be accomplished by obtaining a contractor’s registration number for which he will receive regular tax returns for the purpose of remitting use tax.

The provisions of this § 43.6 adopted October 20, 1972, effective October 21, 1972, 2 Pa.B. 1969.

History

• Source: The provisions of this Chapter 43 adopted October 20, 1972, effective October 21, 1972, 2 Pa.

Chapter 44 Farming and Dairying

61 Pa. Code § 44.1 Dairy farm paper towels.

The purchase by a farmer of paper towels especially made for the purpose of washing the udders of dairy cattle is exempt from tax. The purchase of a dispensing cabinet for use in conjunction with the towels is subject to tax.

The provisions of this § 44.1 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 44 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 44.2 Cooperative agricultural associations.

(a) General. The provisions of this section were repromulgated on July 14, 1973 as a result of the Commonwealth Court decision in Lehigh Valley Cooperative Farmers v. Commonwealth, 8 Pa. Commw. 18, 305 A.2d 908 (1973), which held that cooperative agricultural associations required to pay corporate net income tax under the Co-operative Agricultural Association Corporate Net Income Tax Act (72 P. S. § § 3420-21—3420-30) are exempt upon their purchases of tangible personal property under the Tax Act of 1963 for Education (72 P. S. § § 3403-1—3403-605 (repealed 1971)). The provisions of this section also apply under the TRC. This section has been revised to reflect the amendment to section 3 of the Co-operative Agricultural Association Corporate Net Income Tax Act (72 P. S. § 3420-23) by section 1 of the act of July 1, 1978 (P. L. 591, No. 112) (72 P. S. § 3420-23) which requires cooperative agricultural associations to pay sales and use taxes on registered vehicles beginning August 31, 1978.

(b) Sales and use tax exemption. Cooperative agriculture associations which are required to pay corporate net income tax under the provisions of the Cooperative Agriculture Association Corporate Net Income Tax Act (72 P. S. § § 3420-21—3420-30) are exempt from the payment of sales and use tax on their purchases of tangible personal property. The exemption does not apply to the purchase, lease, repair or maintenance service of any motor vehicle required to be registered under 75 Pa.C.S. § § 101—9910 (relating to Vehicle Code). The exemption does not inure to a construction contractor who, under a construction contract with a cooperative agriculture association, is required to purchase materials, supplies or equipment which are installed so as to become part of the real estate under a construction contract.

(c) Hotel Occupancy Tax exemption. Cooperative agriculture associations which are required to pay corporate net income tax under the provisions of the Cooperative Agriculture Association Corporate Net Income Tax Act (72 P.S. § § 3420-21—3420-30) are exempt from the payment of hotel occupancy tax. The exemption applies only when the billing for the rental of the room is charged to and paid directly by the association. Hotel Occupancy Tax charged to an employe of the association who rents a room, even though he will later be reimbursed by the association.

(d) Procedure for claiming exemption. Cooperative agriculture associations may claim an exemption upon their purchase of tangible personal property by tendering to their supplier a properly executed blanket exemption certificate reflecting the following language on the face thereof: ‘‘Property and/or services are exempt from tax by virtue of the provisions of section 3 of the Co-operative Agriculture Association Corporate Net Income Tax Act’’ (72 P. S. § § 3420-21—3420-30). A blanket exemption certificate once tendered to a supplier may be used in lieu of the payment of tax on all future purchases.

(e) Cooperative agriculture associations engaged in the business of making taxable sales. Cooperative agriculture associations which are engaged in the business of selling taxable tangible personal property or services are required to be licensed by the Department for the purpose of collecting and remitting sales tax upon any sales which they make. The fact that a cooperative agriculture association is exempt from tax upon property which they use or consume in their activities does not exempt them from the responsibility as vendors under the TRC.

The provisions of this § 44.2 adopted July 13, 1973, effective July 14, 1973, 3 Pa.B. 1316; amended March 21, 1980, effective March 22, 1980, 10 Pa.B. 1305. Immediately preceding text appears at serial pages (45934) and (45935).

This section cited in 61 Pa. Code § 47.17 (relating to lease or rental of vehicles and rolling stock); and 61 Pa. Code § 58.13 (relating to carpeting and other floor coverings).

History

• Source: The provisions of this Chapter 44 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 44.3 Farm water heaters.

The purchase by a farmer of water heaters to be used to provide hot water for use in conjunction with the cleaning of dairy farm utensils and equipment is in the nature of a maintenance function and shall therefore be subject to tax.

The provisions of this § 44.3 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 44 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 44.4 Guns and ammunition.

Guns and ammunition are never deemed to be used directly in an operation of manufacturing or agriculture, and therefore they may not be purchased tax exempt under the exemption provided in § § 32.32 and 32.33 (relating to manufacturing; processing and farming).

The provisions of this § 44.4 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 44 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

Chapter 45 Public Utilities

61 Pa. Code § 45.1 Exemption of electric cooperative corporations.

Corporations formed under 15 Pa.C.S. § § 7301—7359 (relating to the Electric Cooperative Law of 1990) are by reason of 15 Pa.C.S. § 7333 (relating to license fee; exemption from excise taxes) exempt from the payment of sales and use tax under the provisions of Article II of the TRC (72 P. S. § § 7201—7282). The corporations shall furnish their vendors with an exemption certificate setting forth that they are corporations formed under the Electric Cooperative Corporation Act and that they are therefore exempt from the sales and use tax imposed by that act on purchases of property to be used in the activities of the corporations.

The provisions of this § 45.1 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686; amended March 2, 1973, effective March 3, 1973, 3 Pa.B. 416.

This section cited in 61 Pa. Code § 47.17 (relating to lease or rental of vehicles and rolling stock); and 61 Pa. Code § 58.13 (relating to carpeting and other floor coverings).

History

• Source: The provisions of this Chapter 45 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 45.2 Automobiles for attorneys.

Autos purchased by a public utility for use by its attorneys in checking rights-of-way and settling claims for condemnation suits are not used directly in producing, delivering or rendering a public utility service, and are subject to tax.

The provisions of this § 45.2 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 45 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 45.3 Street repairs.

(a) General. This section has been revised as a result of the decision rendered in Equitable Gas v. Commonwealth, 18 Pa. Commw. 418 (1975), which held that the purchase of paving materials used by a public utility incidental to the construction, reconstruction, paving or repair of public roads as a result of excavation necessitated by the installation or repair of the public utility facility under the public roads is a use of tangible personal property directly related to the rendition of a public utility service and, therefore, comes within the exclusions in the Tax Act of 1963 for Education (72 P. S. § § 3403-1—3403-605) (Repealed).

(b) Scope of exclusions. The scope of exclusions for the purchase of road paving materials prior to March 4, 1971, shall be as follows:

(1) The purchase of road paving materials prior to March 4, 1971, by a person engaged in the business of rendering a public utility service is not subject to Pennsylvania sales tax, if the paving materials are incidental to the construction, reconstruction, paving or repair of public roads damaged as a result of excavation necessitated by the installation or repair of the public utility facility beneath the public roads.

(2) The purchase of road paving materials on behalf of a public utility under or in fulfillment of a written fixed price sales contract or construction contract or formal bid is not subject to Pennsylvania sales tax, if the paving materials are incidental to the construction, reconstruction, paving or repair of public roads damaged as a result of excavation necessitated by the installation or repair of the public utility facility beneath the public roads.

The provisions of this § 45.3 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686; amended January 7, 1977, January 8, 1977, 7 Pa.B. 76; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (149613) to (149614).

History

• Source: The provisions of this Chapter 45 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

Chapter 46 Construction Contractors

61 Pa. Code § 46.1 Construction contractor cutting or bending a steel beam.

The mere cutting or bending of a structural steel beam prior to its being incorporated into real estate is not considered to be manufacturing or processing under the act. A construction contractor performing the operations shall pay tax based upon his purchase price for his purchase or use of the beam. The construction contractor is not entitled to the manufacturer’s or processor’s exemption with respect to the equipment he uses in the activity.

The provisions of this § 46.1 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 46 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 46.2 Construction of exempt public utility facilities.

Effective March 4, 1971, the purchase or use of tools, equipment and supplies by a contractor which are used but not installed as a component of a public utility facility is subject to tax.

The provisions of this § 46.2 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 46 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 46.3 Construction contractor installing stained glass windows.

Persons engaged in the business of fabricating and installing stained glass windows are construction contractors within the meaning of § § 31.11—31.16 (relating to construction contractors). Persons subject to § § 31.11—31.16 are required to pay tax upon the raw materials purchased and used by them in the fabrication of stained glass windows which they install.

The provisions of this § 46.3 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 46 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 46.4 Fixed price construction contract.

(a) Definition. The term ‘‘fixed price construction contract,’’ when used in this section, shall mean any construction contract, either in written or paragraph form, containing a bid price which has been accepted, which bid price cannot be altered, modified or withdrawn by either of the parties to the contract, unless the context clearly indicates otherwise.

(b) Contracts which are not fixed price contracts. Contracts which are not fixed price contracts shall conform with the following:

(1) A contract containing provisions providing that the owner may, by written order, direct a contractor to perform certain additional work or services or make changes or alterations in the work or omit work or services, or providing that the contractor shall receive cost plus a fixed percentage for any additional or extra work, is not a fixed price contract.

(2) A construction contract containing a provision substantially similar to any one of the following is not deemed to be a fixed price construction contract:

Example 1. If the manufacturer’s price to the Builder for the basic house and other materials is increased prior to delivery thereof to the Builder, the Builder may elect to add such increase to the total purchase price, in which event the Owner may accept such increase in writing or terminate this Agreement in writing within seven days after notification of the increase and be refunded the down payment.

Example 2. This Agreement is conditioned upon the ability of the Seller to complete the above described premises at present prices for material existing at the date of this Agreement with respect to operative home building. If Seller at any time or for any reason is unable to complete the above described premises at present prices for material, or finds that his material costs for the premises or any part thereof still to be constructed will exceed the material costs prevailing at the date of this Agreement, the Seller is hereby given the option to cancel this contract upon written notice to the Buyer, in which event the full deposit money shall be returned to the Buyer without interest and this Agreement shall thereupon become cancelled and void, and the Seller shall have no further liability whatsoever to the Buyer. However, if the Seller is unable to complete the above described property at present prices for material, the Seller may proceed with said construction and give notice to the Buyer of the increase in the material costs, and if the Buyer, within five calendar days after such notice, shall agree in writing to pay such increased costs at or prior to settlement, this Agreement as so modified shall continue in full force and effect, otherwise this Agreement at the option of the Seller shall become cancelled and void.

Example 3. All present and future taxes imposed by any federal, state or local authority which we may be required to pay or collect, upon or with reference to the sale, purchase, transportation, delivery, storage, use or consumption of the materials or services covered hereby, including taxes upon or measured by the receipts therefrom, shall be for your account.

Example 4. All excise, privilege, occupational, sales, use and other taxes applicable to the purchase, sale or use of fencing covered by this proposal or applicable to or measured by the receipts of the contractor therefrom shall be in addition to the price quoted herein and shall be for the sole account of the purchaser.

History

• Source: The provisions of this Chapter 46 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 46.5 Outdoor advertising signs.

(a) The erection of outdoor advertising boards, signs or sign boards by permanent or semipermanent construction is considered to be construction activity. The person erecting the signs is therefore considered the ultimate consumer and is liable for sales tax upon all materials, supplies and equipment purchased within this Commonwealth. He also is liable for use tax upon all materials, supplies and equipment purchased outside this Commonwealth and used in the construction activity.

(b) Tax need not be collected on the periodic charge received by the owner of the board, sign or sign board in consideration of the placing by him of certain advertising materials thereon (such an arrangement being often referred to as ‘‘lease of space’’), since the consideration is for a license relating to real estate.

The provisions of this § 46.5 amended through October 5, 1984, effective October 6, 1984, 14 Pa.B. 3624. Immediately preceding text appears at serial pages (40367) to (40368).

History

• Source: The provisions of this Chapter 46 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 46.6 Contractors renting equipment to others.

Construction contractors renting equipment to other contractors shall apply for a license under the TRC and collect tax with respect to all rentals.

History

• Source: The provisions of this Chapter 46 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 46.7 Nonresident contractors.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Construction equipment and supplies—Property, such as cranes, dozers, graders, vehicles, hand tools, shoring lumber, lubricants, administrative supplies, and the like, which a construction contractor uses but does not install so as to become a part of the facility constructed within this Commonwealth. See § § 31.11—31.16 (relating to construction contractors). Prevailing market price—The price which an item will bring if offered for sale in the open market at the time and place of the taxable use within this Commonwealth.

(b) Construction equipment and supplies purchased within this Commonwealth. An item of construction equipment or supply purchased or leased and delivered within this Commonwealth by a nonresident contractor is subject to sales tax upon its purchase price. See § 33.2 (relating to scope).

(c) Construction equipment and supplies purchased outside of this Commonwealth and used but not consumed in this Commonwealth. Construction equipment and supplies purchased outside of this Commonwealth by a non-resident construction contractor and which are used but not consumed in this Commonwealth for 7 days or less are exempt from tax. These purchases are subject to tax when the property is used in this Commonwealth beyond 7 days.

(d) Construction equipment and supplies purchased outside of this Commonwealth and consumed in this Commonwealth. Construction equipment and supplies purchased outside of this Commonwealth by a nonresident contractor and consumed in this Commonwealth in the performance of a construction contract are subject to tax regardless of the length of time they are used in this Commonwealth.

(e) Tax payment. When a nonresident construction contractor purchases or leases equipment and supplies from a supplier in this Commonwealth and delivery of the property is made within this Commonwealth, sales tax shall be paid upon the full purchase price to the supplier. In all other cases of taxable purchases or use of property within this Commonwealth, the nonresident contractor shall remit and pay tax directly to the Department. Contractors may obtain a use tax license number with which to remit the tax to the Department.

(f) Use tax base. Use tax on taxable property shall be reported by the nonresident contractor either on the original purchase price paid or on the prevailing market price if the nonresident contractor purchased the equipment or supplies 6 months or longer prior to its first taxable use in this Commonwealth.

(g) Fair rental value. Effective March 4, 1971, a nonresident construction contractor is no longer permitted to pay tax on the basis of fair rental value.

(h) Credit against tax. A construction contractor may take credit against tax owed to the Commonwealth with respect to individual items of construction equipment and supplies used within this Commonwealth equal to the tax paid to another state upon the individual items of equipment by reason of a tax similar to the tax imposed by the Commonwealth. Credit will not be granted unless the other state grants similar tax relief to persons who have paid tax to the Commonwealth. A listing of the states granting similar relief may be obtained from the Department, Attention: Legal Bureau, upon request.

The provisions of this § 46.7 adopted September 29, 1972, effective September 30, 1972, 2 Pa.B. 1816; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (94394) and (40369) to (40370).

This section cited in 61 Pa. Code § 46.9 (relating to financial institution security equipment).

History

• Source: The provisions of this Chapter 46 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 46.9 Financial institution security equipment.

(a) General. This ruling pertains to the sale, installation and repair of security equipment utilized by financial institutions. The effective date of this ruling is the date of adoption. Its effect is, therefore, prospective only, and it applies only to transactions involving security equipment consummated after the date of its adoption.

(b) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Financial institution—A corporation or association, such as a bank, a bank and trust company, a trust company, a savings bank, a mutual banking association, a savings and loan association, a finance company, a credit union, or other similar institution, which maintains a place of business in this Commonwealth. Installation—An attachment or affixation of security equipment to real estate by means of one of the following:

(i) A hook, bolt, screw, nail or other similar method.

(ii) Inserting equipment through a building wall or floor, or mounting it upon a specially prepared foundation, the removal of which may result in damage to the real estate.

(iii) Wire which is integrated into an electrical system. Security equipment—Systems, devices and equipment, and their components, utilized by a financial institution for its protection or convenience in conducting financial transactions.

(c) Sales and installation. Sales and installation shall conform with the following:

(1) A sale of security equipment which is also installed, as defined in subsection (b), by the seller or or the seller’s designee is a construction contract. The seller-installer may not charge sales tax of the Commonwealth to his customer upon the contract price. Rather, the seller-installer, as a construction contractor, is considered to be the consumer of property transferred in connection with the construction contract. He shall pay the applicable sales or use tax upon his purchase price of the installed equipment, or upon his purchase price of material acquired and incorporated into the installed equipment during the process by which it is produced by the seller-installer, in accordance with § § 33.1 and 33.2 (relating to definitions; and scope).

Examples. ‘‘S’’ Seller purchases 10,000 lbs. of material at $1 per pound from ‘‘C’’ Company. The invoice submitted by ‘‘C’’ to ‘‘S’’ includes a $10,000 charge for the material and a $100 charge for the delivery of the material.

‘‘S’’ then produces a vault door with 100 lbs. of the material, sells the vault door to ‘‘T’’ Trust Company, and installs it. ‘‘S’’ should not charge sales tax to ‘‘T’’. Rather, ‘‘S’’ is himself liable for the payment of sales or use tax on his purchase price of the material incorporated into the door, or $101—the price which ‘‘S’’ paid for the material plus a proportionate amount of the charge incidental to the delivery of the material.

‘‘S’’ Seller sells a drive-in teller window to ‘‘B’’ Bank. Prior to delivery of the window, ‘‘S’’ sends ‘‘B’’ specifications for construction of the wall in which the drive-in teller window will be installed. ‘‘S’’ does not prepare the wall into which the window will be installed. After the wall has been constructed by ‘‘B’’, ‘‘S’’ delivers the drive-in teller window, inserts it into the previously prepared opening, and bolts it into position. ‘‘S’’ is a construction contractor and is required to pay the applicable sales and use tax of the Commonwealth upon his purchase price of the drive-in teller window installed in ‘‘B’’ Bank.

(2) As a construction contractor, a seller-installer shall also pay tax upon all property, such as tools, equipment and supplies, which is used in the performance of a construction contract, but which is not transferred to a customer, in accordance with § § 33.1 and 33.2 and § 46.7 (relating to nonresident contractors).

(d) Straight sale. A straight sale is one in which security equipment of a type which does not require installation, as defined in subsection (b) is transferred, or one in which any type of security equipment is sold directly to a customer without installation by the seller or a designee. A straight sale is a taxable transfer of tangible personal property, and the seller shall register with the Department, to collect tax upon the total purchase price paid by a customer for security equipment, and to remit the tax collected to the Department.

(e) Maintenance. Maintenance shall conform with the following:

(1) Maintenance of installed security equipment on the premises in which it is installed, or maintenance of installed security equipment by a person who removes it from the premises for the work and later reinstalls it, is a construction contract. As a construction contract, the work is a nontaxable service to real estate, and the person performing the service may not charge tax to his customer upon the contract price. Rather, the person performing the service is responsible for the payment of tax upon the purchase price of any part or other tangible personal property which is transferred to the customer in the course of the service.

(2) Maintenance of security equipment which is the subject of a straight sale because it does not require installation as defined in subsection (b), or maintenance of installed security equipment which is removed by the owner or a designee and taken to the service premises, is a taxable service to tangible personal property. The person rendering the service shall register with the Department and collect tax upon both the labor charge and the charge for any part or other tangible personal property which is transferred to the customer in the course of the service. The resale exemption from tax is available to the serviceman upon the purchase of property which is to be transferred.

(f) Categories of security equipment. Examples of security equipment upon the transfer of which the seller is liable for the payment of tax when installed by him or his designee are as follows:

Accelerated cash terminals or cash guards.

Access control systems.

After-hour depositories.

Alarm systems (burglar, police, fire, and the like).

Automatic banking systems.

Bandit reserve barriers.

Bulletproof windows.

Customer convenience counters.

Drive-in windows (bay, flush, counter, and the like).

Fire doors.

Quick depositories.

Receiving lockers, heads or chests.

Safes.

Safety deposit boxes.

Surveillance and security systems.

Television banking systems.

Teller rails and lockers.

Vaults.

Vault doors (automatic, manual, emergency, and the like).

Vault ventilators.

The provisions of this § 46.9 adopted August 11, 1978, effective August 12, 1978, 8 Pa.B. 2244; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (40370) to (40373).

History

• Source: The provisions of this Chapter 46 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

Chapter 47 Rentals

61 Pa. Code § 47.1 Coin-operated amusement devices.

The placing of coin-operated amusement and record playing devices in a store, restaurant or public place is not considered to be a rental when the owner-operator and the proprietor of the location are joint venturers and divide the proceeds from the device between themselves. It is a rental subject to tax when the proprietor of the location either pays a flat rental charge for the machine and retains all proceeds from the machine himself, or when the proprietor receives all the proceeds and pays a rent to the owner of the machine based on a percentage of the proceeds. In the case of a joint ventureship, the owner-operator of the amusement device shall pay tax upon the purchase of the device, and also upon the purchase by him of phonograph records, supplies, materials and equipment by him in the maintenance and repair of such devices. He should not collect tax from the person who is being provided a service in the form of entertainment upon depositing coins in the machine. Where the transaction is considered to be a rental to the proprietor of the location, the provisions of § § 31.4 and 32.3 (relating to rentals or leases of tangible personal property; and sales for resale) are applicable.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.2 Films for commercial exhibitions.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

Commercial exhibition—A public show, display or presentation made or presented for an audience which pays consideration.

Motion picture film—A series of still photographs capable of being displayed so as to simulate action.

Distributor—A supplier of motion picture films.

(b) Commercial exhibitions. The rental or licensing of motion picture film to persons for commercial exhibition is not subject to tax.

(c) Sponsors of televisions programs. The sale or lease of motion picture film to a sponsor or client for use on a television station is not rented or licensed for the purpose of commercial exhibition and therefore shall be subject to tax.

(d) Commercial or educational television station. The purchase or rental of motion picture film by a commercial or educational television station, licensed by the Federal Communications Commission, for use directly in its broadcasting operations shall be exempt from tax upon the basis of the processing exemption.

The provisions of this § 47.2 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686; amended July 6, 1973, effective July 7, 1973, 3 Pa.B. 1279.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.3 Frozen food lockers.

The tax is not applicable to the charge made for the privilege of storing meat and similar perishable food products in frozen food lockers.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.4 Golf bag carts and lockers.

The rental of golf bag carts by a private, public or municipal golf course shall be subject to tax. The golf course need not collect tax with respect to fees paid for the rental of lockers, although the golf course shall pay tax upon the purchase by them of the lockers.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.6 Miniature golf course.

The tax is not applicable to the charge made for the use of a miniature golf course, even though the proprietor of the golf course permits the customer to use a golf ball and club in conjunction with the use of the course.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.10 Riding academies and stables.

The purchase of a horse by a riding stable or academy to be used exclusively for rental purposes is exempt from tax as a purchase for resale. The academy or stable shall charge sales tax on the rental price of the horse. The purchase of a horse by a riding academy or stable to be used for instruction purposes is subject to sales or use tax. Tax shall be paid on all purchases of materials, supplies and equipment used by these enterprises in the course of operating their business. Included are items as feed, stable supplies and riding equipment. Charges for boarding horses are not subject to tax.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.11 Saws and blades to butchers.

A person in the business of renting saws and blades to butchers shall collect tax with respect to the rental charge received by him, even though a portion of the charge may be attributed to service.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.12 Soda fountains.

Leasing of soda fountains in return for periodic consideration is considered a rental and the entire charge is subject to the tax.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.14 Water filters or softeners.

[Withdrawn]

Editor’s Note: Pursuant to the adoption of the order of the Bureau of Sales and Use Tax, ruling 83, ‘‘Water Filters or Softeners—Rental of,’’ filed November 1, 1965 and adopted in conformance with the Commonwealth Documents Law on September 9, 1972, at 2 Pa.B. 1686, has been withdrawn. Reference should be made to ruling 210 as set forth in § 58.10 (relating to water softeners and conditioners).

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.16 Rental of equipment between affiliated interests.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Affiliated interest—The relationship between two corporations, associations, partnerships, proprietorships or other businesses, in which one corporation, association, partnership, proprietorship, individual or other business owns more than 50% of the stock or assets, including inventory, machinery and equipment of the remaining corporation, association, partnership, proprietorship or other business. Also, the common ownership of more than 50% of the stock or assets of each of two or more business entities results in an affiliated interest between the two commonly owned entities.

Example 1. ‘‘A’’ company owns 60% of the stock of ‘‘B’’ corporation. ‘‘A’’ has an affiliated interest in ‘‘B’’. Example 2. ‘‘C,’’ an individual, owns 75% of the stock of ‘‘D’’ corporation and 55% of the stock of ‘‘E’’ corporation. ‘‘D’’ corporation has an affiliated interest in ‘‘E’’ corporation. Fair rental charge—The amount which would be charged for the rental of the property in the open market for a similar period of time and at a similar place.

(b) Scope. When there has been a rental or lease of equipment, machinery, tools or other property between businesses having an affiliated interest, and the charge for the rental or lease, in the opinion of the Department, is not indicative of the true value of the equipment, machinery or tools, or the fair rental charge thereof, the Department may use as the constructive monthly purchase price of such rental or lease an amount equal to 4% of the original purchase price, which shall include an amount equal to the original purchase price of any accessories, attachments or additions to such equipment, machinery or tools.

Example. ‘‘A’’ company has an affiliated interest in ‘‘B’’ company. ‘‘A’’ company leases a motor vehicle ($10,000 acquisition cost) to ‘‘B’’ company for which an annual charge of $1 is made. The Department determines that the $1 charge is not indicative of the fair rental charge of the vehicle. The Department may use as the monthly tax base 4% of $10,000 or $400 as the constructive purchase price of the monthly rental charge for each month during which the vehicle was rented. The monthly tax due on the transaction is $24. For rental or lease periods for a duration of less than 1 month, appropriate allocation of this rule may be followed.

The provisions of this § 47.16 adopted September 7, 1973, effective September 8, 1973, 3 Pa.B. 2026.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.17 Lease or rental of vehicles and rolling stock.

(a) Introduction. This ruling supersedes Rulings Numbers 74, 76, 77, 78 and 132, and becomes effective upon the date of issue (See 6 Pa.B. 9 (January 2, 1976)). Upon its effective date, the 16 2/3% exemption under former Ruling No. 76, pertaining to charges for gasoline, is no longer in effect. This ruling also pertains to the taxability of rolling stock for the period from March 4, 1971, through October 16, 1974. Prior and subsequent to this period, rolling stock was and is specifically excluded from taxability by statutory amendment. See subsection (c)(1)(i)(B).

(b) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Lease agreement—A contract whereby the lessee obtains or has the right to possession or custody of a vehicle in exchange for lease payments. Lease payments—Full consideration paid or delivered or promised to be paid or delivered to the lessor for a lease period under a lease agreement, whether it be money or otherwise, even though consideration is separately stated and designated as payment for service, maintenance, insurance, repairs, depreciation or otherwise.

(i) Maintenance, insurance or repairs obtained by lessee. When a lessee is required pursuant to a lease agreement to provide or obtain maintenance, insurance or repairs, any payment made by the lessee to a vendor other than the lessor for maintenance, insurance or repairs shall be included by the lessor as part of the lease payments for the purpose of computing tax, unless tax was charged by the vendor who provided the maintenance, insurance or repairs.

(ii) Gasoline charges. Separate sales of gasoline by a lessor to a lessee are not subject to tax. A transfer of gasoline to a lessee is not considered to be a separate sale unless the bill or sales invoice to the lessee separately states the number of gallons of gasoline transferred, and either the charge per gallon or the total charges made for gasoline. Charges for gasoline computed on the basis of the mileage a leased vehicle is driven, rather than upon the actual quantity of gasoline transferred to the lessee, are therefore subject to tax. Lease period—The interval of time established by the lessor and lessee which occurs between successive lease payments in accordance with the lease agreement, but this interval may not exceed 31 days. In circumstances when the lessor and lessee establish an interval between successive payments which exceeds 31 days, the Department will assume lease periods on a month-to-month basis beginning with the first day of the first complete month subsequent to the execution of the lease agreement. Lessor—A person who is engaged in the business of leasing or renting vehicles. Public utility common carrier—A public utility common carrier is a public utility which is registered as a common carrier with either the Pennsylvania Public Utility Commission or the Interstate Commerce Commission and is organized to perform, and does, in fact, perform services affected with a public interest, and which holds itself out to the general public to carry goods or persons without discrimination and for compensation. An independent contractor (that is, one who reserves the right to refuse to serve any person at his discretion and the power to fix his rates or charges by individual contract with the person or persons with whom he contracts) is not a common carrier. Resident—A person who is domiciled in this Commonwealth, maintaining a permanent place of abode within this Commonwealth and spends in the aggregate more than 60 days of the year within this Commonwealth, incorporated under the law of the Commonwealth, authorized to do business or doing business within this Commonwealth, or maintaining a place of business within the Commonwealth. Rolling stock—A device which is used exclusively upon stationary rails or tracks, including, but not limited to, locomotives, flat cars, box cars, coal cars, coaches, cabooses and other railroad cars. Rolling stock includes the type of property described even though it may be owned by persons other than railroads. Vehicle—A device in, upon or by which a person or property is or may be transported or drawn, including, but not limited to, automobiles, trucks, trailers, tractors, power shovels, road machinery and agricultural machinery. The term does not include devices moved by human power, vehicles which are designed to travel solely through air or water, or a device which is used exclusively upon stationary rails or tracks.

(c) Scope. Use of vehicles and rolling stock is subject to tax as follows:

(1) Vehicles. Taxability of vehicles shall conform with the following:

(i) Taxability of lease payments. Taxability of lease payments shall conform with the following:

(A) Leases executed within this Commonwealth. All lease payments made in accordance with lease agreements executed within this Commonwealth are subject to tax.

(B) Leases executed outside this Commonwealth. Leases executed outside this Commonwealth shall conform with the following:

(I) Resident. A lease payment made in accordance with a lease agreement executed outside this Commonwealth by a resident is subject to tax if during the corresponding lease period the vehicle is brought within the geographical boundaries of this Commonwealth; unless, the lessee is otherwise exempt under subsection (d).

(II) Nonresident. A lease payment made in accordance with a lease agreement executed outside this Commonwealth by a nonresident lessee is subject to tax if during the corresponding lease period the vehicle is used within the Commonwealth more than 7 days; unless, the nonresident lessee is exempt as a tourist or vacationer or is otherwise exempt under subsection (d).

(C) Lease with option to buy. When a lease agreement involves an option to buy, sales tax is applicable to lease payments as well as any payment made in exercising the option to buy.

(ii) Use of vehicles or parts therefor by lessors. Use of vehicles or parts therefor by lessors shall conform with the following:

(A) Resident. A vehicle or parts therefor used within this Commonwealth by a resident lessor for a purpose other than leasing makes the property subject to use tax based on the purchase price paid by the lessor in his initial purchase of the property. However, if the property was purchased more than 6 months prior to its first taxable use, tax may be computed and reported on the fair market value of the property at the time of such taxable use.

(B) Nonresident. The use of a vehicle or parts therefor within this Commonwealth for a period of more than 7 days, for any purpose other than leasing, makes the property subject to use tax if the lessor is not a tourist or vacationer. Tax is based on the original purchase price; or if purchased more than 6 months prior to its first taxable use, then on the fair market value at the time of the taxable use. The option of basing the tax on the fair market value is an election which shall be made by the taxpayer.

(2) Rolling stock. Taxability of rolling stock shall conform with the following:

(i) Taxable period. Lease payments made from March 4, 1971, through October 16, 1974, for the leasing of rolling stock are subject to tax in precisely the same manner as lease payments for the leasing of vehicles under paragraph (1)(i). Thus, the taxability of lease payments made for the leasing of rolling stock may be determined by substituting rolling stock for vehicles in paragraph (1)(i). Similarly, the use of rolling stock within this Commonwealth from March 4, 1971, through October 16, 1974, is subject to tax in precisely the same manner as the use of vehicles under paragraph (1)(i)(B)(II). Thus, tax liability for the use of rolling stock during this period may be determined by substituting rolling stock for vehicles in paragraph (1)(ii). Subsections (d)—(f), dealing with exemptions, credits against tax, and procedures, also apply to the leasing or rental of rolling stock during the taxable period.

(ii) Nontaxable period. Lease payments made prior to March 4, 1971, or subsequent to October 16, 1974, for the leasing of rolling stock are specifically excluded from tax by statutory amendment. Similarly, the use of rolling stock within this Commonwealth prior to March 4, 1971, or subsequent to October 16, 1974, is specifically excluded from tax by statutory amendment.

(d) Exemptions. Exemptions shall conform with the following:

(1) Purchases of vehicles or parts, lubricants or repairs therefor by lessors. Lessors are not subject to tax upon their purchase or lease of vehicles which are purchased for leasing. Also, repair services, repair parts, replacement parts or lubricants purchased for vehicles which are used for leasing are exempt from tax. This exemption does not apply to tools, equipment and supplies used in connection with the repairing or servicing of leased vehicles.

(2) Lease by exempt organizations. A vehicle leased by any one of the following individuals or organizations is exempt from tax:

(i) Charitable organization, volunteer firemen’s organization, religious organization or nonprofit educational institution if the vehicle is for use in any activity which bears a reasonable relationship to the purpose for which the organization or institution exists. See § 32.21 (relating to charitable, volunteer firemen’s and religious organizations, and nonprofit educational institutions).

(ii) United States Government. See § 32.22 (relating to sales to the United States Government or within areas subject to the jurisdiction of the Federal Government).

(iii) Commonwealth of Pennsylvania or its political subdivisions. See § 32.23 (relating to sales to the Commonwealth or its political subdivisions and sales by the Commonwealth and its political subdivisions).

(iv) Ambassadors, ministers and consular officers of foreign governments. See § 32.24 (relating to sales to ambassadors, ministers and consular officers of foreign governments).

(v) Federal credit unions organized under the provisions of the Federal Credit Union Act (12 U.S.C.A. § § 1751—1795k). See § 48.4 (relating to credit unions).

(vi) Pennsylvania credit unions formed and incorporated under 17 Pa.C.S. § § 101—1504 (relating to the Credit Union Code). See § 48.4.

(vii) Public authorities created under the Municipal Authorities Acts of 1945 (53 P. S. § § 301—322). See § 32.23.

(viii) Cooperative agricultural associations required to pay corporate net income tax under the provisions of the Co-operative Agricultural Association Corporate Net Income Tax Act (72 P. S. § § 3420-21—3420-30). See § 44.2 (relating to cooperative agricultural associations).

(ix) Electric cooperative corporations formed under 15 Pa.C.S. § § 7301—7359 (relating to the Electric Cooperative Law of 1990). See § 45.1 (relating to exemption of electric cooperative corporations).

(x) Any other organization claiming an exempt status under a particular statute shall make application to the Bureau of Sales and Use Tax (Attention: Legal Division) for approval to use the exemption.

(3) Public utility common carrier exemption. The lease of vehicles by a public utility common carrier, engaged in business as a common carrier is exempt from tax if the vehicles are predominantly used directly by the lessee in performing a public utility service. This exemption also applies to the purchase of supplies, repair parts and accessories for such vehicles. The lease of vehicles as well as supplies, repair parts and accessories for the vehicles by any other public utility service are subject to tax.

(4) Manufacturing, processing or farming exemptions. The manufacturing, processing or farming exemption does not apply to the lease of any vehicles required to be registered under 75 Pa.C.S. § § 101—9821. Supplies, repair parts or accessories for the vehicles are taxable unless purchased by the lessor.

(e) Credits against tax. A credit against tax shall be granted, with respect to vehicles purchased or leased for use outside this Commonwealth, equal to the tax paid to another state by reason of the imposition by the other state of a tax similar to the tax imposed by Article II of the TRC (72 P. S. § § 7201—7282), provided, however, that no credit shall be granted unless such other state grants substantially similar tax relief by reason of the payment of tax under Article II of the TRC. Tax paid by a lessor on his purchase of vehicles cannot be credited against taxes due from a lessee to the lessor on lease payments. A credit listing of the states can be obtained upon request from this Bureau.

(f) Procedures. Procedures for records and claiming exemptions shall conform with the following:

(1) Records. All lessors shall keep books that enable the Department to accurately determine at any time the amount of tax collected and remitted upon each individual vehicle. The lessor shall identify each vehicle by reference to the specific registration number and state of registration. The identification shall be made upon the books and records of the lessor and upon all billings and invoices to customers.

(2) Procedure for claiming exemption. A lessee claiming exemption must tender to the lessor a properly executed Blanket Exemption Certificate.

The provisions of this § 47.17 adopted January 2, 1976, effective January 3, 1976, 6 Pa.B. 9; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (249848) to (249853).

This section cited in 61 Pa. Code § 31.41a (relating to scope).

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.18 Totalizator equipment.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Corporation—A corporation licensed under section 203 of the Race Horse Industry Reform Act (4 P. S. § 325.203). Prevailing market price—The price which the equipment will bring if offered for sale in the open market at the time the equipment is brought into this Commonwealth. Resident—A natural person, partnership, corporation, association or other entity which is domiciled, maintains a place of business or is authorized to do business in this Commonwealth. Totalizator company—A business providing electronic totalizator equipment to a corporation.

(b) Scope. A totalizator company shall conform with the following:

(1) Charges to a corporation. A totalizator company which provides electronic totalizator equipment to a corporation in connection with parimutuel betting is deemed to be rendering a nontaxable service. Therefore, charges made by the totalizator company to a corporation in connection with rendering its nontaxable service is exempt from sales and use taxes.

(2) Purchases by a resident totalizator company. A totalizator company is considered to be the consumer of equipment, materials or supplies, and services thereto, which it uses in the rendition of its nontaxable service. Accordingly, a totalizator company shall pay sales or use tax of this Commonwealth in accordance with this subsection:

(i) Purchases involving delivery within this Commonwealth. A purchase of taxable property and services which involve delivery within this Commonwealth is subject to sales or use tax at the effective rate of tax upon the full purchase price, including charges for delivery. Credit will not be granted for taxes illegally imposed and paid to states other than the Commonwealth.

(ii) Purchases involving delivery outside of this Commonwealth but later brought into this Commonwealth:

(A) Purchases within 6 months. Property, including property upon which a taxable service has been performed, which has been brought into this Commonwealth within 6 months of the date of purchase or service is subject to tax at the effective rate upon the original purchase price, including charges for delivery. See subsection (c).

(B) Purchases beyond 6 months. Property, including property upon which a taxable service has been performed, which has been brought into this Commonwealth beyond 6 months of the date of purchase or service, is subject to tax at the effective rate of tax upon the original purchase price of the property or service including charges for delivery.

(3) Purchases by nonresident totalizator company. Notwithstanding subsection (b), when a nonresident totalizator company brings property, including property upon which a taxable service has been performed, into this Commonwealth in connection with the establishment of a permanent residence, the totalizator company shall pay use tax of the Commonwealth with respect to the property in accordance with this subsection:

(i) Purchases within 6 months. Property, including property upon which a taxable service has been performed, which has been brought into this Commonwealth within 6 months of the date of purchase, is subject to tax at the effective rate on the original purchase price, including charges for delivery.

(ii) Purchases beyond 6 months. Property, including property upon which a taxable service has been performed, which has been brought into this Commonwealth beyond 6 months of the date of purchase, is exempt from Commonwealth sales or use tax.

(4) Fair rental value. There is no authority under the TRC by which a totalizator company may pay tax upon the basis of the fair rental value of property which is subject to tax.

(c) Credits against tax. A totalizator company may take credit against tax owed to the Commonwealth, under subsection (b)(2)(ii) with respect to equipment, materials and supplies which are taxable in this Commonwealth equal to the tax legally due and paid to another state upon the equipment, materials and supplies by reason of a tax similar to the tax imposed by the Commonwealth. Credit will not be granted unless the other state grants similar tax relief to persons who have paid tax to the Commonwealth. A listing of the states granting similar relief may be obtained from the Department (Attn: Legal Bureau) upon request. Credit cannot be taken for sales tax paid to Canada.

The provisions of this § 47.18 adopted July 15, 1977, effective July 16, 1977, 7 Pa.B. 1982; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (59269) to (59270) and (117865).

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.19 Public Transportation Assistance Fund taxes and fees.

(a) General provisions.

(1) General. This section is promulgated to administer section 2301 of the TRC (72 P. S. § 9301).

(2) Registration. A person who makes sales, rentals or leases subject to a tax or fee under subsection (b), (c) or (d) is required to apply for a Public Transportation Assistance Tax License Number on a form prescribed by the Department. The registration is separate from sales tax registration required under section 208 of the TRC (72 P. S. § 7208).

(3) Returns. The taxes and fees collected under subsection (b), (c) or (d) shall be reported on a return prescribed by the Department. The returns shall be filed under sections 217—220 of the TRC (72 P. S. § § 7217—7220) and § 34.3 (relating to tax returns).

(4) Payment. Payment of the taxes and fees under subsection (b), (c) or (d) shall be made under sections 221—224 of the TRC (72 P. S. § § 7221—7224).

(5) Imposition of tax. The taxes and fees imposed under subsection (b), (c) or (d) are in addition to Sales or Use Tax and are excluded from the computation of tax for Sales and Use Tax purposes.

(6) Exemption certificates. Claims for exemption from the taxes and fees imposed under subsection (b), (c) or (d) shall be supported by the use of a valid Pennsylvania Exemption Certificate.

(7) Direct payment permit. A direct payment permit issued under § 34.4 (relating to direct payment permit) may be used in conjunction with the taxes and fees imposed under this section.

(8) Applicability of TRC. Article II of the TRC (72 P. S. § § 7201—7282) and regulations promulgated thereunder apply to the taxes and fees imposed under subsection (b), (c) or (d).

(b) Tire fee.

(1) Definitions. The following words and terms, when used in this subsection, have the following meanings, unless the context clearly indicates otherwise: Highway use—The use of a tire on a vehicle which is required to be licensed for highway use. If a tire is of the type used on a vehicle normally required to be licensed for highway use under 75 Pa.C.S. § § 1301—1318 (relating to general provisions), the tire shall be presumed to be for highway use. Sale—A transfer of the ownership of new tires for a consideration whether the transfer is absolute or conditional and by whatever means the transfer has been effected. The term does not include a rental or lease.

(2) Scope. Effective October 1, 1991, the sale of a new tire which is delivered to a location in this Commonwealth for highway use is subject to a $1 fee. The fee shall be collected by the vendor from the purchaser. If the vendor fails to collect, report or remit the tire fee, the vendor shall be assessed the fee. If the purchaser does not pay the fee to the vendor, the purchaser shall be assessed the tire fee. The sale of new tires in conjunction with the sale of other property shall be subject to the tire fee. There is no exclusion for exempt organizations or businesses engaged in manufacturing, processing, farming, dairying, printing, mining or rendering a public utility service.

(3) Exclusions. The following transactions are excluded from tax:

(i) The sale of tires not for highway use.

(ii) The sale of new tires to governmental entities.

(iii) The rental or lease of new tires. The lessor is required to pay the tire fee on the purchase of tires to be rented or leased.

(iv) The sale of used tires including retreads or recaps.

(v) The sale of tires when delivered to the purchaser at an out-of-State location. The subsequent use of the tires within this Commonwealth is not subject to the tire fee.

(4) Examples of sales subject to the tire fee.

(i) A purchaser buys a new or used automobile with four new tires and one spare tire. A tire fee of $5 is due on the sale of five new tires.

(ii) A leasing company buys new tires to use as replacements on its leased licensed vehicle fleet. Since the tires are for highway use, the purchase of the tires by the leasing company is subject to the tire fee.

(iii) A church buys a new tire to replace a tire on a vehicle registered in the name of the church. The purchase of the tire by the church is subject to the tire fee.

(iv) A trucking company buys tires from an out-of-State vendor. The tires are delivered to the trucking company in this Commonwealth. The sale of the tires is subject to the tire fee.

(v) A new car dealer withdraws an automobile from inventory and makes a taxable use of the automobile for sales and use tax purposes. The dealer is required to pay the tire fee directly to the Department.

(vi) A garage replaces a tire in connection with the repair of a damaged motor vehicle. The sale of the tire is subject to the tire fee regardless of whether the cost of the repair is covered by an insurance contract.

(5) Examples of sales not subject to the tire fee.

(i) A used car dealer buys new tires to place on a vehicle to be resold. The purchase of tires by the dealer is not subject to the tire fee. The subsequent sale of the vehicle with the new tires to a purchaser for highway use is subject to the tire fee.

(ii) A lessee rents a vehicle with new tires from a leasing company. A tire fee is not due on the rental. The lessor is liable for paying the tire fee on the purchase of the tires.

(iii) A manufacturer purchases new tires for use on forklifts not required to be licensed for highway use. The purchase is not subject to the tire fee.

(iv) A trucking company buys new tires from an out-of-State vendor. The tires are delivered to the trucking company at an out-of-State location. The sale or use of the tires is not subject to the tire fee even though the tires are subsequently used in this Commonwealth.

(v) A retail tire dealer purchases tires from a tire manufacturer for resale. As the retail tire dealer is not purchasing the tires for highway use, the purchase is not subject to the tire fee. The retail tire dealer’s subsequent sale of the tire to a customer for highway use is subject to the tire fee.

(c) Motor vehicle lease tax.

(1) Definitions. The following words and terms, when used in this subsection, have the following meanings, unless the context clearly indicates otherwise: Lease—A contract for the use of a motor vehicle for 30 days or more. Lease price—Full consideration paid or delivered or promised to be paid or delivered to the lessor for a lease period under a lease agreement, whether it is money or otherwise, even though the consideration is separately stated and designated as a payment for downpayment, service, maintenance, insurance, repairs, depreciation, excess mileage fees or similar charges.

(i) The term also includes an accelerated lease payment or buy out purchase price whether or not made in connection with the termination of the lease.

(ii) The term does not include the option purchase price, penalty fees for early termination of lease, damage fees or similar charges.

(iii) The term does not include Sales Tax imposed on the lease price.

(iv) Credits or refunds which reduce the lease price reduce the amount subject to tax even though the credits or refunds are issued after termination of the lease.

(v) If the lessor fails to separately state the lease price of other property, such as a trailer, from the lease of a motor vehicle, the total lease price is subject to tax. Motor vehicle—A self-propelled device in, upon or by which a person or property is or may be transported or drawn upon a public highway, except tractors, power shovels, road machinery, agricultural machinery and vehicles which move upon or are guided by a track or trolley. The term does not include trucks in Class 4 or higher as defined in 75 Pa.C.S. § 1916(a)(1) (relating to trucks and truck tractors). Title 75 Pa.C.S. § 1916(a)(1) currently defines trucks in Class 4 as those having a registered gross or combination weight between 9,001 and 11,000 pounds.

(2) Scope. Effective October 1, 1991, each lease of a motor vehicle subject to the tax imposed by section 202 of the TRC (72 P. S. § 7202) is subject to an additional tax of 3% of the total lease price charged. This tax will be imposed upon lease payments due on or after October 1, 1991, regardless of the date upon which the lease was executed. Lease payments made on or after April 1, 1995, for the use of trucks in Class 4 or higher as defined in 75 Pa.C.S. § 1916(a)(1) are not subject to the tax. The tax shall be collected by the lessor from the lessee. If the lessor fails to collect, report or remit the tax, the lessor shall be assessed the tax. If the lessee does not pay the tax to the lessor, the lessee shall be assessed the tax.

(3) Exclusions. If the lease of a motor vehicle is exempt from Sales and Use Tax imposed by section 202 of the TRC, the lease is exempt from the tax imposed under this subsection.

(d) Motor vehicle rental fee.

(1) Definitions. The following words and terms, when used in this subsection, have the following meanings, unless the context clearly indicates otherwise: Motor vehicle—A self-propelled device in, upon or by which a person or property is or may be transported or drawn upon a public highway, except tractors, power shovels, road machinery, agricultural machinery and vehicles which move upon or are guided by a track or trolley. Rental—A contract for the use of a motor vehicle for less than 30 days.

(2) Scope. Effective October 1, 1991, each rental of a motor vehicle subject to the tax imposed by section 202 of the TRC is also subject to a fee of $2 for each day or part of a day for which the vehicle is rented. The fee shall be collected by the lessor from the lessee. If the lessor fails to collect, report or remit the fee, the lessor shall be assessed the fee. If the lessee does not pay the fee to the lessor, the lessee shall be assessed the fee. If a motor vehicle is rented for less than 30 days, and the use of the motor vehicle subsequently extends beyond a 29-day period, the transaction remains a rental, and the rental payments continue to be subject to the fee until the rental contract is terminated. With respect to lease payments paid in accordance with a lease contract, lease payments are subject to tax at the rate of 3%.

(3) Exclusions. If the rental of a motor vehicle is exempt from Sales and Use Tax imposed by section 202 of the TRC (72 P. S. § 7202), the rental is exempt from the fee imposed under this subsection.

(4) Examples of rentals subject to the rental fee.

(i) A lessee rents a motor vehicle from a rental company for 5 hours. The rental is subject to a $2 rental fee.

(ii) A lessee rents a motor vehicle from a rental company for 1 day. The vehicle is returned to the lessor 5 hours after the end of the rental period. If the lessee is charged the daily rental rate plus an additional charge for the period after the end of the rental period, a rental fee of $4 is due.

(iii) A lessee rents a motor vehicle from a rental company under a daily rental contract. The rental is subject to a $2 per day rental fee. The lessee returns the motor vehicle to the lessor at the end of the 15th day and enters into a lease contract. During the first 15 days, the lessee is required to pay a rental fee of $2 per day. For the period after the 15th day, the lessee is required to pay a tax of 3% of the lease payment.

The provisions of this § 47.19 issued under section 506 of The Administrative Code of 1929 (71 P. S. § 186).

The provisions of this § 47.19 adopted October 30, 1998, effective October 31, 1998, 28 Pa.B. 5488.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 47.20 Vehicle Rental Tax.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Licensing and title fees—Licensing and title fees imposed by 75 Pa.C.S. § § 1912, 1916(a), 1920 and 1952(a) and collected by the Department of Transportation. The term does not include encumbrance fees. Local sales or use tax—Sales or Use Tax imposed by a county of this Commonwealth or the city of Philadelphia and administered by the Department. PTA—The Public Transportation Assistance Fund created by Article XXIII of the TRC (72 P. S. § 9301). Purchaser—A person who acquires, for money or other consideration, the custody or possession of a rental vehicle under a rental contract. Rental contract—A contract between a purchaser and a vehicle rental company for the use of a rental vehicle for 29 or fewer consecutive days. If a rental vehicle is rented for 29 or fewer consecutive days, and the use of the rental vehicle extends beyond a 29-day period without entering into a new written contract, the transaction remains a rental unless the parties enter into a written lease agreement. Rental payment—Full consideration paid or delivered or promised to be paid or delivered to the vehicle rental company under a rental contract, excluding charges for local sales or use tax, State Sales or Use Tax and PTA fees. Rental vehicle—A motor vehicle designed to transport 15 or fewer passengers or a truck, trailer or semitrailer used in the transportation of property other than commercial freight, that is rented without a driver. The term does not include a motorcycle, motor-driven cycle, school bus, hearse, motor home, camper or mobile home. State Sales or Use Tax—Sales or Use Tax imposed by Article II of the TRC (72 P. S. § § 7201—7281.2). VRT—Vehicle Rental Tax—The tax authorized under Article XVI-A of the TRC (72 P. S. § § 8601-A—8604-A). Vehicle rental company—A business entity engaged in the business of renting five or more rental vehicles in this Commonwealth.

(b) General provisions.

(1) General. This section is promulgated to administer Article XVI-A of the TRC relating to the VRT.

(2) Registration. A vehicle rental company renting rental vehicles that are subject to the VRT shall register with the Department.

(3) Returns. A vehicle rental company shall report the VRT on a return prescribed by the Department. The return is due on a quarterly basis.

(4) Payment. A vehicle rental company shall make payment with the return.

(5) Direct payment permit. A purchaser cannot use a direct payment permit issued under § 34.4 (relating to direct payment permit) in conjunction with the VRT because the vehicle rental company may be entitled to a refund of the tax collected.

(6) Applicability of TRC. Article II of the TRC and regulations promulgated thereunder apply to the VRT.

(c) Scope.

(1) General. With respect to rental contracts involving motor vehicles designed to transport 15 or fewer passengers, a tax of 2% is imposed upon the rental payments. With respect to rental contracts involving trucks, trailers and semitrailers used in the transportation of property other than commercial freight, entered into on or after July 1, 1997, a tax of 2% is imposed upon the rental payments made on or after July 1, 1997. If the vehicle rental company fails to collect the applicable tax, the purchaser shall pay the tax directly to the Department on a form prescribed by the Department.

(2) Examples.

(i) The following are examples of transactions that are subject to the VRT:

(A) ‘‘A’’ rents a rental vehicle from a vehicle rental company for 14 days. Due to circumstances unforeseen at the commencement of the rental, ‘‘A,’’ without entering into a new contract, continues to use the car on a day by day basis and eventually returns the car on the 36th day. Because the transaction continues to be governed by the rental contract for the entire 36-day period, the rental payment is subject to the VRT.

(B) ‘‘B’’ rents a rental vehicle from a vehicle rental company for 10 days. The rental contract provides for an additional charge for excess mileage as well as a pick up and drop off fee. In addition, under the rental contract, ‘‘B’’ elects to obtain a vehicle damage waiver, a child’s car seat and a car top carrier. Because the charges for excess mileage, a pick up and drop off fee, a vehicle damage waiver, a child’s car seat and a car top carrier are all part of the rental payment, the cost of these items is subject to the VRT.

(C) ‘‘P’’ rents a rental vehicle for 7 days from ‘‘R.’’ ‘‘R’’ owns two and leases 28 of the 30 rental vehicles that it rents to others. Because ‘‘R’’ has five or more rental vehicles available for rental, ‘‘R’’ is a vehicle rental company, and the rental payment made by ‘‘P’’ is subject to the VRT.

(D) ‘‘R’’ rents a truck to transport a used living room set to ‘‘R’s’’ hunting camp. The rental payments are subject to VRT as the living room set does not qualify as commercial freight.

(ii) The following are examples of transactions that are not subject to the VRT:

(A) ‘‘Y’’ rents a rental vehicle from ‘‘E’’ vehicle rental company for 28 days. Due to circumstances unforeseen at the commencement of the rental, ‘‘Y’’ wishes to use the car for a longer period of time. After using the car for 28 days, ‘‘Y’’ returns the car to ‘‘E,’’ and pays the VRT on the rental payment, and the parties terminate the rental contract. They then enter into a lease agreement under which ‘‘Y’’ leases the same car from ‘‘E’’ for 2 years. Because the second transaction is a lease agreement and not a rental, the lease payments are not subject to the VRT.

(B) ‘‘Z’’ rents a rental vehicle from ‘‘D’’ car dealership, which has only three rental vehicles available for rental. Because ‘‘D’’ has fewer than five rental vehicles available for rental, ‘‘D’’ is not a vehicle rental company and the rental payment is not subject to the VRT.

(C) ‘‘M’’ manufacturer rents a truck used exclusively to deliver ‘‘M’s’’ own manufactured products to ‘‘M’s’’ customers. The rental payments are not subject to VRT as ‘‘M’s’’ products qualify as commercial freight.

(d) Exclusions. If the rental of a rental vehicle is exempt from State Sales or Use Tax, the rental is also exempt from the VRT. A purchaser shall support a claim for exemption from the VRT by submitting a completed Pennsylvania exemption certificate setting forth a valid basis for exemption. A purchaser may use the same exemption certificate used to claim an exemption from State sales or use tax, but the exemption certificate shall clearly indicate that the purchaser is claiming an exemption from the VRT. The purchaser shall make that indication either by checking the appropriate blocks for the VRT on the exemption certificate form or by checking the paragraph labeled ‘‘other’’ on the older exemption certificate form and explaining that an exemption is being claimed from the VRT.

(e) Annual reconciliation reports.

(1) General. A vehicle rental company that has remitted the VRT and is claiming a refund shall file an annual reconciliation report. An annual reconciliation report shall be on a form prescribed by the Department. An annual reconciliation report is not required if the vehicle rental company is not claiming a refund. An annual reconciliation report shall be filed on or before February 15 of the subsequent calendar year.

(2) Date of filing. The United States Postal Service postmark date will be used to determine the date of filing of an annual reconciliation report. When the envelope containing the report does not reflect a United States Postal Service postmark date, the date of receipt by the Department shall determine the date of filing.

(3) Contents. An annual reconciliation report shall set forth the amount of both:

(i) The VRT remitted during the previous calendar year.

(ii) The total amount of licensing and title fees imposed by the Commonwealth on a vehicle rental company’s rental vehicles and paid to the Department of Transportation by the vehicle rental company in the previous calendar year.

(4) Refund. The Department will refund to a vehicle rental company that has remitted the VRT an amount, not including interest or penalties that may have been paid by the vehicle rental company, equal to the total amount of licensing and title fees paid to the Department of Transportation on the rental vehicles. The amount of refund cannot exceed the amount of the VRT remitted by the vehicle rental company in the previous calendar year.

(5) Example. ‘‘R’’ owns a vehicle rental company that ‘‘R’’ sells to ‘‘S’’ on July 30, 1995. Prior to the sale, ‘‘R’’ pays licensing and title fees on a portion of its fleet of vehicles. ‘‘R’’ also files tax returns and remits the VRT on January 20, April 20 and July 20, 1995. Under paragraph (4), ‘‘R’’ may claim a refund up to the amount of the VRT remitted by ‘‘R’’ with the three tax returns. After acquiring ownership of the vehicle rental company, ‘‘S’’ pays the licensing and title fees due between August 1 and December 31, 1995, on the other vehicles in the fleet, and remits the VRT for the third quarter on October 20, 1995. ‘‘S’’ may claim a refund of the licensing and title fees paid from August to December. The amount of the refund to ‘‘S’’ may not exceed the amount of the VRT ‘‘S’’ remitted in October. To claim a refund, both ‘‘R’’ and ‘‘S’’ shall file their respective annual reconciliation reports on or before February 15, 1996.

The provisions of this § 47.20 issued under section 270 of The Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 47.20 adopted October 30, 1998, effective October 31, 1998, 28 Pa.B. 5492.

History

• Authority: The provisions of this § 47.
• Source: The provisions of this Chapter 47 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

Chapter 48 Exempt Organizations

61 Pa. Code § 48.1 Utility services used by exempt organizations.

The sale at retail or use of fuel oil, petroleum products, steam, natural, manufactured or bottled gas, or electricity or telephone services by a charitable, volunteer firemen’s, or religious organization, or nonprofit educational institution for use in conjunction with its exempt activities is not subject to tax. The organizations are required to tender to their suppliers an exemption certificate in lieu of the payment of tax.

The provisions of this § 48.1 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Source: The provisions of this Chapter 48 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 48.4 Credit unions.

(a) Federal Credit Unions organized under the provisions of the Federal Credit Union Act (12 U.S.C.A. § 1751 et seq.) and Pennsylvania Credit Unions formed and incorporated under the provisions of the Credit Union Act (15 P. S. § § 12301—12333) are exempt from sales tax and Hotel Occupancy Tax under a Stipulation for Judgment in Commonwealth v. Pacedoc Federal Credit Union, 500 C.D. 1966.

(b) A Federal Credit Union which is not formed or organized under the Federal Credit Union Act (12 U.S.C.A. § 1751 et seq.) is presumed to be subject to sales, Use and Hotel Occupancy Tax unless it is an agency of the United States Government or an exemption is extended to the organization by the law under which it is created.

(c) State Credit Unions which are not formed or organized under the Credit Union Act are presumed to be subject to sales, use and hotel occupancy tax unless an exemption is extended to the organization by the law under which it is created. However, a State Credit Union which is not formed under the Credit Union Act but is an agency of the Commonwealth or its political subdivisions is exempt from sales and use tax, but shall pay Hotel Occupancy Tax.

The provisions of this § 48.4 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686; amended April 26, 1974, effective April 27, 1974, 4 Pa.B. 828.

This section cited in 61 Pa. Code § 47.17 (relating to lease or rental of vehicles and rolling stock); and 61 Pa. Code § 58.13 (relating to carpeting and other floor coverings).

History

• Source: The provisions of this Chapter 48 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

Chapter 49 Food and Beverages

61 Pa. Code § 49.2 Game fish, animals and birds.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: (1) Game fish—As defined in 30 Pa.C.S. § 102 (relating to definitions). (2) Game animals—As defined in 34 Pa.C.S. § 102 (relating to definitions). (3) Game birds—As defined in 34 Pa.C.S. § 102.

(b) Scope. The purchase or use of game fish, game animal or game bird, whether purchased live or dressed, is exempt from tax when the purchase is for the purpose of human consumption except when purchased from a caterer; lunch counter; restaurant; cafe; or another ‘‘eating place,’’ as that term is used in Article II of the TRC (72 P. S. § § 7201—7282).

The provisions of this § 49.2 issued under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 49.2 adopted May 13, 1983, effective May 14, 1983, 13 Pa.B. 1638.

History

• Authority: The provisions of this § 49.
• Source: The provisions of this Chapter 49 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

Chapter 50 Purchases for Resale

61 Pa. Code § 50.1 Purchases and sales by wholesalers.

(a) The tax does not apply to ordinary sales at wholesale, the sales being made by the wholesalers to licensed retailers who will collect the tax upon their sales to the consumer. Neither does the tax apply to sales made to the wholesalers, since the transactions are in no sense retail sales.

(b) The fact that a person is engaged in the wholesale business does not relieve him from the duty of collecting or paying tax on purchases of property he makes for his own use, or upon sales made directly to consumers or others not for resale. The ordinary nature of the transaction in question, rather than the label by which the business is known or the nature of some or most of the transactions conducted, is the determining factor.

History

• Source: The provisions of this Chapter 50 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

Chapter 51 Motor Vehicles

61 Pa. Code § 51.1 Purchases of replacement parts by automobile dealer.

The purchase by an automobile dealer of replacement parts which he is to install in automobiles which are being reconditioned by him prior to resale is exempt from tax as a purchase for resale.

The provisions of this § 51.1 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Authority: The provisions of this § 51.
• Source: The provisions of this Chapter 51 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 51.2 Use of automobiles other than for resale; evidence.

(a) Under the recent Federal law, known as the Automobile Information Disclosure Act, Pub. L. No. 85-506, 72 Stat. 325, commonly referred to as the ‘‘Truth in Labeling Act’’, automobile dealers are prohibited from removing truth-in-labeling stickers from new automobiles, except when the dealers intend to use the automobiles for their own personal use in which case the automobiles are not considered to have been purchased by them for resale purposes. New automobile means an automobile to which the equitable or legal title has never been transferred by a manufacturer, distributor or dealer to an ultimate purchaser.

(b) An automobile dealer’s possession of a new automobile, without the stickers may be considered presumptive evidence that the dealer is using the automobile for purposes other than resale and shall be therefore, required to pay use tax on the purchase price of the automobile unless it is established to the satisfaction of the Department that the automobile from which the sticker has been removed was in fact purchased for resale.

The provisions of this § 51.2 adopted September 8, 1972, effective September 9, 1972, 2 Pa.B. 1686.

History

• Authority: The provisions of this § 51.
• Source: The provisions of this Chapter 51 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 51.4 Remittances for payment of sales tax on certain vehicles.

(a) With respect to purchases of motor vehicles from persons registered in the dealer class as defined in 75 Pa.C.S. § § 101—9701, sales tax shall be remitted to the Department either by the purchaser or the registered dealer.

(b) With respect to purchases from persons other than registered dealers, the Department of Transportation will accept a check or draft for payment of sales tax only if the applicant’s name appears on the check or draft either in the capacity of the drawer or alternatively, as a payee with a special endorsement to the Commonwealth of Pennsylvania. The type of check or draft which is acceptable on purchases from nonregistered dealers is illustrated by the following examples. In both of the following illustrations the applicant is the party to whom the certificate of title will be issued.

(1) Applicant as a drawer.

(c) The applicant is responsible for payment of the sales tax. If payment of the tax is made with a check issued by someone other than the purchaser and the check is uncollectible, the purchaser remains personally liable for the tax.

(d) A check for sales tax shall be made payable to ‘‘Commonwealth of Pennsylvania’’ and sent along with Form MV-4ST, Vehicle Sales and Use Tax Return/Application for Registration to: Pennsylvania Department of Transportation, Bureau of Motor Vehicles, Box No. 8593, Harrisburg, Pennsylvania 17105.

The provisions of this § 51.4 amended under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 51.4 adopted September 8, 1972, effective September 9, 1972, Pa.B. 1686; amended July 28, 1989, effective July 29, 1989, 19 Pa.B. 3166. Immediately preceding text appears at serial pages (40394) and (89219).

History

• Authority: The provisions of this § 51.
• Source: The provisions of this Chapter 51 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

Chapter 52 Physicians and Dentists

61 Pa. Code § 52.1 Purchases of medicines, medical supplies, medical equipment and prosthetic or therapeutic devices.

(a) General. This section is intended to clarify the extent to which the sale or use of drugs, medicines, medical supplies, medical equipment and prosthetic or therapeutic devices is subject to tax. The determination that purchases qualify for exemption as medicines, medical supplies and the like, is based essentially upon the use for which the purchases are intended rather than upon the occupation of the purchaser.

(b) Exempt purchases. The following constitute exempt purchases:

(1) Medicines and drugs. The sale at retail or use of prescription or nonprescription medicines and drugs.

(2) Medical supplies. The sale at retail or use of tangible personal property for use in alleviation or treatment of injury, illness, disease or incapacity, and which is consumed during the use.

(3) Dentists’ materials. The purchase or use by a dentist of materials used in dental treatment and property (such as dentures, fillings, crowns, inlays, bridges, lingual or palatal bars) transferred by the dentist to the patient.

(4) Therapeutic or prosthetic devices. Therapeutic or prosthetic devices designed for the use of a particular individual to correct or alleviate a physical incapacity.

(5) Wrapping supplies. The sale at retail or use of wrapping supplies and nonreturnable containers, such as medicine bottles, ointment tins, prescription bottles and pill bottles, envelopes, or boxes when the sale or use is incidental to delivery of personal property. Reference should be made to § 32.6 (relating to wrapping supplies, equipment and services).

(c) Taxable purchases. The sale at retail or use of medical equipment remains subject to tax, unless the equipment qualifies as an exempt therapeutic or prosthetic device under subsection (b).

(d) Retailers’ Information Booklet. To facilitate the administration of this chapter, the Department will publish a list of taxable and exempt property in the Pennsylvania Bulletin under § 58.1 (relating to publication of list of taxable and exempt tangible personal property). In addition, the Department may prepare for use by taxpayers a Retailers’ Information Booklet which summarizes this chapter, provides supplemental procedural instructions for the submission of reports and tax remittances and contains a list of taxable and nontaxable items. A copy of this publication may be obtained from the Department upon request.

The provisions of this § 52.1 amended under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 52.1 amended through March 9, 1984, effective March 10, 1984, 14 Pa.B. 845; amended July 20, 1990, effective July 21, 1990, 20 Pa.B. 3977. Immediately preceding text appears at serial pages (139179) to (139180) and (89221) to (89228).

History

• Authority: The provisions of this § 52.
• Source: The provisions of this Chapter 52 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 52.2 Fabrication of dental prosthetics.

The fabrication of dentures, dental-mechanical appliances and restorations to be sold to dentists is a manufacturing operation and the provisions of § 32.32 (relating to manufacturing; processing), are applicable to dental laboratories engaged in such activity.

History

• Authority: The provisions of this § 52.
• Source: The provisions of this Chapter 52 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

61 Pa. Code § 52.4 Sellers and repairers of eyeglasses.

(a) General. The promulgation of this revised ruling reflects a change in the policy of the Department. Formerly, the production of optical lenses was not considered to be manufacturing. It has been determined, however, that, for sales and use tax purposes, the production of optical lenses is manufacturing. The effective date of this ruling is the date of its adoption. Its effect is, therefore, prospective only.

(b) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Eyeglasses—The term includes optical lenses, eyeglass frames, eyeglass temples and other components necessary to make optical lenses suitable for human wear. Optical Lenses—The term includes prescriptive and nonprescriptive lenses, contact lenses, tinted lenses for sunglasses, lenses for items as ski goggles and diving masks, and other similar optical lenses, whether the lenses are glass, plastic or other material.

(c) Manufacture of optical lenses. The cutting, molding, shaping, grinding and polishing of optical lenses is manufacturing as that term is defined in section 201(c) of the TRC (72 P. S. § 7201) and § 32.32 (relating to manufacturing; processing). Therefore, a manufacturer of optical lenses is entitled to claim the manufacturing exemption upon the purchase or use of tangible personal property which is directly used in the manufacture of optical lenses.

(d) Assembly of eyeglasses. Assembly of eyeglasses shall conform with the following:

(1) The assembly of eyeglasses by a person who also manufactures one or more eyeglass components is manufacturing as that term is defined in section 201(c) of the TRC and § 32.32. Therefore, the manufacturing exemption is available upon the purchase or use of tangible personal property which is directly used in the assembly of eyeglasses if the person performing the assembly also manufactures one or more of the components which are incorporated as part of the eyeglasses.

(2) The assembly alone of eyeglasses from previously manufactured components is not manufacturing, even if the person performing the assembly is required to fit lenses into particular frames or make other adjustments in order to fulfill the requirements of a prescription. Therefore, a person who only assembles eyeglasses is not entitled to claim the manufacturing exemption upon the purchase price of tangible personal property which is used in the assembly.

(e) Sale and repair. Sale and repair shall conform with the following:

(1) Sale or repair of prescriptive eyeglasses. The sale or repair of eyeglasses or eyeglass components prescribed for a particular individual by an ophthalmologist, oculist or optometrist is exempt from tax. This rule is applicable also to the sale or repair of eyeglasses or eyeglass components which replace those originally prescribed. A person who sells or repairs these eyeglasses or eyeglass components should not collect tax upon their sale price or repair charge.

(2) Sale or repair of nonprescriptive eyeglasses. The sale or repair of eyeglasses or eyeglass components not prescribed for a particular individual by an ophthalmologist, oculist or optometrist is subject to tax. A person who sells or repairs these eyeglasses or eyeglass components is required to register with the Department and to collect and remit tax. The repair of nonprescriptive eyeglasses or eyeglass components is more specifically governed by § 31.5 (relating to persons rendering taxable services).

(3) Tax liability of vendors and repairers. A person who sells or repairs eyeglasses shall pay tax upon his purchase or use of property which he utilizes in his business, except upon property which he purchases to resell or transfers to a customer in the course of a repair. The resale exemption is applicable to the purchase of eyeglasses or eyeglass components which are to be sold or transferred. To obtain the exemption, the vendor or repairer shall present to his supplier a properly completed exemption certificate indicating ‘‘resale’’ as the basis for the exemption.

The provisions of this § 52.4 amended October 28, 1977, effective October 29, 1977, 7 Pa.B. 3206.

History

• Authority: The provisions of this § 52.
• Source: The provisions of this Chapter 52 adopted September 8, 1972, effective September 9, 1972, 2 Pa.

Chapter 53 Clothing

61 Pa. Code § 53.1 Clothing.

(a) Definitions. The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Accessories—Articles, other than clothing, which are designed to be worn on or about the human body. Clothing—Articles, including vesture, wearing apparel, raiments, garments or shoes, which are designed to cover the human body as ordinary or everyday wear. Formal day or evening apparel—Articles worn or carried on or about the human body which are designed for formal functions and not normally worn except while attending a formal function. Fur articles—Articles worn or carried on or about the human body which are made of:

(i) Fur on the hide or pelt.

(ii) Material imitative of fur.

(iii) Combination of fur, real, imitative or synthetic, and other material provided the fur, real, imitative or synthetic, is more than three times the value of the next most valuable material. Ornamental wear—Articles, other than clothing, which are designed and normally worn for decorative purposes. Sporting goods and sporting clothing—Articles worn or carried on or about the human body which are designed for sporting activity and not normally worn except while engaged in sports.

(b) Scope. This section applies to the following transactions:

(1) The sale or use of clothing is not subject to tax.

(2) The sale or use of accessories, ornamental wear, formal day or evening apparel, fur articles and sporting goods and sporting clothing shall be subject to tax unless the purchaser is entitled to claim an exemption under the law.

(3) A charge for the service of repairing, altering, mending, pressing, fitting, dyeing, laundering, drycleaning or cleaning shoes of any type or clothing is not subject to tax with the exception of the imprinting or printing of clothing belonging to others.

(4) A charge for the service of repairing, altering, mending, pressing, fitting, dyeing, laundering, drycleaning or cleaning accessories, ornamental wear, formal day or evening apparel, fur articles or sporting goods and sporting clothing, except for shoes of any type shall be subject to tax unless the purchaser is entitled to claim an exemption under the law.

(c) Examples. The following are examples of accessories, ornamental wear, formal day or evening apparel, fur articles and sporting goods and sporting clothing:

(1) Accessories. Accessories include the following:

(i) Handbags, pocket books and purses.

(ii) Wallets and billfolds.

(iii) Umbrellas.

(iv) Jewelry, including jewelry with religious symbols, pins, cufflinks, and the like.

(v) Earring backs and covered buttons for making earrings and brooches.

(vi) Hair nets, hairpins, barrettes, curlers, hair clips, chignons and bandeaus.

(vii) Wigs and toupees.

(2) Formal men’s day and evening apparel. Formal men’s day and evening apparel includes the following:

(i) Tuxedos.

(ii) Dinner jackets.

(iii) Tail coats.

(iv) Cummerbunds.

(v) Striped formal trousers.

(vi) Opera capes.

(vii) Formal vests.

(viii) Cutaway coats.

(ix) Formal ties including ascots.

(x) White leather and silk gloves.

(xi) White formal suspenders.

(xii) Wing collars.

(xiii) Silk hats.

(xiv) Opera hats.

(xv) Derby hats.

(3) Formal women’s day and evening apparel. Formal women’s day and evening apparel includes the following:

(i) Headpieces of the tiara type.

(ii) Kid or suede gloves, 16 button type.

(iii) Shoes for formal wear such as metallic cloth, brocade and satin.

(iv) Bridal apparel.

(4) Sporting goods and sporting clothing. Sporting goods and sporting clothing includes the following:

(i) Athletic supporters.

(ii) Team or individual uniforms, for example: football, baseball, basketball, hockey and soccer.

(iii) Shoes designed for particular sports, for example: football, baseball, soccer and track spikes; motorcross boots; ski boots; ice skates; wrestling shoes; swim fins; golf shoes; and bowling shoes.

(iv) Uniform socks, single-strap-under-a-foot-type.

(v) Weightlifting belts.

(vi) Protective equipment, for example: shoulder, knee, thigh, elbow, forearm, hand and rib pads used in football and other contact sports; mouthpieces; football and other sports helmets; cups for athletic supporters; and boxing headgear.

(vii) Gloves, for example: baseball, handball, hockey, batting and golf.

(viii) Hunting and fishing accessories, ammunition belts, hip waders and fly vests.

(ix) Bathing suits and caps.

(5) Fur articles. Fur articles include the following:

(i) Articles made of rabbit fur dyed to resemble mink.

(ii) Articles made of sheepskin with wool or hair attached thereto.

(iii) Articles made of fabrics made with vegetable, mineral or synthetic fibers which resemble fur in appearance.

(iv) Articles made of woven animal hair or wool which resembles fur in appearance.

(v) Articles with fur trim if the value of the fur trim is three times the value of the next most valuable component part.

(6) Ornamental wear. Ornamental wear includes the following:

(i) Costumes.

(ii) Corsages.

(iii) Hats, sashes, emblems, insignias, medallions, and the like, designed and normally worn in conjunction with club, organization, fraternity and similar ceremonies.

(d) Materials to be incorporated in clothing. The sale of items such as fabrics, thread, knitting yarn, buttons, snaps and zippers, to be incorporated into clothing is not subject to tax. The sale of property such as needles, dress forms, scissors and thimbles, is subject to tax unless the purchaser is engaged in the business of manufacturing or of purchasing the items for resale.

The provisions of this § 53.1 amended under the Tax Reform Code of 1971 (72 P. S. § 7270(a)).

The provisions of this § 53.1 amended November 7, 1980, effective November 8, 1980, 10 Pa. B. 4300; amended April 2, 2010, effective April 3, 2010, 40 Pa.B. 1746. Immediately preceding text appears at serial pages (342975) to (342976) and (265825).

History

• Authority: The provisions of this § 53.
• Source: The provisions of this § 53.

61 Pa. Code § 53.2 Footwear, footwear accessories and footwear repairs.

(a) The sale at retail or use of footwear is not taxable unless the footwear is of the type normally worn for formal, sport or athletic wear. Therefore, ordinary shoes, overshoes, safety shoes and sneakers are not taxable. However, shoes for formal wear, ski boots, bathing shoes, bowling shoes, golf shoes, baseball shoes and football shoes are not exempt from tax.

(b) Accessories not attached to footwear are subject to tax. For example, shoe brushes, shoe polish applicators and shoe trees are subject to tax. However, accessories attached to footwear are not subject to tax. For example, shoe laces, soles, heels, shoe polish and shoe dye are exempt from tax.

(c) The service of repairing all types of footwear, including footwear for formal, sport or athletic wear, is exempt from tax. Repairmen, in purchasing materials to be incorporated into the repaired article and transferred to the customers, may give resale exemption certificates to their suppliers at the time of purchase. However, the resale exemption is not applicable to the purchase of equipment, supplies or other items which are not to be incorporated into the repaired article.

History

• Authority: The provisions of this § 53.
• Source: The provisions of this § 53.

Chapter 54 Purchase Price

61 Pa. Code § 54.1 Delivery charges.

(a) Effective March 4, 1971, separately stated delivery charges billed by the vendor made in conjunction with a taxable transaction are subject to tax. For example, delivery charges for transit-mixed concrete are subject to tax even if such charges are stated separately from the charge made for the concrete. Similarly, if a vendor effects delivery of a taxable item to a Pennsylvania vendee through the mails, charges by the vendor for the cost of the taxable item and the postage fee are subject to tax, even if these charges are stated separately on the invoice.

(b) Delivery charges made in conjunction with nontaxable transactions are not subject to tax. Therefore, delivery charges of items purchased for resale or items excluded from the tax are not subject to tax.

(c) Charges for delivery made by someone other than the vendor and billed by someone other than the vendor are not subject to tax.

Electricity Services Taxable

Transmission, distribution, and transition services associated with taxpayer’s purchase of electricity was not exempt from Pennsylvania sales tax even though taxpayer purchased electricity from third party generator which was delivered by a separate utility; utility that delivered electricity to taxpayer was not a mere delivery carrier, but with electricity generator, were together the ‘‘vendor’’ and therefore the services were not separate and exempt from sales tax. Spectrum Arena L.P. v. Com., 983 A.2d 641, 650-651 (Pa. 2009).

61 Pa. Code § 54.2 Sign painters.

Persons engaged in the business of painting or otherwise fabricating signs are making sales at retail when they sell such signs to the ultimate user thereof, and shall collect tax with respect to such sales. Labor or service charges for painting of such signs shall be considered as part of the purchase price thereof for tax purposes.

Chapter 55 Services

61 Pa. Code § 55.1 Automobile towing service.

The charge made by a garage for the towing of an automobile is a service charge not subject to tax under the TRC.

History

• Authority: The provisions of this § 55.
• Source: The provisions of this § 55.

61 Pa. Code § 55.4 Taxidermy service.

(a) Persons engaged in the business of performing taxidermy services upon birds, animals, fish or other personal property are vendors of the service so rendered and shall collect sales tax upon the entire charge made for the work, including charges for time, labor, materials, service and the like. Effective March 4, 1971, separately stated charges for the delivery of the finished product to the customer are subject to tax. Prior to March 4, 1971, the separately stated delivery charges were not subject to tax.

(b) A taxidermist is liable for tax upon the purchase or use of tangible personal property, such as machinery, equipment, tools and supplies, which is used but does not physically transfer to the customer or to the customer’s property. With respect to materials which are to be physically transferred to the customer’s property, the taxidermist is entitled to give the supplier a proper Resale Exemption certificate.

History

• Authority: The provisions of this § 55.
• Source: The provisions of this § 55.

61 Pa. Code § 55.5 Cleaning of animals.

The cleaning of animals, pets, show animals, and the like, for a fee is a taxable service whether performed by a veterinarian or other person. Cleaning services performed by a veterinarian for the purpose of or incidental to medical treatment are not subject to tax. Cleaning includes, but is not limited to, activities such as washing the animal, cleaning the eyes and ears, and clipping or trimming the nails and coat.

History

• Authority: The provisions of this § 55.
• Source: The provisions of this § 55.

61 Pa. Code § 55.6 Lawn care services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Lawn—An area maintained with grass adjacent to a building. The term does not include athletic fields, cemeteries, golf courses, fields, parks and public utility or highway right-of-ways. Lawn care service—Providing services for lawn upkeep including fertilizing, lawn mowing, shrubbery trimming or other lawn treatment services. Shrubbery—A woody plant that produces branches or shoots from or near the base. Tree—A woody plant with a main stem and usually having a distinct head.

(b) Scope. The sale at retail or use of lawn care services performed in this Commonwealth is subject to tax.

(c) Examples of taxable services. The following are examples of taxable lawn care services:

(1) Fertilizing lawns.

(2) Mowing, trimming, cutting or edging lawns.

(3) Dethatching lawns.

(4) Applying herbicides, insecticides or fungicides to lawns.

(5) Raking grass on lawns.

(6) Applying treatments for weed, pest, insect or disease control to lawns.

(7) Watering lawns.

(8) Applying lime to lawns.

(9) Aerating lawns.

(10) Providing lawn evaluation, consultation or soil testing services on lawns, if purchased in conjunction with other lawn care services, regardless of whether the costs of the lawn evaluation, consultation or soil testing services are separately stated on the invoice.

(11) Overseeding, sodding or grass plugging of existing lawns.

(12) Trimming or pruning shrubbery when performed in conjunction with other lawn care services.

(d) Examples of nontaxable services. The following are examples of services which are not taxable lawn care services:

(1) Seeding, sodding or grass plugging to establish a new lawn. Seeding, sodding or grass plugging in conjunction with building construction will be presumed to be a new lawn.

(2) Trimming, pruning or fertilizing trees.

(3) Planting or removing shrubbery or trees.

(4) Providing lawn evaluation, consultation or soil testing services, if not purchased in conjunction with other lawn care services.

(5) Designing lawns or landscapes.

(6) Applying herbicides or fungicides to shrubbery, trees, flowers or vegetables.

(7) Maintaining shrubbery, flower or vegetable beds, such as by mulching, tilling, weeding or fertilizing.

(8) Separately stated charges for leaf raking.

(e) Purchase price. Tax shall be imposed on the total charge for lawn care services. The failure to separately state charges for lawn care services from other nontaxable charges on the same invoice requires the charging of tax on the total invoice amount.

(f) Exemptions.

(1) Lawn care services are not subject to tax if purchased by qualified institutions of purely public charity, charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business; the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions, including public school districts. The purchase of lawn care services is subject to tax if purchased by persons engaged in the business of manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture, as those terms are defined in section 201(k)(8) and (o)(4)(B) of the TRC (72 P. S. § 7201(k)(8) and (o)(4)(B)).

(2) The vendor of lawn care services may claim the resale exemption upon its purchase of tangible personal property that is transferred to the purchaser or a third party in the performance of the lawn care services. The vendor may also purchase lawn care services from another provider and subsequently resell the services to a purchaser. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of other taxable services that it may use but not transfer in the performance of its lawn care services.

(i) The following are examples of property that may be purchased exempt for resale when transferred to the purchaser in the performance of lawn care services:

(A) Herbicides, insecticides, fungicides or other chemicals that are applied to lawns.

(B) Grass seed, sod, grass plugs, straw, fertilizers or lime applied to lawns.

(ii) The following are examples of taxable property when used in the performance of lawn care services:

(A) Mowers; edgers; or pruning, dethatching, aerating or mulching equipment, including motor oil and gasoline used in the equipment.

(B) Rakes, shovels or hoes.

(C) Spray applicators.

(D) Testing kits.

(E) Lawn sweepers.

(F) Other tangible personal property and services used in connection with the performance of lawn care services such as invoices, sales receipts, contracts, estimate sheets, confirmations and other similar items.

The provisions of this § 55.6 issued under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 55.6 adopted August 4, 2000, effective August 5, 2000, 30 Pa.B. 3935.

History

• Authority: The provisions of this § 55.
• Source: The provisions of this § 55.

Chapter 56 Multistate Sales

61 Pa. Code § 56.1 Maintaining a place of business within this Commonwealth.

(a) Scope. A vendor maintaining a place of business within this Commonwealth is required to comply with the provisions of the TRC (72 P. S. § § 7101—10004). This includes the requirements to pay or to collect and remit tax imposed by the TRC.

(b) Maintaining a place of business within this Commonwealth. A vendor who is engaged in one or more of the following activities, within this Commonwealth, is maintaining a place of business within this Commonwealth:

(1) Having or maintaining either directly or through a subsidiary, an office, distribution house, sales house, warehouse, service enterprise or other place of business irrespective of whether the place of business is located permanently or temporarily or authorized to do business within this Commonwealth.

(2) Having or maintaining an agent of general or restrictive authority irrespective of whether the agent is located permanently or temporarily or authorized to do business within this Commonwealth.

(3) Maintaining a stock of goods.

(4) Regularly soliciting orders through a solicitor, salesman, agent or representative, whether or not the orders are accepted in this Commonwealth, or performing promotional activities in this Commonwealth.

Example. ‘‘A’’ Company is a New Jersey corporation, with ‘‘R’’ representative in Pennsylvania. ‘‘R’’ takes orders from Pennsylvania customers and forwards the money to the New Jersey office for approval. ‘‘R’’ has no authority to approve orders. ‘‘A’’ mails all purchases directly to its customers. The customers are billed from the New Jersey office. ‘‘A’’ is ‘‘maintaining a place of business within Pennsylvania.’’

(5) Regularly engaging in the delivery of property in this Commonwealth, other than by common carrier or United States mail, and soliciting business within this Commonwealth, whether by means of United States mail, radio, television, newspaper or otherwise.

Example. ‘‘B’’ Company, a New York corporation, advertises on Pennsylvania radio stations and has regularly scheduled deliveries into Pennsylvania. ‘‘B’’ is ‘‘maintaining a place of business within Pennsylvania.’’

(6) Regularly engaging in an activity in connection with the leasing or servicing of property which is located within this Commonwealth.

Example. ‘‘C’’ Company, a Delaware corporation, employs ‘‘E’’ to make service calls. ‘‘P,’’ a Pennsylvania resident, is a customer of ‘‘C’’ company. ‘‘P’’ calls ‘‘C’’ and requests that a serviceman be sent to his house. ‘‘E’’ is dispatched to the residence of ‘‘P.’’ ‘‘C’’ is ‘‘maintaining a place of business within Pennsylvania.’’

The provisions of this § 56.1 issued under the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 56.1 amended through March 14, 1986, effective March 15, 1986, 16 Pa.B. 815. Immediately preceding text appears at serial pages (72875) to (72876).

This section cited in 61 Pa. Code § 60.10 (relating to adjustment and collection services).

History

• Authority: The provisions of this § 56.
• Source: The provisions of this § 56.

Chapter 57 Retail Sales, Restaurants, Bars and Clubs

61 Pa. Code § 57.1 Carbonator for soda fountain.

The sale of a carbonator to a soda fountain operator for making soda or carbonated water is subject to tax. Such tangible personal property is not considered to be used in manufacturing. The sale of carbon dioxide to a soda fountain operator is considered a sale for resale and is not considered taxable.

History

• Authority: The provisions of this § 57.
• Source: The provisions of this § 57.

61 Pa. Code § 57.2 Gas used by restaurants.

Gas purchased by a restaurant to be used in the preparation of meals shall be subject to tax under the provisions of the act.

History

• Authority: The provisions of this § 57.
• Source: The provisions of this § 57.

61 Pa. Code § 57.3 Icemaking equipment.

The purchase of icemaking equipment by restaurants, clubs, bars or similar establishments shall be subject to tax.

History

• Authority: The provisions of this § 57.
• Source: The provisions of this § 57.

61 Pa. Code § 57.4 Merchandising equipment.

The tax shall be applicable to the sale of display cases and similar merchandising equipment to hotels, food markets, stores and similar persons using the property in the conduct of their business.

History

• Authority: The provisions of this § 57.
• Source: The provisions of this § 57.

61 Pa. Code § 57.5 Sale of equipment to restaurants.

The sale of equipment, implements, other than wrapping supplies, and similar tangible personal property to a restaurant for use in the preparation or service of food shall be subject to tax under the TRC. Reference should be made to § 32.6 (relating to wrapping supplies, equipment and services).

History

• Authority: The provisions of this § 57.
• Source: The provisions of this § 57.

61 Pa. Code § 57.6 Sales order books.

The entire purchase price of sales order books shall be subject to tax. The fact that one copy of each set of forms contained therein may be transferred by the purchaser to his customers is not relevant under the TRC.

History

• Authority: The provisions of this § 57.
• Source: The provisions of this § 57.

61 Pa. Code § 57.7 Purchase of soft drinks by liquor licensees and beer distributorships.

(a) Retail liquor and malt or brewed beverages licensees may purchase soft drinks without the payment of tax if the licensee tenders to the supplier a resale exemption certificate.

(b) Liquor and malt or brewed beverage licensees are required to collect and remit tax upon the sale of soft drinks having a purchase price of more than 10¢.

(c) Liquor licensees are required to pay use tax upon the purchase price paid by the licensee for soft drinks used in the preparation of mixed drinks or otherwise consumed by the liquor licensee.

The provisions of this § 57.7 issued under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 57.7 adopted September 8, 1972, 2 Pa.B. 1686; amended June 18, 1982, effective June 19, 1982, 12 Pa.B. 1872. Immediately preceding text appears at serial page (40413).

History

• Authority: The provisions of this § 57.
• Source: The provisions of this § 57.

Chapter 58 Miscellaneous

61 Pa. Code § 58.1 Publication of list of taxable and exempt tangible personal property.

The Department will compile a list of taxable and exempt property to be furnished as a general guide to vendors. This list will be published by notice in the Pennsylvania Bulletin at least once every 3 years. In addition, the Department will quarterly publish notice in the Pennsylvania Bulletin of additions, deletions or revisions to the list. A ruling on unusual transactions or on property or services not included in the list may be obtained upon written request to the Department of Revenue, Office of Chief Counsel, Dept. 281061, Harrisburg, Pennsylvania 17128-1061.

The provisions of this § 58.1 amended under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 58.1 amended through March 9, 1984, effective March 10, 1984, 14 Pa.B. 845; amended July 20, 1990, effective July 21, 1990, 20 Pa.B. 3977. Immediately preceding text appears at serial pages (117875) to (117876), (40415) to (40428), (89231) to (89239), (40437) to (40440) and (117877) to (117878).

This section cited in 61 Pa. Code § 32.1 (relating to definitions); 61 Pa. Code § 52.1 (relating to purchases of medicines, medical supplies, medical equipment and prosthetic or therapeutic devices); and 61 Pa. Code § 58.2 (relating to Retailers’ Information Booklet).

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.2 Retailers’ Information Booklet.

The Department may prepare for use by taxpayers a Retailers’ Information Booklet which summarizes this chapter, provides supplemental procedural instructions for the submission of reports and tax remittances and reproduces the list of taxable and nontaxable items published in the Pennsylvania Bulletin under § 58.1 (relating to publication of list of taxable and exempt tangible personal property). In addition, for a temporary period pending the publication of a revised list in the Pennsylvania Bulletin, the booklet may contain listings of new products available to retailers clarifying the taxability of the items.

The provisions of this § 58.2 issued under sections 248.2 and 270 of the Tax Reform Code of 1971 (72 P. S. § § 7248.2 and 7270).

The provisions of this § 58.2 adopted April 24, 1987, effective April 25, 1987, 17 Pa.B. 1665; amended July 20, 1990, effective July 21, 1990, 20 Pa.B. 3977. Immediately preceding text appears at serial page (117878).

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.3 Timbering operations.

There may be no exemption provided in the act for property used in timbering or logging operations.

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.4 Commission vendors of greeting cards.

When a dealer places greeting cards or similar items with a licensed vendor registered under the act who is to sell the merchandise on a commission basis, the registered vendor may report his sales on his sales tax return and regard the dealer as a wholesaler. Should the registered vendor fail to report the transaction or pay the proper tax the dealer would be liable for the tax due.

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.5 Decorated cottage cheese containers.

The purchase by a dairy of decorated glass containers used to package cottage cheese for delivery to its customers is exempt from tax.

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.6 Barbers’ and beauticians’ supplies, materials, tools and equipment.

(a) Tax due on supplies purchased. A barber or beautician shall pay sales tax to his supplier upon the purchase of barber and beautician supplies, materials, tools and equipment, whether for use in the performance of services or for resale. Suppliers who sell property to barbers and beauticians are responsible for collecting and remitting the sales tax to the Department. With respect to tax returns and remittances, suppliers are governed by the provisions of sections 215—219 of the TRC (72 P. S. § § 7215—7219).

(b) Tax to be collected on supplies sold. Although a barber or beautician is required to pay tax to his supplier, he shall also register with the Bureau for the collection and remissions of sales tax upon his sales of property or services, such as charges for performing services on wigs, falls or other type hair pieces. A barber or beautician is not permitted to collect sales tax from a customer on property which he uses in the performance of his services.

(c) Credit for tax paid to supplier. If a barber or beautician makes an ordinary sale of some item of property, he shall collect the full 6.0% sales tax from the purchaser, on the purchase price of the item. However, at the time the tax is reported, a credit may be taken on account of ‘‘Taxes Paid—Purchases Resold’’ (TPPR) against the tax which was collected, equal in amount to the tax which was paid to a supplier. In other words, upon these items he shall pay over to the Bureau a tax payment computed upon the markup on items sold. He shall indicate upon the return the amount of tax which was paid to a supplier upon items sold, which is being credited against the tax collected from customers on account of TPPR. It is not sufficient merely to report and remit tax on the mark-up without indicating to the Bureau upon the return, the amount of credit which was taken.

Example. B, a barber, purchases 200 bottles of hair tonic during the month of August at $1.00 a bottle; B pays tax to the supplier upon the price paid for the hair tonic. B later uses 20 bottles of tonic in his own work and resells 180 bottles at $2.00 per bottle. B collects tax upon the sale of the 180 bottles. In reporting the tax upon the return, B shall complete the return form as follows:

TPPR represents Taxes Paid—Purchases Resold. This represents the amount of tax paid by B to the supplier on the bottles which B resold (180 x $1.00, cost per bottle = $180 x 6% = $10.80).

(d) Tax returns and remittance. Tax returns and remittance shall conform with the following:

(1) With respect to tax returns and remittances by barbers and beauticians, see the provisions of sections 215—219 of the TRC (72 P. S. § § 7215—7219).

(2) Returns shall be filed under § 34.3 (relating to tax returns).

The provisions of this § 58.6 issued under the Tax Reform Code of 1971 (72 P. S. § 7270).

The provisions of this § 58.6 amended December 27, 1985, effective December 31, 1985, 15 Pa.B. 4584. Immediately preceding text appears at serial pages (89242) to (89243).

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.7 Trading stamps.

(a) Companies who distribute and sell trading stamp programs are liable for tax upon the cost to them of trading stamps, booklets, catalogues and promotion items, such as signs, and the like, transferred to the retail merchants in connection with the trading stamp program. The sale of trading stamps to retail merchants, however, is not subject to tax.

(b) The purchase of property by the trading stamp company for the purpose of redeeming stamps is considered to be a purchase for resale and is therefore exempt from tax.

(c) The redemption of trading stamps for the exchange of merchandise is a ‘‘sale at retail’’ under the TRC. Persons redeeming the stamps shall collect sales tax upon the fair retail price of the merchandise being tendered.

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.8 Commercial airport and aircraft operators.

(a) Definitions. The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Casual sales—A sale of an aircraft by a person not engaged in the business of selling aircraft. Commercial aircraft operator—A person, excluding scheduled airlines, who is engaged in any of the following activities as a business for compensation:

(i) Transporting persons or property as a common carrier.

(ii) Selling or leasing of aircraft.

(iii) Providing flight instruction. Common carrier—An air carrier who has obtained a Certificate of Convenience from the Civil Aeronautics Board, or its successor, for the purpose of transporting persons or property. Fair rental value—The rental price which the owner, lessor or other operator of an aircraft normally charges for the rental of the aircraft; or the rental price which would be charged on the open market for the rental of a similar aircraft for a similar period of time under similar circumstances. When the fair rental value is unknown, the Department will recognize 2.0% of the purchase price as a monthly fair rental value of an aircraft provided the purchase price represents the fair market value of such aircraft. Flight instruction—Instruction provided in connection with obtaining a student license, private rating, commercial rating, instrument rating, instructor rating, transport rating, jet rating, instrument instructor rating or any rating or course approved by the Federal Aviation Administration. Prevailing market price—The amount which would be charged for an aircraft on the open market at the time and place of transfer; or the amount which would be charged on the open market for a similar aircraft under similar circumstances. Purchase price—The total value paid or delivered, or promised to be paid or delivered, whether it be money or otherwise in the complete performance of a sale or purchase including delivery charges paid to the seller. The following items may be excluded from purchase price provided they are separately stated:

(i) Tangible personal property taken in trade or exchange.

(ii) Reasonable interest and finance charges in connection with an installment sale. Rental or lease—The transfer of possession or custody of an aircraft, including an aircraft provided or used in connection with flight instruction, but the term does not include the service of a common carrier. Rental or lease payment—The total value paid or delivered, or promised to be paid or delivered, whether it be money or otherwise, for any period under a rental or lease arrangement:

(i) Including payments for maintenance, insurance or repair paid by the lessee to the lessor, or directly to a repairman or insurance carrier.

(ii) Excluding separately stated charges for aircraft fuel sold by the lessor or purchased by the lessee and reimbursed by the lessor. To qualify for exemption, the charges for fuel shall:

(A) Be separately stated on the rental or lease invoice and reflect the quantity and total charge.

(B) Not exceed 110% of the manufacturers consumption rate for the aircraft leased.

(iii) Excluding separately stated charges for instructor fees if such fees are identified. Resident—

(i) A natural person who is domiciled in this Commonwealth, or who maintains a permanent place of abode within this Commonwealth and spends in the aggregate more than 60 days of the year within this Commonwealth.

(ii) A corporation incorporated under the statutes of this Commonwealth, or authorized to do business or doing business within this Commonwealth, or maintaining a place of business within this Commonwealth.

(iii) An association, fiduciary, partnership or other entity domiciled in this Commonwealth, or authorized to do business or doing business within this Commonwealth, or maintaining a place of business within this Commonwealth. Use—The exercise of any right or power incidental to the ownership, custody or possession of tangible personal property including but not limited to the transportation, storage and consumption.

(b) Sales, purchases, leases or rentals involving delivery in this Commonwealth.

(1) Transactions originating in this Commonwealth. Transactions which originate in this Commonwealth and involve physical delivery within this Commonwealth are subject to sales tax, unless the purchaser or lessee is entitled to claim one of the exemptions listed in subsection (d). Examples of taxable transactions include casual or dealer sales or purchases of aircraft, and leases or rentals of aircraft; sales, purchases, leases or purchases of aircraft parts; and sales or purchases of repair or maintenance services.

(2) Transactions originating outside of this Commonwealth. Transactions such as sales, purchases, leases or rentals of aircraft, parts or repair or maintenance services originating outside of this Commonwealth but involving physical delivery within this Commonwealth are also subject to tax. If the seller, lessor or repairman is licensed by the Department to collect Pennsylvania sales tax, the purchaser or lessee is required to pay the applicable tax at the time of purchase or lease. If the seller, lessor or repairman is not licensed by the Department to collect tax, the purchaser or lessee is required to remit the tax directly to the Department. See subsection (h).

(3) Leases and rentals. Leases or rentals taxable at the time of delivery remain subject to Pennsylvania sales tax throughout the entire period of the lease or rental, notwithstanding the fact that the aircraft or aircraft part may be periodically removed from this Commonwealth on one or more occasions during the total rental period. If during a period of out of state use, the lessee is legally required to pay sales or use tax to another taxing jurisdiction having tax credit reciprocity with the Commonwealth, appropriate credit will be given for such tax against Pennsylvania sales tax owing upon the same lease or rental payment. See subsection (e).

(4) Basis for tax. If the transaction is a sale, the tax is imposed upon the purchase price. If the transaction is a lease or rental, the tax is imposed upon the full lease or rental payment.

(c) Purchases, leases or rentals involving delivery outside of Pennsylvania.

(1) General. Transactions which originate either inside or outside this Commonwealth and involve physical delivery outside of this Commonwealth are exempt from Pennsylvania sales or use tax. If the aircraft enters this Commonwealth following delivery, it becomes subject to Pennsylvania use tax unless the purchaser or lessee is entitled to claim one of the exemptions listed at subsection (d). Examples of this type of transaction include the casual sale or the purchase of an aircraft from a dealer; leases or rentals of aircraft; purchases or leases of aircraft parts and purchases of repair or maintenance service.

(2) Use by a resident. If a resident brings an aircraft or aircraft part into this Commonwealth within 6 months following the date of an out-of-state purchase, the use tax is based upon the original purchase price. If after 6 months of the date of purchase, the resident brings the aircraft into this Commonwealth, the resident purchaser may elect to pay use tax based upon the prevailing market value on the date the aircraft or aircraft part enters this Commonwealth. If a resident brings an aircraft or aircraft part into this Commonwealth following its lease or rental ouside of this Commonwealth, the use tax is based upon that portion of the rental or lease payment attributable to the use of the aircraft in this Commonwealth. The resident may be entitled to a tax credit representing sales tax required to be paid to another taxing jurisdiction having tax credit reciprocity with the Commonwealth.

(3) Use by a nonresident. If a nonresident brings an aircraft or aircraft part into this Commonwealth following an out-of-state purchase, lease or rental, the nonresident is required to pay use tax and is entitled to the same exemptions as a Pennsylvania resident. The nonresident is not required to pay tax upon an aircraft or aircraft part:

(i) Used in this Commonwealth for any period of time as a tourist or vacationer.

(ii) Used in this Commonwealth other than as a tourist or vacationer, for a period of 7 days or less.

(iii) Brought into this Commonwealth in connection with the establishment of a permanent business or residence if the aircraft or aircraft part was purchased more than 6 months prior to the date it was brought into this Commonwealth. This 6 month exemption does not apply to aircraft or aircraft parts which were purchased within 6 months of the date they were brought into this Commonwealth in connection with the establishment of a permanent business or residence. The aircraft or aircraft parts, purchased within 6 months, are subject to Pennsylvania use tax upon their original purchase price. If a nonresident brings an aircraft or aircraft part into this Commonwealth following its lease or rental outside of this Commonwealth, and is not entitled to an exemption, the Pennsylvania use tax is based upon that portion of the rental or lease attributable to the use of the aircraft in this Commonwealth. The nonresident may be entitled to a tax credit representing sales tax required to be paid to another taxing jurisdiction having tax credit reciprocity with the Commonwealth.

(4) Payment of tax. Residents and nonresidents who use aircraft or aircraft parts in this Commonwealth following their purchase, lease or rental in another state, have the responsibility to remit any Pennsylvania use tax which may be due directly to the Department. See subsection (h).

(d) Exemptions. Transactions relating to aircraft may be subject to an exemption. If the purchase, lease or rental involves physical delivery within this Commonwealth, the purchaser or lessee is required to give to the seller or lessor a completed exemption certificate in lieu of the tax (Form REV-1220). If the exempt purchaser or lessee brings the aircraft or aircraft parts into this Commonwealth, following the purchase or lease, the purchaser or lessee may claim an exemption at the time of filing with the Department (Form REV-832 ‘‘Aircraft Sales and Use Tax Return’’). Purchasers or lessees entitled to claim an exemption under their appropriate regulations are required to complete the form and provide a reason for the claimed exemption.

(e) Credit against tax. A credit may be granted with respect to the tax due and paid to another state by reason of a tax similar to the tax imposed by the TRC. No credit will be granted unless the other state grants similar tax relief to persons who have paid tax to the Commonwealth. A list of states granting similar tax relief may be obtained from the Department upon request.

(f) Commercial aircraft operators. A commercial operator may purchase an aircraft without payment of tax if the commercial aircraft operator is entitled to claim an exemption under the law. Thereafter, if the commercial aircraft operator makes a taxable use of such aircraft, he is permitted to pay tax to the Department based upon the fair rental value of the aircraft during such taxable use. If the commercial aircraft operator uses the aircraft or aircraft part in performing aerial surveys, crop dusting, pipeline inspections or similar flight activities or uses the aircraft or aircraft part for personal use, he is required to pay to the Department use tax upon the fair rental value of the aircraft or aircraft part during such use.

(g) Flight instruction. Airport operators who engage in the business of providing flight instructions are required to collect sales tax upon all equipment and supplies including the rental of an aircraft used in providing this service. No tax need be collected on charges made for flight instructions. If the charges for an aircraft are not separately stated, the Department will require tax to be collected on the amount billed to the student.

(h) Tax and information returns.

(1) General. Purchases and lessees of aircraft, aircraft parts or repair or maintenance services who do not pay the applicable sales tax to the seller, lessor or repairman are required to remit tax directly to the Department. If the purchaser or lessee is licensed with the Department, the applicable tax shall be remitted with the purchaser’s or lessee’s regular tax return. In the conduct of its audit examinations, the Department will examine both the books and records as well as the aircraft flight logs in order to determine the tax due. If the purchaser or lessee is not licensed with the Department, the following forms shall be used:

(i) Purchase of aircraft. Form REV-832 ‘‘Aircraft Sales and Use Tax Return.’’

(ii) Leases of aircraft, lease of aircraft parts or purchase of repair or maintenance services. Form PA-3. To obtain this tax return, purchaser or lessee must register with the Department of filing Form REV-289 ‘‘Application of Sales, Use or Hotel Occupancy License.’’

(2) Aircraft sales information return. Persons engaged in the business of selling aircraft are required to file an Aircraft Sales Information Return with each regular tax return which is filed with the Department. This form permits the seller to list all purchasers of aircraft during the reporting period, the identification of the aircraft sold, and whether the sale was taxable or exempt.

The provisions of this § 58.8 amended March 9, 1984, effective March 10, 1984, 14 Pa.B. 848. Immediately preceding text appears at serial pages (40444) to (40445).

This section cited in 61 Pa. Code § 33.2 (relating to scope); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.9 School textbook exemption.

Students enrolled in educational institutions approved by the Department of Education are exempt from sales tax on their purchases of textbooks which are used in conjunction with the educational curriculum. This exemption is also applicable to the faculty of such institutions.

(1) To qualify for the exemption granted by section 204(33) of the act of March 4, 1971 (P. L. 6, No. 2) (72 P. S. § 7204(33)) pertaining to sales of textbooks, the following requirements shall be met:

(i) The transaction shall pertain to the sale of a textbook. For these purposes textbook means any book which the educational institution requires students to purchase for use in one of its courses.

(ii) The purchase of the books shall be for use in a school, college or university either public or private, recognized by the Department of Education. The vendor shall verify the purchaser’s association with the educational institution by examining the matriculation card if he is a student, or requiring other evidence of his association with the educational institution if he is a member of the faculty. The vendor shall also maintain a textbook exemption register to be signed by the purchaser at the time of the purchase certifying that he is entitled to this exemption.

(A) It is recommended for simplification of record keeping that this register be maintained as follows:

I certify that I am entitled to the school textbook exemption of section 204(33) of the act.

(B) The vendor should also retain all invoices of his sales so that he will have an auditable record of his transactions.

(iii) The exemption is applicable only if the schools, colleges or universities sell directly or through bookstores designated by them to sell textbooks on their behalf to the students and faculty. The designation shall be granted by the educational institution on request by a bookstore. The educational institution may only designate those bookstores who operate as a school or college bookstore by maintaining in inventory for purchase by the student body the textbooks required by the school, college or university. The relationship between the educational institution and designee shall be evidenced by a written authorization.

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.10 Water softeners and conditioners.

(a) Water softeners and conditioners are considered tangible personal property, irrespective of the manner in which they are attached to a water system. Accordingly, the sale at retail of water softening or conditioning equipment, or parts thereof are subject to sales tax based on the total purchase price, including charges for delivery or installation.

(b) Charges for the rental of a water softener or conditioner are also subject to sales tax based on the total rental price, including delivery or installation charges.

(c) The servicing or repair of water softeners or conditioners is the maintenance of tangible personal property, and a charge therefore is subject to tax.

The provisions of § 58.10 adopted June 1, 1973, effective June 1, 1973, 3 Pa.B. 1059.

This section cited in 61 Pa. Code § 47.14 (relating to water filters or softeners).

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.11 Taxes paid; purchases resold.

(a) A licensee may claim a credit on his sales tax return for taxes paid on purchases of property included in inventory which have been resold or leased in the ordinary course of the licensee’s business. This credit is referred to as a credit for ‘‘Taxes Paid—Purchases Resold’’ or, as abbreviated, TPPR. The Department’s intention in granting this credit is to eliminate the necessity of filing a petition for refund in circumstances where a less formal procedure would be appropriate. This credit is subject to certain limitations in subsections (b) and (c) and will not be considered a substitute for situations in which a refund may be claimed under Chapter 7 (relating to Board of Appeals).

(b) A TPPR credit may be claimed when a licensee pays Pennsylvania sales or use tax on an item included in inventory which the licensee subsequently sells as a sale at retail. In filing the regularly scheduled return, the licensee may recover the tax overpayment by claiming a credit for the amount of tax he has previously paid on the property.

Example. ‘‘A’’ owns and operates an aluminum siding company with 50% of the business derived from retail sales and 50% from construction contracts. ‘‘A’’ enters into a construction contract with ‘‘B’’ whereby he is to install 1,000 square feet of aluminum siding on ‘‘B’s’’ house. ‘‘A’’ purchases the 1,000 square feet of aluminum siding at $3 per square foot and he correctly pays $180 sales tax on the $3,000 purchase price because he anticipates that he will be the ultimate consumer of the siding. Before the contract is performed, ‘‘A’’ decides to sell at retail the aluminum siding at $5 per square foot to ‘‘C’’. At the time of sale ‘‘A’’ properly collects $300 sales tax from ‘‘C’’ who purchases the aluminum siding for $5,000. In reporting the $300 tax which he has collected from ‘‘C’’, ‘‘A’’ is permitted to claim a credit of $180 for the sales tax which he had previously paid on this item.

(c) A claim for TPPR credit is subject to the following limitations:

(1) The TPPR credit shall be taken within 3 years of the original payment of tax on the item which has been sold.

Example. Adopt the facts from the example in subsection (b), except that ‘‘A’’ purchased the aluminum siding in January, 1966 and sold same to ‘‘C’’ in January 1974. Since more than 3 years have elapsed from the original purchase, ‘‘A’’ may not claim a credit on his return for the first quarter of 1974.

(2) The amount of TPPR credit taken on any one return may not exceed the total amount due the Commonwealth for that period before the TPPR credit. The balance on the return may not be less than zero, and the amount of TPPR credit which exceeds the tax due amount may be carried forward on subsequent returns. Documentation shall be retained which supports the TPPR credit amount shown on the return for a period of at least 3 years from the date of the return. The TPPR credit shall be taken within 3 years of the original payment of tax on the item which has been resold or leased. Filing a timely petition for refund is required if the total credit cannot be recovered within 3 years.

Example. Use the same facts as above except that ‘‘A’’ resells the aluminum siding at $2 per square foot. The sale price would be $2,000 and the tax collected would be $120. Since ‘‘A’’ wishes to claim a credit of $180, his credit would exceed the total amount due the Commonwealth for the quarter by $60 (assuming this was his only transaction in the period). The maximum credit ‘‘A’’ may claim is $120. ‘‘A’’ must wait until the following quarter to claim the $60 excess against his remittance for that quarter. In other words, the credit may not reduce amount remitted below zero.

(3) The TPPR credit will only be granted in situations where a licensee has either paid the Commonwealth sales or use tax upon property and has resold or leased the same property as a normal sale at retail of inventory. In claiming the credit for the tax on his return, the taxpayer shall note TPPR beside the word ‘‘credit’’ on the credit line of the return. The amount of the credit shall be entered on the same line in the column provided for amounts. This amount shall be subtracted from the sum of ‘‘total tax due’’, penalty and interest; the remainder should then be inserted opposite the word ‘‘payment’’ on the payment line of the return.

The provisions of this § 58.11 amended under section 270 of the Tax Reform Code of 1971 (P. L. 6, No. 2) (72 P. S. § 7270).

The provisions of this § 58.11 adopted December 27, 1974, effective December 28, 1974, 4 Pa.B. 2709; amended June 23, 1989, effective June 24, 1989, 19 Pa.B. 2663. Immediately preceding text appears at serial pages (115269) and (40449).

This section cited in 61 Pa. Code § 58.13 (relating to carpeting and other floor coverings).

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.12 Flags.

(a) General. This section is intended to clarify the extent to which the sale or use of flags is subject to tax. The basis for the determination of taxability is essentially whether the flag is an official flag of the United States of America or the Commonwealth as defined in this section.

(b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise: Flag of the United States of America—A flag which has been adopted through legislative enactment by the Congress of the United States as an official flag. Flag of the Commonwealth of Pennsylvania—A flag which has been adopted through legislative enactment by the General Assembly of the Commonwealth as an official flag. Accessories—A pole, rope or other hardware which is to be used in connection with the display of a flag. Scope—The sale at retail or use of a flag other than a flag of the United States of America or the Commonwealth of Pennsylvania is subject to tax.

(c) Accessories which are purchased or used in connection with the use of any flag are subject to tax. Where flags of the United States of America or the Commonwealth are sold with accessories and the purchase price of the flag is not separately stated on the invoice, the entire purchase price is subject to tax.

The provisions of this § 58.12 adopted August 20, 1976, effective August 21, 1976, 6 Pa.B. 1990.

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

61 Pa. Code § 58.13 Carpeting and other floor coverings.

(a) General. This section pertains to the sale and/or installation of carpeting, tile, linoleum and other similar floor coverings. This ruling is intended to amplify the provisions of § 31.16 (relating to contractors acting as agents for their exempt customers).

(b) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Construction contract—A sale of floor covering under which the dealer has the responsibility for installation. If an invoice to a customer is written to include the rendering of installation services, such as with notations ‘‘installed’’, ‘‘including installation’’, ‘‘delivered and installed’’, ‘‘paste-down’’ or ‘‘tacking’’, it is presumed that the transaction constitutes a ‘‘construction contract’’.

Example. ‘‘D’’ Dealer agrees to furnish carpeting to ‘‘B’’ Buyer for use in ‘‘B’s’’ home. ‘‘D’’ engages ‘‘C’’ Installer to install the carpeting. ‘‘D’’ includes on ‘‘B’s’’ invoice the notation ‘‘installed’’. The sale between ‘‘D’’ and ‘‘B’’ is a ‘‘construction contract’’. Floor covering—A type of carpeting, tile, linoleum or other floor surfacing materials. Installation—The attachment of floor covering to real estate by tacking, adhesive, hooks, tape or another method. Licensed dealer—A person engaged in the business of selling floor covering who has been issued a license by the Department to collect and remit sales tax. A dealer holding a use tax registration number prefixed with the digits ‘‘89’’ is not a licensed dealer. Purchase price—For purposes of this section, the total value of anything paid or delivered, or promised to be paid or delivered, whether it is money or otherwise.

(i) Items which are includable in purchase price whether or not they are separately stated are:

(A) Cost or value of the floor covering and other materials transferred.

(B) Cost or value of transportation.

(C) Discount paid or allowed after the sale, such as a prompt payment discount.

(ii) Items which may be excluded from purchase price, if separately stated, are:

(A) Employe, volume, trade and cash discounts which establish a new purchase price before the sale is completed.

(B) Interest or finance charges paid by a purchaser on an installment basis. Straight sale—A sale of floor covering not a ‘‘construction contract’’ as defined in this subsection.

Example. ‘‘D’’ Dealer agrees to furnish carpeting to ‘‘B’’ Buyer. ‘‘B,’’ independent of the sale, engages and pays ‘‘C’’ Installer to install the carpeting. The invoice between ‘‘D’’ and ‘‘B’’ does not reflect the notation ‘‘installed,’’ and the like. The sale between ‘‘D’’ and ‘‘B’’ is a ‘‘straight sale.’’

(c) Straight sales. A straight sale of floor covering is a taxable sale of tangible personal property under the sales tax law. Dealers making taxable straight sales of floor covering are required to be licensed with the Department and collect and remit sales tax upon the total purchase price, as defined in subsection (b), unless the purchaser submits a properly executed exemption certificate or other documentary evidence establishing that the transaction is exempt. See subsection (h). The amount representing the purchase price of a taxable ‘‘straight sale’’ is reported on the taxable sale line of the dealer’s regular sales tax return (Form PA-3).

(d) Construction contracts. A construction contract does not constitute a taxable sale of tangible personal property. Charges for the sale and installation of floor covering (construction contract) are not subject to tax. The dealer making the construction contract is not exempt from tax. He is considered to be the consumer of property which he uses or transfers in the performance of the ‘‘construction contract’’ and is liable for the payment of the applicable tax. The tax which the dealer is required to pay is based upon his purchase price, as defined in subsection (b), of property used, consumed or transferred in the performance of the construction contract. The tax may be paid by utilizing one of two procedures set forth at subsection (g). The amount representing a construction contract is reported at the nontaxable sales line of the dealer’s regular sales tax return (Form PA-3).

(e) Repairing of floor covering. Repairing of floor covering shall conform with the following:

(1) Persons who provide the service of repairing or altering of floor covering without removing the floor covering from the place where it is located are considered to be performing the services upon a permanent part of the realty. As a service upon real estate, sales tax is not due upon the contract price. The person performing the services is deemed to be the ultimate consumer of the materials, supplies and equipment used in performing the services and shall pay sales and use tax thereon.

(2) Persons who provide the service of repairing or altering of floor covering involving the removal of floor covering from the place where it is located are performing a taxable service upon tangible personal property. Persons performing these services shall collect and remit sales tax upon the total price charged for performing the services unless the purchase qualifies for exemption under subsection (h). Purchases of machinery, equipment, tools, supplies, materials or other tangible personal property, such as shampoo and other cleaning agents, are subject to tax when purchased for use in performing these services. Persons performing these services are entitled to use the ‘‘resale’’ exemption with respect to purchases of tangible personal property or services which they transfer to their customers.

(f) Subcontractors’ charges for installing floor covering. A subcontractor’s charges for floor covering installation services, as defined in subsection (b) are not subject to sales tax as a separately stated item on the customer’s invoice, since a subcontract to perform the services falls within the definition of a ‘‘construction contract.’’

Example. ‘‘D’’ Dealer agrees to furnish carpeting to ‘‘B’’ Buyer. ‘‘D’s’’ sales invoice includes the notation ‘‘installed.’’ ‘‘D’’ enters into an agreement with ‘‘C’’ Installer for ‘‘C’’ to pick up the carpeting at ‘‘D’s’’ store and install the carpeting in ‘‘B’s’’ home. ‘‘C’s’’ charge of $50 to ‘‘D’’ for performing this service is not subject to tax. ‘‘D’’ would be required to pay the applicable tax upon his purchase price of the carpet.

Example. ‘‘D’’ Dealer makes a ‘‘straight sale’’ of carpeting to ‘‘B’’ Buyer. ‘‘D’’ charges ‘‘B’’ the applicable sales tax. The sales invoice makes no reference to installation. ‘‘B,’’ thereafter, independently contracts with ‘‘C’’ Installer for ‘‘C’’ to install the carpeting in ‘‘B’s’’ home. ‘‘C’s’’ charge of $50 to ‘‘B’’ for the installing of the carpet is not subject to tax.

(g) Purchases. Purchases by licensed dealers and unlicensed dealers shall conform with the following:

(1) Licensed dealer. A licensed dealer may utilize one of the following procedures with respect to each purchase of floor covering:

(i) Claim the ‘‘resale’’ exemption and not pay sales tax to the supplier at the time of purchase. The dealer shall tender to his supplier a properly executed Sales and Use Tax Exemption Certificate (Form REV-1220), indicating thereon the resale basis for exemption and the dealer’s sales tax license number.

(ii) Pay the applicable tax to his supplier on the total purchase price.

(2) A licensed dealer who either claims an exemption or otherwise makes purchases from a supplier not licensed by the Department at the time of the purchase, shall thereafter:

(i) Collect the applicable tax upon his taxable ‘‘straight sales.’’

(ii) Pay use tax upon the purchase price of the materials used in his ‘‘construction contracts.’’

(iii) Accept in good faith an exemption certificate from his customer as to those transactions qualifying as exempt straight sales. See subsection (h).

(3) A licensed dealer who pays the applicable Pennsylvania sales tax to his supplier has fulfilled his tax responsibilities with respect to the use of floor covering and related materials in connection with his construction contracts. If the licensed dealer sells the floor covering or related materials as a taxable or exempt straight sale, he is permitted to take credit for the tax he has paid to his supplier against any tax he has collected, to the extent of the material sold either as a taxable or exempt straight sale. See § 58.11 (relating to taxes paid; purchases resold).

(4) Unlicensed dealer. A dealer who does not make taxable ‘‘straight sales’’ of floor covering or taxable sales of other tangible personal property, is not required to be licensed by the Department. An unlicensed dealer is required to pay tax upon his purchases of floor covering and related materials to his supplier. If the dealer’s supplier is not licensed with the Department for the collection and remission of taxes, the unlicensed dealer is required to obtain a use tax registration number from the Department for the purpose of paying the applicable tax upon materials used in the performance of his construction contracts directly to the Department. If an unlicensed dealer later makes taxable straight sales, the dealer is required immediately to obtain a sales tax license number from the Department as authority to collect and remit tax upon his taxable straight sales. If an unlicensed dealer makes an exempt straight sale of floor covering, the dealer may file a Petition for Refund with the Department for the recovery of tax paid by him upon the floor covering transferred in connection with the exempt straight sale or he may claim the ‘‘resale’’ exemption at the time of purchase. If the unlicensed dealer claims the ‘‘resale’’ exemption on the material which he will sell exempt from tax, the dealer shall provide a statement on the exemption certificate which explains why he is not required to be licensed.

(h) Exemptions. Exemptions shall conform with the following:

(1) Construction contracts. An exemption is not available to a dealer with respect to construction contracts involving floor covering. Thus, a dealer is required to pay the applicable tax upon his use of any floor covering and related materials in the performance of a construction contract, notwithstanding the fact that his contract is with a school, church, college, the Commonwealth, the United States Government, municipal authority, hospital, and the like. Any tax which the dealer is required to pay, nevertheless, may be included as an ingredient of the total contract price charged to the customer, provided it is not invoiced as a separately stated item and identified as sales or use tax.

(2) Straight sales. Straight sales shall conform with the following:

(i) A dealer is permitted to make straight sales of floor covering and related materials to the following organizations and entities without the collection of tax. The dealer shall obtain a properly executed Sales and Use Tax Exemption Certificate (Form REV-1220) in lieu of the applicable tax.

(A) United States Government. See § 32.22 (relating to sales to the United States Government or within areas subject to the jurisdiction of the Federal Government).

(B) Commonwealth of Pennsylvania, its instrumentalities or its political subdivisions. Political subdivisions include public schools, school districts or intermediate units governed by The Public School Code of 1949 (24 P. S. § § 1-101—27-2702). See § 32.23 (relating to sales to the Commonwealth or its political subdivisions and sales by the Commonwealth and its political subdivisions).

(C) Ambassadors, ministers and consular officers of foreign governments who are holders of a United States Department of State Tax Exemption Card. See § 32.24 (relating to sales to ambassadors, ministers and consular officers of foreign governments).

(D) Federal credit unions organized under the provisions of the Federal Credit Union Act (12 U.S.C.A. § § 1751—1795k). See § 48.4 (relating to credit unions).

(E) Pennsylvania credit unions formed and incorporated under 17 Pa.C.S. § § 101—1504 (relating to the Credit Union Code). See § 48.4.

(F) Public authorities formed under the Municipal Authority Acts of 1935 and 1945. See § 32.23.

(G) Cooperative agricultural associations required to pay corporate net income tax under the provisions of the Co-operative Agricultural Association Corporate Net Income Tax Act (72 P. S. § § 3420-21—3420-30). See § 44.2 (relating to cooperative agriculture associations).

(H) Electric cooperative corporations formed under 15 Pa.C.S. § § 7301—7359 (relating to the Electric Cooperative Law of 1990). See § 45.1 (relating to exemption of electric cooperative corporations).

(I) Another organization claiming exempt status under a particular statute shall make application to the Department (Attention: Legal Division) for approval to use the exemption.

(ii) A dealer shall be required to collect the applicable sales tax upon the straight sale of floor covering and related materials to the following organizations or institutions where the floor covering and related materials are of the type which require installation as that term is defined in subsection (b).

(A) Religious organizations.

(B) Charitable organizations.

(C) Nonprofit educational institutions such as private schools, colleges, universities, and the like.

(D) Volunteer fire companies.

Example. ‘‘D’’ Dealer makes a ‘‘straight sale’’ of rubber backed carpeting to ‘‘C’’ Church. Rubber backed carpeting is normally installed by means of adhesive. ‘‘D’’ Dealer is required to collect and remit the applicable tax upon the sale of carpeting to ‘‘C’’ Church.

Example. ‘‘D’’ Dealer makes a ‘‘straight sale’’ of a persian rug to ‘‘U’’ University. Persian rugs do not require installation. ‘‘D’’ Dealer may accept a properly executed exemption certificate from ‘‘U’’ University in lieu of the applicable sales tax.

(iii) A dealer who, within this Commonwealth, performs work or services upon floor covering which thereafter is delivered to an out-of-State location in the completion of a ‘‘straight sale’’ or ‘‘construction contract’’, need not collect sales tax nor pay a use tax upon the floor covering and materials used out-of-State.

Example. ‘‘D’’ Dealer agrees to furnish and install carpeting as a ‘‘construction contract’’ at the home of ‘‘B’’ Buyer in New Jersey. ‘‘D’’ Dealer cuts the carpet at his Commonwealth business location prior to its delivery and installation within the state of New Jersey. ‘‘D’’ Dealer need not collect Pennsylvania sales tax nor pay Pennsylvania use tax upon the carpeting and related materials used in the performance of the construction contract in New Jersey.

The provisions of this § 58.13 amended through August 6, 1977, effective August 7, 1977, 7 Pa.B. 2191; amended June 15, 1990, effective June 16, 1990, 20 Pa.B. 3160; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (149638) to (149642) and (176799) to (176800).

This section cited in 61 Pa. Code § 31.11 (relating to definitions).

History

• Authority: The provisions of this § 58.
• Source: The provisions of this § 58.

Chapter 60 Sales and Use Tax Pronouncements—Statements of Policy

61 Pa. Code § 60.1 Building maintenance or building cleaning services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Administrative supplies—

(i) Tangible personal property which is consumed in one of the following manners:

(A) Used but not transferred by a vendor in the performance of this service.

(B) Transferred by a vendor to another party in connection with the performance of the vendor’s services when the property is not a critical element of the service.

(ii) Examples of the property include sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items. Boiler—A container which is used in the generation of steam from water or the production of hot water which is part of a heat distribution system. The term does not include, as part of the boiler, pipes used to circulate the steam or water, pumps, humidifiers, chimneys, utility lines into the boiler, water makeup systems or hot water heaters which are not part of the heat distribution system. Building—A structure which usually has a roof and walls and is intended to be permanently affixed to real property. The term includes equipment which is an integral part of the structure such as centralheating and air conditioning units, electrical substations, fuel tanks, water tanks or chillers. For purposes of this section, an enclosed telephone booth is a building. Building cleaning services—The performance of services which include the removal of dirt, dust, grease or grime on a building or inside of a building and the keeping of the building and its contents in a clean, neat, polished or orderly appearance. The term includes janitorial, maid or housekeeping services, office or building cleaning, window cleaning, floor waxing, chimney cleaning, acoustical tile cleaning, venetian blind cleaning, cleaning or degreasing service stations, or cleaning enclosed telephone booths. Building maintenance services—The performance of routine and periodic services upon a building which keeps a building in a satisfactory operating condition. The term includes cleaning, oiling, greasing and replacing parts. The term does not include building repair services. Building repair services—Services to a building which do not qualify as a building maintenance service or building cleaning service. Employe—A person who is paid for his work or services by a vendor, including persons on the payroll or independent contractors. Employe costs—Payments made or withheld by a vendor to an employe, including wages, salaries, bonuses, commissions, employment benefits, expense reimbursements, payroll and withholding taxes, employer paid Social Security Tax or Federal and Pennsylvania unemployment taxes. The term does not include employe recruiting, training, liability insurance, bonding expenses and other costs. Employment benefits—Paid leave such as vacation; sick leave; health care such as hospitalization, medical, dental or eye care; retirement benefits; or worker’s compensation. Expense reimbursement—Meals, lodging, mileage or similar expenses incurred by the employe on behalf of the vendor for which the employe is reimbursed. Furnace—An enclosed structure which produces heat and is part of a building heating system such as a central furnace; coal, oil or gas furnace; heat pump; or wood stove. The term does not include, as part of a furnace, the duct work, humidifier, chimney, air cleaner, utility lines into the furnace or similar items. The term does not include radiant heating systems, electric baseboard heating systems, portable heaters, fireplaces or similar systems which are not enclosed structures. Gross fee—The total amount charged by the vendor excluding sales tax. Interior office building cleaning services—Building cleaning services which are performed on the interior of an office building. Office building—A building which is used predominantly for the transaction of business or the performance of a business service. The term includes manufacturing facilities, processing facilities, research and development facilities, public utility facilities, warehouses, laboratories, hospitals, libraries, retail stores, banks, stock brokerages, service stations, repair garages, parking garages, movie theaters, race tracks, bars, restaurants and hotels. A building is predominantly used for the transaction of business or the performance of a business service if more than 50% of the total square footage of the building is actually used for these purposes. The term does not include apartment houses, retirement homes, condominiums and private residences unless the building is predominantly used for the transaction of business or the performance of a business service. Service fee—Gross fees less separately stated employe costs.

(b) Scope.

(1) Effective October 1, 1991, the sale at retail or the use of building maintenance services or building cleaning services is subject to tax when the services are performed in this Commonwealth. The performance of building repair services on buildings or other property which is permanently affixed to realty are not taxable.

(2) Between October 1, 1991, and January 1, 1992, painting and wallpapering of buildings, other than new construction, and maintenance services or cleaning services of boilers, furnaces or parts thereof were taxable. Effective January 1, 1992, the following services are not taxable: the interior painting, wallpapering and application of other like coverings to walls, ceilings or floors; the exterior painting of buildings; and maintaining, cleaning, or repairing of boilers, furnaces or parts thereof. Effective July 1, 2000, the maintenance or repairs of residential air-conditioning equipment or parts thereof are not taxable.

(3) Between October 1, 1991, and March 31, 1995, the entire purchase price of interior office building cleaning services was taxable. Effective April 1, 1995, separately stated employe costs related to interior office building cleaning services are not taxable if these costs are specifically itemized or listed in aggregate on the invoice.

Example: An attorney practices law from an office located in a private residence. The office, which has its own entrance and is a separate area in the private residence, comprises less than 50% of the total square footage of the private residence. The attorney contracts with a cleaning service to clean only the office portion of the private residence. Because the private residence is not predominantly used as an office building, employe costs related to the building cleaning services, even if separately stated, are subject to sales tax.

(4) When interior office building cleaning services are provided by a sole proprietor, employe costs also include net profit or loss as reportable on the sole proprietor’s Pennsylvania or Federal Schedule C for the prior year. When interior office building cleaning services are provided by a partnership, employe costs also include the partners’ net profits from business and guaranteed payments for services rendered as reportable for purposes of Pennsylvania individual income tax for the prior year. Gross sales minus net profit divided by gross sales equals the ratio which is applied to invoices to determine the taxable amount of the sale by a sole proprietor or a partnership.

Example: In 1994, ‘‘A,’’ a sole proprietor, reported gross sales of $50,000 and a net profit of $20,000. The amount of ‘‘A’s’’ gross sales which is subject to tax is $30,000 or 60%. During 1995, ‘‘A’’ shall collect tax on 60% of the amount invoiced for interior office building cleaning services.

(5) When building maintenance services or building cleaning services are provided by a lessor to a lessee, the providing of the services, including separately stated employe costs, is taxable unless the services are incidental to the value of the lease. For purposes of this section, incidental services would be the performance of building maintenance services or building cleaning services to the area outside of the building being leased or the common areas within the building.

Example: An apartment complex is comprised of 100 separate units and the apartment owner provides general maintenance and cleaning outside the building and the hallways inside the building. The providing of these maintenance and cleaning services is not taxable because the services are incidental to the providing of an apartment.

(c) Building cleaning services. Building cleaning services include:

(1) Housekeeping services.

(2) Office cleaning, such as window cleaning, carpet cleaning, floor waxing and furniture polishing.

(3) Chimney and fireplace cleaning, inside and outside of the building.

(4) Cleaning light fixtures.

(5) Telephone booth cleaning.

(6) Cleaning and degreasing of service stations equipment and areas.

(7) Indoor pool cleaning.

(8) Fire restoration cleaning services, not including building repair services.

(9) Siding or exterior cleaning of a building, including the pressure washing of a building.

(10) Duct work cleaning.

(11) Acoustical tile cleaning.

(12) Venetian blind cleaning.

(13) Examples.

(i) A contractor performs fire restoration services on a building. These services include both cleaning the building and repairing it. The invoice separately states the charges for cleaning services and the charges for repair services. Only the charges for cleaning services are subject to sales tax. The charges for repair services are not taxable.

(ii) A contractor performs fire restoration services on a building. These services include both cleaning the building and repairing it. The invoice does not separately state the charges for cleaning services and the charges for repair services. All of the charges are subject to sales tax.

(d) Building maintenance services. Building maintenance services include:

(1) General maintenance of an apartment building.

(2) Replacing light bulbs.

(3) Elevator maintenance, and burglar and security alarm maintenance.

(4) Inspections in connection with maintenance services.

(5) Central air conditioning maintenance.

(6) Changing of air filters.

(e) Examples of services which are not building maintenance services or building cleaning services. The following are examples of services which are not building maintenance services or building cleaning services:

(1) Building repair services to buildings.

(2) Maintenance of boilers, furnace or parts thereof (effective January 1, 1992).

(3) Cleaning of outdoor in-ground pools.

(4) Painting or wallpapering interior walls, ceilings or floors.

(5) Exterior building painting.

(6) Sandblasting real property; pointing of bricks.

(7) Carpet dying.

(8) Snow plowing.

(9) Plumbing repairs, such as opening drains or repairing water leaks.

(10) Driveway sealing.

(11) Drapery and upholstery cleaning which are otherwise taxable as services to tangible personal property.

(12) Maid services performed in accordance with a two party transaction where the individual for whom the services are performed is required to withhold Federal Income and Social Security Taxes.

(13) Maintenance of residential air-conditioning equipment or parts thereof (effective July 1, 2000).

(f) Interior office building cleaning services. When a taxable building cleaning service enumerated in subsection (c) is performed on the interior of an office building, the purchase price is computed in accordance with subsection (g).

(g) Purchase price.

(1) Building maintenance and cleaning services. The total amount charged for performing building maintenance services or building cleaning services is subject to tax. The failure to separately state taxable building maintenance services or building cleaning services from other nontaxable services on the invoice requires the charging of tax on the total invoice amount.

Example: The lease of offices within a building includes the providing of janitorial services for each of the offices. Since the janitorial services are not incidental to the lease of the offices, the janitorial services are taxable and if the services are not separately stated, the entire lease amount is taxable.

(2) Interior office building cleaning services.

(i) There are three methods to compute the purchase price of interior office building cleaning services:

(A) Gross fee method. To the extent that employe costs are not separately stated on the invoice, the purchase price is the gross fee charged by the vendor.

(B) Actual service fee method. To the extent that employe costs are separately stated on the invoice, the purchase price is the actual service fee charged by the vendor.

(C) Average employe cost or average service fee method. A vendor may, at its own risk, calculate the purchase price based upon the average employe cost or average service fee applicable to its total Pennsylvania business during a prior representative period. If it is determined that the average employe cost reported was higher than the actual employe cost or if the average service fee reported was less than the actual service fee, the vendor will be assessed a tax deficiency plus interest and penalties.

(ii) If either the actual service fee, average employe cost or average service fee method is used, at a minimum, the invoice provided to the purchaser shall contain the following information:

(3) Taxable portion of purchase price. The taxable portion of the purchase price for interior office building cleaning services shall be computed in accordance with this section. Chapter 33 (relating to computation of tax) does not apply to the extent that Chapter 33 is inconsistent with this section.

(h) Exclusions.

(1) Building maintenance services or building cleaning services are exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also exempt if purchased by the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions including public school districts. The manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exclusion does not apply.

(2) The vendor of building maintenance services or building cleaning services may claim the resale exemption upon its purchase of tangible personal property which is transferred to its purchaser or a third party in the performance of its building maintenance services or building cleaning services. The vendor may also purchase building maintenance services or building cleaning services from another provider which the vendor resells to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of another taxable service which it may use in the performance of its building maintenance services or building cleaning services.

(i) The following are examples of property which may be purchased exempt for resale when used in the performing of building maintenance services or building cleaning services:

(A) Polishes, waxes and air fresheners.

(B) Parts, belts, freon, filters and fittings.

(C) Light bulbs.

(ii) The following are examples of property which is taxable when used in the performing of building maintenance services or building cleaning services:

(A) Cleaners and soaps.

(B) Brooms, mops, brushes, dust rags, buckets, polishers, scrubbers and ladders.

(C) Grease guns, oil cans, testing and inspection equipment.

(D) Administrative supplies.

The provisions of this § 60.1 adopted January 8, 1993, effective January 9, 1993, 23 Pa.B. 176; amended October 6, 1995, effective October 7, 1995, 25 Pa.B. 4233; amended March 10, 2006, effective March 11, 2006, 36 Pa.B. 1130. Immediately preceding text appears at serial pages (268443) to (268444), (200673) to (200676) and (268445).

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.3 Disinfecting or pest control services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Administrative supplies—

(i) Tangible personal property which is consumed in one of the following manners:

(A) Used but not transferred by a vendor in the performance of this service.

(B) Transferred by a vendor to another party in connection with the performance of the vendor’s services when the property is not a critical element of the service.

(ii) Examples of this property include sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items. Agricultural commodity—An unprocessed farm product. Disinfecting—The performance of services to property which destroys or sanitizes harmful microorganisms, including deodorizing. Fumigation—The performance of services to property which disinfects or destroys pests through the use of smoke, gas, gaseous chemicals or other fumigants. Pest—A form of animal life which is considered detrimental, including termites, insects or rodents. The term does not include plant life including weeds. Pest control—The performance of services to trees, shrubs, animals, buildings and other property which neutralizes, exterminates, traps, recovers or prevents pests, including fumigation.

(b) Scope. Effective October 1, 1991, the sale at retail or use of disinfecting or pest control services is subject to tax when these services are:

(1) Performed on real property which is located in this Commonwealth.

(2) Performed on tangible personal property located in this Commonwealth unless the property is delivered to a location outside of this Commonwealth.

(3) Performed on tangible personal property outside this Commonwealth and the property is delivered to a location in this Commonwealth.

(c) Taxable examples. The following are examples of taxable disinfecting or pest control services:

(1) Inspection or certification provided in conjunction with disinfecting, deodorizing, exterminating, fumigating or pest control services whether or not billed separately.

(2) Service policy fees or renewals for disinfecting, deodorizing, exterminating, fumigating or pest control services.

(3) Deodorizing and disinfecting buildings, restrooms, washrooms or other areas in a building.

(4) Disinfecting hot tubs, food processing equipment, wearing apparel, medical instruments, trucks, containers or other property.

(5) Pest proofing.

(6) Disinfecting, deodorizing, exterminating, fumigating or pest control services purchased by persons engaged in manufacturing, processing, rendering public utilities services, mining, printing or photography.

(d) Examples. The following are examples of services which are not disinfecting or pest control services:

(1) Inspection or certification not provided in conjunction with disinfecting, fumigating, deodorizing or pest control services.

(2) Application of herbicides or fungicides to property other than lawns.

(3) Integrated pest management planning programs not involving other pest control services.

(e) Purchase price. Tax shall be imposed on the total charge for disinfecting or pest control services. The failure to state taxable disinfecting or pest control services from other nontaxable charges on the invoice requires the charging of tax on the total invoice amount.

(f) Exclusions.

(1) Disinfecting or pest control services are exempt if they are purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also exempt if purchased by the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions including public school districts. The manufacturing, mining, processing or the public utility exclusion does not apply.

(2) The vendor of disinfecting or pest control services may claim the resale exemption upon its purchase of tangible personal property which is transferred to its purchaser or a third party in the performance of its disinfecting or pest control services. The vendor may also purchase disinfecting or pest control services from another provider which the vendor resells to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of other taxable services which it may use in the performance of its disinfecting or pest control services.

(i) The following are examples of property which may be purchased exempt for resale when used in the performing of disinfecting or pest control services:

(A) Insecticides or other similar types of chemicals.

(B) Dispensers and dispenser paper towels.

(C) Dispenser soap and dispenser deodorants.

(ii) The following are examples of property which are taxable when used in the performing of disinfecting or pest control services:

(A) Spray applicators.

(B) Mops and brushes.

(C) Animal traps.

(D) Administrative supplies.

(3) The spraying of gypsy moth control chemicals on trees which are intended for commercial harvesting is exempt.

(4) The purchase of disinfecting or pest control services which are predominately used directly in farming, dairying, agriculture, floriculture and horticulture, effective January 1, 1992, is exempt.

(5) The fumigation of agricultural commodities or containers for agricultural commodities, effective January 1, 1992, is exempt.

The provisions of this § 60.3 adopted January 8, 1993, effective January 9, 1993, 23 Pa.B. 179.

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.4 Help supply services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Administrative supplies—

(i) Tangible personal property which is consumed in one of the following manners:

(A) Used but not transferred by a vendor in the performance of this service.

(B) Transferred by a vendor to another party in connection with the performance of the vendor’s services when the property is not a critical element of the service.

(ii) Examples of this property include sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items. Employe—A person who is paid for his work or services by a vendor, including persons on the payroll or independent contractors. Employe costs—Payments made or withheld by a vendor to an employe, including wages, salaries, bonuses, commissions, employment benefits, expense reimbursements, payroll, withholding taxes, employer paid social security tax or Federal and Pennsylvania unemployment taxes. The term does not include employe recruiting, training, liability insurance, bonding expenses and other costs. Employment benefits—Paid leave such as vacation; sick leave; health care such as hospitalization, medical, dental or eyeglasses; retirement benefits; or worker’s compensation. Expense reimbursement—Meals, lodging, transportation or another expense incurred by the employe on behalf of the vendor for which the employe is reimbursed. Gross fee—The total amount charged by the vendor excluding sales tax. Help supply service—The providing of an individual by a vendor to a purchaser whereby the individual is an employe of the vendor and the work performed by the individual is under the supervision of the purchaser.

(i) The term includes the type of service provided by labor and manpower pools, employe leasing services, office help supply services, temporary help services, usher services, modeling services or fashion show model supply services.

(ii) The term does not include farm labor, home health care, human health-related services, including nursing and personal care. Personal care includes providing at least one of the following types of assistance to persons with limited ability for self-care:

(A) Dressing, bathing or feeding.

(B) Supervising self-administered medication.

(C) Transferring a person to or from a bed or wheelchair.

(D) Routine housekeeping chores when provided in conjunction with and supplied by the provider in clause (A), (B) or (C). Service fee—Gross fees less separately stated employe costs. Supervision—Directing the work activities of the vendor’s employe either directly or through a supervisor provided by the vendor.

(b) Scope. Effective October 1, 1991, the sale at retail or use of help supply service is subject to tax. If the delivery or use of the service occurs in this Commonwealth, it is subject to tax. For purposes of this section, delivery means an employe reporting for work at a location in this Commonwealth and use means an employe performing work at a location in this Commonwealth. If the purchaser is located in this Commonwealth, it is presumed that delivery occurred at a location in this Commonwealth unless otherwise documented. These principles may be illustrated as follows:

(1) A Pennsylvania purchaser requests a vendor’s employe to report to the purchaser’s location in this Commonwealth. This is a taxable transaction.

(2) A Pennsylvania purchaser requests a vendor’s employe to report to its out-of-State location. No tax is due. However, if the employe does enter this Commonwealth for work purposes, that portion of the transaction is taxable. For example, if the billing period is weekly and the purchaser is billed $100 a day and the employe works 1 day in this Commonwealth, $100 is the gross fee that is reportable in this Commonwealth.

(3) A non-Pennsylvania purchaser requests a vendor’s employe to report to a location in this Commonwealth. This is a taxable transaction.

(4) A non-Pennsylvania purchaser requests a Pennsylvania vendor’s employe to report to its out-of-State location. No tax is due. If the employe subsequently reports to a location in this Commonwealth, that portion of the transaction is taxable. If the employe is merely passing through this Commonwealth, for example a truck driver traveling from New York to Ohio via Pennsylvania, no tax would be due.

(c) Purchase price.

(1) The purchase price for help supply services subject to tax for the period October 1, 1991, to December 31, 1991, is the gross fee charged.

(2) Effective January 1, 1992, there are three methods to compute the purchase price subject to tax:

(i) Gross fee method. To the extent that employe costs are not itemized or stated on the invoice as in subparagraph (ii), the service fee shall be the gross fee.

(ii) Service fee method. The service fee charged by the vendor is subject to tax.

(iii) Average employe cost or average service fee method. A vendor may, at its own risk, compute its service fee by utilizing an average employe cost or average service fee applicable to its total Pennsylvania business. If it is determined that the average employe cost reported was higher than the actual costs or if the average service fee reported was less than the actual amount, the vendor will be assessed a tax deficiency plus interest and penalties.

(3) If the service fee, average employe cost or average service fee methods are used, at a minimum, the invoice provided to the purchaser shall contain the following information:

(d) Examples. The following are examples of taxable help supply services:

(1) A contractor needs immediate help and obtains the services of employes of another contractor.

(2) Transactions between affiliated groups including common paymasters. If the gross fees and employe costs are identical, no service fee exists and no tax is due.

(3) Transactions identified as management fees which include taxable help supply services are taxable upon the total charge unless the taxable help supply services are separately stated.

(4) A law firm needs a secretary for a day and obtains the secretary from a vendor.

(5) A law firm requires the services of a specialized attorney and obtains the attorney from a vendor.

(6) A construction company requires the services of an engineer for 2 years and obtains the engineer from a vendor.

(7) An accounting firm acquires the contract for an assignment that requires more personnel than they have available. The firm contracts with another accounting firm to provide the additional personnel required. The contract for the additional personnel is a taxable transaction. If the two firms had bid the assignment contract as a joint venture, no tax would be due.

(8) A business with one computer operator requires another operator for 2 days a week and obtains an operator from a vendor. If the company had hired the second operator as an employe, no tax would be due.

(9) Exempt equipment rental with an operator. When equipment is exempt and the fee for the operator is separately stated, the operator fee is taxable. If the operator fee is not separately stated, the total charge is taxable.

(e) Examples. The following are examples of services which are not help supply services:

(1) A nursing home requires the services of a doctor once a month and acquires the doctor through a vendor.

(2) A law firm requires the services of a specialized attorney and engages the services of an attorney who is an independent contractor.

(3) A Pennsylvania trucking company requests a Pennsylvania vendor to furnish truck drivers that are to report to the purchaser’s out-of-State location.

(f) Exclusions.

(1) Help supply services are exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations, and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also exempt if purchased by the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions including public school districts. The manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exclusion does not apply.

(2) The vendor of help supply services may claim the resale exemption upon its purchase of tangible personal property which is transferred to its purchaser or a third party in the performance of its help supply services. The vendor may also purchase help supply services from another provider which the vendor resells to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of other taxable services which it may use in the performance of its help supply services.

The provisions of this § 60.4 adopted January 8, 1993, effective January 9, 1993, 23 Pa.B. 180.

This section cited in 61 Pa. Code § 60.8 (relating to secretarial and editing services).

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.5 Employment agency services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Administrative supplies—

(i) Tangible personal property which is consumed in one of the following manners:

(A) Used but not transferred by a vendor in the performance of this service.

(B) Transferred by a vendor to another party in connection with the performance of the vendor’s services when the property is not a critical element of the service.

(ii) Examples of the property include sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items. Employe—A person who performs work for an employer and is paid for the performance of work or services, including persons on the payroll or independent contractors. Employer—A person who hires an individual for the performance of duties as an employe. Employment agency—A vendor engaged in the business of providing employment agency services. Employment agency services—The service of attempting to procure or procuring temporary or permanent employment for prospective employes or employers. Examples of employment agency services include executive placing services or labor contractor employment agencies. Employe costs—Payments made or withheld by a vendor to an employe, including wages, salaries, bonuses, commissions, employment benefits, expense reimbursements, payroll, withholding taxes, employer paid social security tax or Federal and Pennsylvania unemployment taxes. The term does not include employe recruiting, training, liability insurance, bonding expenses and other costs. Gross fee—Total amount charged by the seller excluding sales tax. Service fee—Gross fees less separately stated employe costs.

(b) Scope. Effective October 1, 1991, the sale at retail or use of employment agency services is subject to tax.

(1) An employe reporting to work at a location in this Commonwealth is subject to tax.

(2) An employe reporting to work at a location outside of this Commonwealth is not subject to tax, unless the employe is assigned to work in this Commonwealth.

(3) If the employe is located in this Commonwealth, it is presumed that the employment agency service is subject to tax unless documentation supports the reporting to a location outside of this Commonwealth.

(c) Examples of taxable services. The following are examples of taxable employment agency services:

(1) A Pennsylvania resident contacts a Pennsylvania vendor and is placed with an employer at a location in this Commonwealth.

(2) A Pennsylvania resident contacts an Ohio vendor and is placed with an employer at a location in this Commonwealth.

(3) A Pennsylvania employer contacts a vendor outside this Commonwealth and accepts an employe for its location in this Commonwealth.

(4) A New York resident contacts a New York vendor and is placed with an employer at a location in this Commonwealth.

(5) A Pennsylvania vendor paid on an hourly rate interviews and recommends a potential employe to an employer.

(d) Examples of services which are not employment agency services. The following are examples of services which are not employment agency services:

(1) A Pennsylvania resident contacts a Pennsylvania vendor and is placed with an employer at a location outside of this Commonwealth.

(2) A Pennsylvania resident contacts a New York vendor and is placed with an employer in New Jersey.

(3) A New York resident contacts a Pennsylvania vendor and is placed with an employer at a location in New York.

(4) A Pennsylvania employer contacts a vendor outside of this Commonwealth and accepts an employe for its out-of-State location.

(e) Purchase price.

(1) Effective October 1, 1991, through December 31, 1991, the purchase price of employment agency services subject to tax is the gross fee.

(2) Effective January 1, 1992, the purchase price of employment agency services subject to tax is the service fee if the employe costs are separately stated; otherwise, the gross fee is subject to tax.

(3) If the purchase price is canceled or renegotiated, tax is due on the adjusted purchase price. If an adjustment to the tax occurs, the vendor is permitted to offset the adjustment against current tax liabilities.

(4) If the purchase price is paid on an installment basis, the tax is due on the full purchase price and is payable at the time the purchaser accepts the contract or within 30 days of acceptance of the contract.

(f) Exclusions.

(1) Employment agency services are exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also exempt if purchased by the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions including public school districts. The manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exclusion does not apply.

(2) Employment services provided by theatrical employment agencies or motion picture casting bureaus.

(3) Farm labor.

(4) A vendor of employment agency services may claim the resale exemption upon its purchase of tangible personal property which is transferred to its purchaser or a third party in the performance of its employment agency services. The vendor may also purchase employment agency services from another provider which the vendor resells to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of another taxable service which it may use in the performance of its employment agency services.

The provisions of this § 60.5 adopted January 8, 1993, effective January 9, 1993, 23 Pa.B. 182.

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.6 Lobbying services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Administrative supplies—

(i) Tangible personal property which is consumed in one of the following manners:

(A) Used but not transferred by a vendor in the performance of this service.

(B) Transferred by a vendor to another party in connection with the performance of the vendor’s services when the property is not a critical element of the service.

(ii) Examples of the property include sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items. Communication—A verbal or written message. Expenses—Includes office supplies, travel, meals, entertainment, gifts, costs of communication, cost of maintaining an office and other costs connected with the performance of lobbying services. Formal action—The promulgation, amendment or repeal of a ruling or regulation. Lobbying services—The term means to advocate:

(i) The passage or defeat of legislation to members or staff of the General Assembly, or approval or veto of legislation to the Governor or his staff.

(ii) To officers or employes of an agency of the Commonwealth that the agency take or refrain from taking formal action, or that an agency engage in lobbying services as defined in subparagraph (i). Lobbyist—A natural person who is registered under the Lobbying Registration and Regulation Act (46 P. S. § § 148.1—148.76) to perform lobbying services. Purchase price—

(i) For purposes of this section, the term means compensation, expense or obligation, whether in money or property, paid or due to a lobbyist for the performance of lobbying services.

(ii) The term does not include salary or wages paid by the employer to an employe employed to perform lobbying services solely for the employer.

(iii) The term purchase price includes that portion of:

(A) An advance payment to a contract lobbyist relating to the expenditure of time and expenses by the lobbyist in the performance of lobbying services for its purchaser.

(B) The dues or fees received by an organization or firm relating to the expenditure of time and expenses by an employe of the organization or firm in the performance of lobbying services for a member or purchaser. Total lobbying activities—The total time spent by a registered lobbyist in the performance of nontaxable and taxable lobbying services.

(b) Scope. Effective October 1, 1991, the sale at retail or use of lobbying services is subject to tax if the benefit or delivery of the service occurs in this Commonwealth. The tax is imposed upon the purchase price of the lobbying service. The lobbyist or organization performing the lobbying service for its members, has the responsibility to collect and pay the tax to the Department. Purchasers of lobbying services who have not paid tax upon lobbying services to their lobbyist are required to pay the applicable tax directly to the Department.

(c) Examples of lobbying services. The following are examples of taxable lobbying services:

(1) Communications to members or staff of the General Assembly advocating the passage or defeat of legislation.

(2) Communications to the Governor or his staff advocating the approval or veto of legislation.

(3) Communications to an agency advocating the promulgation, amendment or repeal of a ruling or regulation.

(4) Communications to an agency advocating that the agency engage in performing lobbying services as defined in this section.

(d) Examples of services which are not lobbying services. The following are examples of services which are not lobbying services:

(1) Review of proposed legislation, amendments or tax journals.

(2) Communications to a client, another lobbyist, members of an association or to a private individual.

(3) Drafting proposed testimony.

(4) Attending a meeting of the General Assembly or a committee session of the General Assembly or an agency solely for the purpose of monitoring developments and not involving advocacy.

(5) Communications to members of the United States Congress and their staffs, the office of the President and his staff, and members of a Federal agency.

(6) Communications to elected and appointed officials of political subdivisions of this Commonwealth and their employes.

(7) Communications to elected and appointed officials of state governments other than the Commonwealth.

(e) Purchase price.

(1) The total purchase price paid for the performance of lobbying services is subject to tax.

(2) A lobbyist who is required to collect and remit tax upon the purchase price paid for the performance of lobbying services may elect to report and pay tax upon either the ‘‘service by service’’ or ‘‘formularly’’ methods of reporting tax.

(i) Service by service method. Under this method, taxes are collected or set aside from the advance payment each time a taxable lobbying service is performed. The total tax due is reported and paid at the time of filing the licensee’s tax return.

(ii) Formulary method.

(A) Under this method, the licensee chooses a representative sample period within a calendar year during which both nontaxable services and taxable lobbying services are performed.

(B) Utilizing the sample representative period, the licensee compares the amount representing total expenditures of time and expenses for total lobbying activities within the amount representing the total expenditures of time and expenses for taxable lobbying services.

(C) The resulting ratio or percentage is applied to total expenditures of time and expenses for total lobbying activities throughout the calendar year to establish the amount upon which the sales tax is calculated.

(D) Organizations performing lobbying services for their members may also utilize the formulary method in reporting tax.

(I) The organization which has paid salary and expenses for an employe lobbyist should follow the procedures in this subparagraph by comparing the total gross salary and expenses of its employe lobbyist relating to total lobbying activities with the gross salary and expenses of the employe lobbyist relating to taxable lobbying services.

(II) The resulting ratio or percentage would then be applied by the organization to the total gross salary and expenses relating to total lobbying activities performed by the employe lobbyist throughout the calendar year to establish the amount upon which the sales tax is calculated.

(III) Gross salary and expenses paid to the lobbyist employe for services rendered to the organization which do not involve lobbying activities would not be used in calculating the ratio or percentage.

(IV) An organization need not make a specific charge to the member for lobbying services and collect the applicable tax.

(V) The organization may accrue tax based upon method 1 or 2 and remit the tax directly to the Department.

(E) In the event of an audit of the records of the organization or lobbyist, the Department will verify the representativity of the ‘‘sample.’’ If the representativity of the ‘‘sample’’ is not verifiable, the lobbyist will be assessed on a transaction by transaction basis.

(F) An organization or a lobbyist utilizing the formulary reporting method shall establish a new ratio or percentage for each calendar year. The mixing of methods within a calendar year is not permitted.

(G) Lobbyists who maintain their principal office within the city of Philadelphia are required to collect the 1% Philadelphia sales tax in addition to the 6% State sales tax upon the expenditures of time and expenses in the performance of lobbying services.

Example: Lobbyist ‘‘L,’’ located in Pittsburgh, received $1,000 from A company to perform lobbying activities. ‘‘L’’ elects to collect and pay tax on the formulary basis. ‘‘L’’ chooses the month of March as the representative period. During March, ‘‘L’’ incurred $100 in time and expenses in performing total lobbying activities. Of this amount, $75 represented time and expenses in performing taxable lobbying services. ‘‘L’s’’ ratio or percentage is .75 ($75 ÷ $100 = .75). ‘‘L’’ files quarterly tax returns. From January to March, ‘‘L’’ incurred $300 in time and expenses in performing total lobbying activities. ‘‘L’s’’ 1st quarter tax return would reflect the following: Gross Sales $300, Nontaxable Sales $75, taxable sales $225 ($300 x .75 = $225). Sales tax would be calculated on $225. ‘‘L’’ would use the same procedure at the time of filing his remaining quarterly sales tax returns during the calendar year.

(3) Purchasers of lobbying services who have not paid tax upon lobbying services to their lobbyist and are required to pay tax directly to the Department may elect to pay tax in accordance with subsection (b).

(f) Exclusions.

(1) Exempt purchases. Lobbying services are exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also exempt if purchased by the Federal government or its instrumentalities; the Commonwealth, its instrumentalities or subdivisions including public school districts. The manufacturing, printing, publishing, processing, farming, dairying, mining or public utility exclusion does not apply.

(2) Resale exemption.

(i) The vendor of lobbying services may claim the resale exemption upon the purchase of tangible personal property which is transferred to its purchaser of the service in the performance of its lobbying services.

(A) The resale exemption does not apply to the transfer of property to the individual to whom the lobbying services are directed.

(B) A lobbyist may also claim the resale exemption upon the purchase of lobbying services from another lobbyist which the purchasing lobbyist resells to its purchaser.

(C) A lobbyist may not claim the resale exemption upon the purchase of administrative supplies or the purchase of other taxable services which the lobbyist may use in the performance of lobbying services.

(ii) The following are examples of property which may be purchased exempt for resale when transferred to the purchaser in the performing of lobbying services:

(A) Writing or typing paper.

(B) Envelopes.

(C) Labels.

(D) Typewriter ribbons.

(iii) The following are examples of property which are taxable when used in the performing of lobbying services:

(A) Telephones.

(B) Fax machines.

(C) Typewriters.

(D) Word processors.

(E) Administrative supplies.

(F) Postage meter devices.

(G) Meals, gifts and other property or service provided to the individual to whom the lobbying service is directed.

The provisions of this § 60.6 adopted January 8, 1993, effective January 9, 1993, 23 Pa.B. 183.

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.7 Sale and preparation of food and beverages.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Candy and gum—The term candy refers to all types of preparations commonly referred to as candy, including hard candy, caramel, chocolate candy, licorice, fudge, cotton candy, caramel coated popcorn, chocolate coated granola bars and similar items. The term gum refers to preparations commonly referred to as gum, including chewing gum, bubble gum and similar items. Caterer—A business engaged in the service of providing prepared or ready-to-eat food and beverages for immediate consumption at a specific meal, affair or social function, usually at the premises of one other than the caterer, and normally including eating and drinking utensils. Eating establishment—A business, or an identifiable location within a business, which advertises or holds itself out to the public as being engaged in the sale of prepared or ready-to-eat food or beverages, to customers for their immediate consumption on or off the premises. An eating establishment may be mobile or immobile and may or may not provide seating accommodations for its customers. The following are examples of eating establishments: restaurants, cafes, lunch counters, private and social clubs, taverns, dining cars, hotels, night clubs, fast food operations, honor boxes, pizzerias, fairs, carnivals, lunch carts, ice cream stands, snack bars, lunch trucks, cafeterias, employe cafeterias, theaters, stadiums, arenas, amusement parks, juice stands, carry out shops, coffee shops, popcorn stands, automats, vending machines and similar establishments. Food and beverages—Includes items for human consumption, regardless of quantity. Examples are sandwiches, hot pizza, salad bar items, crackers, cakes, ice cream, baked goods, potato chips, yogurt, hot or cold drinks, milk, natural fruit or vegetable juices, cocoa, soft drinks, candy, gum and other similar items whether or not the item is individually packaged in a sealed wrapper. The term does not include water or ice, malt or brewed alcoholic beverages or spirituous and vinous liquors. Food retailer—A business, or an identifiable location within a business, which is engaged in the sale of grocery type items for other than immediate consumption. The following are examples of food retailers: bakeries, pastry shops, doughnut shops, delicatessens, grocery stores, supermarkets, farm markets, convenience stores and similar businesses. Gratuity—A voluntary payment by the purchaser or a reasonable mandatory charge by the vendor, in lieu of the voluntary payment, which is billed to the purchaser for services rendered in connection with the purchase of food or beverages or hotel or motel accommodations. Grocery type items—Includes baked goods such as pies, cakes, bread and similar items; produce such as fresh fruit and vegetables; canned goods; meat and cheese by the pound; milk in pint, quart, 1/2 gallon or gallon quantities; prepackaged ice cream products such as ice cream by the pint, quart, 1/2 gallon or gallon quantities; ice cream cakes and pies; frozen foods; unprepared fish and seafood; bottled honey; bottled syrup; jam; jelly and similar items. Nonfood retailer—A business engaged in the sale of nonfood items. The following are examples of nonfood retailers: department stores, service stations, clothing stores, book stores and similar businesses. Selected food and beverage items—Soft drinks; meals; sandwiches, including hoagies, hot dogs, hamburgers and similar sandwiches; food from salad bars; hand-dipped or hand-served ice-based products, including, ice cream, yogurt, frozen water-based products and similar items; hot soup; hot pizza, either whole or by the slice; other hot food items such as chicken, pork ribs, macaroni and cheese and similar items and hot drinks such as coffee, tea, cocoa and similar items. Soft drink—A nonalcoholic beverage, in either powder or liquid form, whether or not carbonated, such as soda water, ginger ale, colas, root beer, flavored water, artificially carbonated water, orangeade, lemonade, juice drinks containing less than 25% by volume of natural fruit or vegetable juices, and similar drinks. The term does not include fruit and vegetable juices containing at least 25% by volume of natural fruit or vegetable juice. The term does not include coffee, coffee substitutes, tea, cocoa and milk or noncarbonated drinks made from milk derivatives. Vending machine—A device which mechanically dispenses tangible personal property for a purchase price.

(b) Scope.

(1) General. The term food and beverages includes all forms of food and beverages for human consumption. The term includes selected food items, candy and gum and grocery type items. The term does not include water, ice, malt or brewed and alcoholic beverages or spirituous and vinous liquors. The sale of water and ice are exempt from tax. The sale of malt or brewed alcoholic beverages and spirituous and vinous liquors are taxed in a different manner than the sale of food and beverages. Under the provisions of the sales and use tax law, the sale of food or beverages may be taxable or exempt depending upon the type of food or beverage or upon the basis of the location from which the food or beverage is sold. This is illustrated by the following:

(i) The sale of food and beverages by an eating establishment or a caterer is subject to tax. However, if an eating establishment operates a separate department from which grocery type items are sold, the sale of the grocery type items is exempt from tax if the eating establishment fulfills the requirements in this section.

(ii) The sale of selected food items is subject to tax, whether or not the selected food items are sold by an eating establishment, caterer, food retailer or nonfood retailer. However, the sale of selected food items is exempt from tax when made by a school or church in the ordinary course of its activities, by a business located on the premises of the school or church in the ordinary course of its activities, by a business located on the premises of the school or church and the sale is in the ordinary course of the activities of the school or church or by a nonprofit association which supports sports programs and which operates at fixed locations on public property.

(iii) The remaining provisions of this subsection address various situations under which the sale of food and beverages is exempt or is subject to tax.

(2) Malt or brewed alcoholic beverages and spirituous and vinous liquors.

(i) The sale of malt or brewed alcoholic beverages by a distributor to a retail dispenser, liquor licensee or the public is subject to tax. However, the sale of malt or brewed alcoholic beverages by a retail dispenser or a liquor licensee is not subject to tax.

(ii) The sale of spirituous and vinous liquor by the Liquor Control Board, a winery or other vendor authorized by the Liquor Control Board is subject to tax. However, the sale of spirituous and vinous liquor by a liquor licensee is not subject to tax.

(3) Sale of food and beverages by eating establishments. With the exception of sales qualifying for exclusion from tax under subparagraphs (i) and (ii), the sale of food and beverages, including candy and gum, by an eating establishment is subject to tax, whether or not the food or beverages are prepared or consumed on or off the premises. Tax is imposed upon the total purchase price billed to the purchaser for the food or beverages, including an amount billed for delivery but excluding a separately stated amount representing a gratuity.

(i) Sale of grocery type items by a food retailer. An eating establishment may also operate as a food retailer. An eating establishment failing to qualify as a food retailer, is required to collect tax upon its sale of items of food or beverages including grocery type items. To qualify as a food retailer, the eating establishment is required to satisfy the following requirements. The eating establishment shall maintain:

(A) A separate department or identifiable location from which grocery type sales are made.

(B) Separate records, such as a separate cash register or cash register key, for the sale of grocery type items.

(ii) Sale of candy, gum and prepackaged frozen items from vending machines. The sale of candy, gum and prepackaged frozen milk or frozen water-based products from a vending machine prior to October 1, 1991, and on or after December 13, 1991, is not subject to tax. However, the sale of these items from October 1, 1991, through and including December 12, 1991, is subject to tax.

(iii) Examples.

(A) ‘‘P’’ pizzeria sells whole pizzas, pizza by the slice and soft drinks. ‘‘P’’ has no eating facilities on its premises. ‘‘P’’ sells its food and beverages at its premises or delivers to its customers. The sale of whole pizza, pizza by the slice and soft drinks by ‘‘P’’ is subject to tax. If ‘‘P’’ makes a charge for delivery, the delivery charge is also subject to tax.

(B) ‘‘I’’ ice cream parlor sells hand-dipped ice cream products by the cone, dish, pint, quart and 1/2 gallon. ‘‘I’’ also sells ice cream cakes, pies and prepackaged ice cream sundaes from a separate department and maintains separate sales records. The sale of ice cream cakes, pies and prepackaged ice cream sundaes by ‘‘I’’ would not be subject to tax. The sale of hand-dipped ice cream in any quantity is taxable because hand-dipped ice cream qualifies as a selected food item.

(C) ‘‘R’’ restaurant sells prepared food and beverages. At the same location, but within a separately identified department, ‘‘R’’ operates a bakery from which baked goods, such as bread, cakes, doughnuts and cookies are sold and recorded on a separate cash register. The sale of food and beverages, including baked goods from ‘‘R’s’’ restaurant operation is subject to tax. Baked goods sold from ‘‘R’s’’ bakery operation are exempt from tax.

(D) ‘‘L’’ lunch counter sells quick lunches including hot and cold beverages, sandwiches and similar items. ‘‘L’’ has no tables or chairs for its customers. The sale of food and beverages by ‘‘L’’ is subject to tax.

(E) ‘‘T’’ tavern sells alcoholic and nonalcoholic beverages, sandwiches, popcorn, peanuts, crackers and similar items. ‘‘T’’ also sells prepared seafood such as lobsters, clams and crabs which may be purchased for consumption on or off the premises. ‘‘T’’ maintains separate sales records and a separate department from which unprepared lobsters, clams and crabs may be purchased. The sale of food and beverages, other than alcoholic beverages, including prepared lobsters, clams and crabs for consumption on or off the premises, is subject to tax. The sale of unprepared lobsters, clams and crabs from the separate department is not subject to tax.

(F) ‘‘V’’ vending machine operator, on or after December 13, 1991, sells hot and cold drinks, prepackaged crackers, pretzels, candy, gum, prepackaged frozen milk and frozen water-based products through vending machines. The sale of hot and cold drinks and prepackaged crackers and pretzels is subject to tax. However, the sale of candy, gum and prepackaged frozen milk and frozen water-based products is exempt from tax.

(4) Sale of food and beverages by caterers. The sale of food and beverages, including candy and gum, by a caterer is subject to tax. The tax is imposed upon the total purchase price billed to the purchaser including separately stated charges for tables, chairs, decorations, utensils, bartenders, food servers and similar charges. Since the caterer is required to pay tax at the time of the purchase of malt or brewed beverages and spirituous and vinous liquors, separately stated charges by the caterer to the customer for these items are not subject to tax.

Example:

‘‘C’’ caterer caters a meal for a customer and issues the following billing:

Food @ $8/person…$400 Room…100 Liquor…60 Floral Decorations…75 50 Settings, @ $2/setting…100 5 Waiters @ $25…125 1 Bartender @ $35…35 5 tables @ $5…25 50 chairs @ $2.50…125 Service charge…100 Gratuity… 172 SUBTOTAL…$1,317 Sales Tax 65.10

‘‘C’s’’ separately stated charge for liquor and the reasonable gratuity are not taxable. The service charge, which is not in lieu of the gratuity, is taxable. The amount of $1,085, therefore, is subject to tax.

(5) Sale of food and beverages by food retailers and nonfood retailers. Generally, the sale of food and beverages, including candy and gum, by a food retailer or a nonfood retailer is not subject to tax. However, the sale of selected food or beverage items, as defined in this section, by a food retailer or a nonfood retailer is subject to tax. If a food retailer or a nonfood retailer operates an eating establishment, the sale of food and beverages from the eating establishment is subject to tax.

Examples:

(i) ‘‘B’’ bakery sells baked goods, soft drinks, coffee, prepackaged and hand-dipped ice cream. The sale of baked goods and prepackaged ice cream by ‘‘B’’ is not subject to tax. However, the sale of soft drinks, coffee and hand-dipped ice cream by ‘‘B’’ is subject to tax.

(ii) ‘‘D’’ delicatessen sells meat and cheese by the pound, hoagies, sandwiches, prepared cold salads, hot beans, hot macaroni and cheese, cold hard-boiled eggs and hot barbecued chicken. The sale of meat and cheese by the pound, prepared cold salads and cold hard-boiled eggs by ‘‘D’’ is not subject to tax. The sale of hoagies, sandwiches, hot beans, hot macaroni and cheese and hot barbecued chicken by ‘‘D’’ is subject to tax.

(iii) ‘‘S’’ service station sells frozen ice cream products, small bags of potato chips, candy and heated sandwiches. The sales are not made from a vending machine. The sale of frozen ice cream products, bags of potato chips and candy by ‘‘S’’ is not subject to tax. The sale of heated sandwiches by ‘‘S’’ is subject to tax.

(iv) ‘‘C’’ candy store sells candy products. ‘‘C’’ also sells ice cream products such as hand-dipped ice cream by the cone, dish, pint or quart as well as coffee, milk shakes and ice cream sodas. The sale of candy by ‘‘C’’ is exempt from tax. However, the sale of coffee and hand-dipped ice cream products, such as cones, dishes, pints, quarts, milk shakes and ice cream sodas is subject to tax.

(v) ‘‘D’’ department store, a nonfood retailer, operates a restaurant located on its premises. The restaurant menu includes appetizers, salads, entrees, side dishes, desserts and beverages. The sale of food or beverage items by ‘‘D’’ from the restaurant is subject to tax.

(6) Sale of food and beverages at or from a school or church.

(i) Schools and churches. Generally, the sale of food or beverages by a school or church is exempt from tax, if the sales are in the ordinary course of the activities of the school or church. For example, the preparation and sale of a dinner to church members by a church organization in connection with a church function would be in the ordinary course of the activities of the church. However, if a school or church sells selected food or beverage items to the public or operates an eating establishment from which food or beverages are sold to the public in competition with other organizations or businesses selling similar taxable items, the school or church is deemed to be operating an unrelated trade or business with respect to the sales and is required to collect tax.

Examples:

(A) ‘‘S’’ public school prepares lunch at the school cafeteria which it sells to its students. The sale of the lunch by ‘‘S’’ would not be subject to tax since the sale of the lunch to the students is in the ordinary course of the activities of the school.

(B) ‘‘C’’ church operates a hoagie stand at the annual Farm Show. There are other vendors located at the Farm Show selling taxable sandwiches, coffee and soft drinks. The sale of hoagies by ‘‘C’’ is subject to tax since ‘‘C’’ is operating an unrelated trade or business.

(C) ‘‘U’’ university operates a restaurant on university property. The restaurant holds itself out to and primarily sells meals to the public, rather than the students and faculty. The operation of the restaurant by ‘‘U’’ is not in the ordinary course of its school activities. The sale of food and beverages by the restaurant is subject to tax.

(D) ‘‘C’’ church offers catered meals to the public on a regular basis. The meals may be served on or off the church premises. The business of providing the catered meals is an unrelated trade or business of the church. The sale of food and beverages by the church is subject to tax.

(E) ‘‘C’’ church caters wedding receptions, funeral luncheons and anniversary dinners at the church in connection with member and nonmember church weddings, funerals and anniversaries. The business of providing catered receptions, luncheons and dinners is an unrelated trade or business of the church. The sale of food and beverages is subject to tax.

(ii) Businesses located on the premises of a school or church. Generally, the sale of food or beverages by a business located on the premises of a school or church is exempt from tax, if the sale is in the ordinary course of the activities of the school or church. For example, the sale of lunch to students at a public school by a business would be in the ordinary course of the activities of a school. However, if the business sells selected food or beverage items to the public or operates an eating establishment from which food or beverages are sold to the public in competition with other businesses selling similar items, the business is required to collect tax upon its sale of food and beverages to the public whether or not they are consumed on or off the premises of the school or church.

Examples:

(A) ‘‘V’’ vending machine sales company, a private business, operates vending machines at various locations at ‘‘H’’ college from which food and beverages, including selected food and beverage items, are sold. The vending machines have been installed for the primary use by students and faculty of ‘‘H.’’ The sale of food and beverages from the vending machines by ‘‘V’’ is exempt from tax.

(B) ‘‘P’’ pizzeria, a private business, operates a pizza shop near the premises of ‘‘C’’ college. ‘‘P’’ delivers the pizza it sells to its customers. The sale of pizza by ‘‘P’’ to students and faculty located on the premises of ‘‘C’’ is subject to tax, whether or not the pizza is delivered to the customer on school premises.

(C) ‘‘R’’ restaurant, a private business, operates an eating establishment on the premises of ‘‘C’’ college primarily for ‘‘C’’ college students. The public is also permitted to utilize ‘‘R’s’’ restaurant facilities and purchase meals from ‘‘R.’’ The sale of food and beverages by ‘‘R’’ to the public is not in the ordinary course of the activities of ‘‘C’’ college. ‘‘R’’ need not collect sales tax upon food and beverages sold to students and faculty. However, the food or beverages sold to the public is subject to tax.

(7) Sale of food and beverages by an exempt organization other than a school or church. Generally, the sale of food or beverages by an exempt organization, as defined at § 32.1 (relating to definitions), to the members of the organization in connection with an organizational activity is exempt from tax. However, if the organization sells selected food or beverage items to the public or operates an eating establishment from which food or beverages are sold to the public, the sale is subject to tax as an unrelated trade or business, unless the sale qualifies as an isolated sale as defined at § 32.1.

Examples:

(i) ‘‘E,’’ an exempt charitable organization, sells hoagies to the public on three separate Saturdays during a calendar year from a location at which no other organizations or businesses are selling similar items. ‘‘E’’ makes no other taxable sales during the calendar year. The sale by ‘‘E’’ qualifies as an isolated sale under § 32.1. ‘‘E’’ would not be required to collect sales tax on its sale of hoagies.

(ii) ‘‘C’’ charity, an exempt organization, for the purpose of raising funds, sells hoagies to its members and the public on the first Saturday of each month during the calendar year. The sale by ‘‘C’’ does not qualify as an isolated sale as defined by § 32.1 but constitutes an unrelated trade or business of the organization. The sale of hoagies by ‘‘C’’ is subject to tax including those sales made during the first 3 months of the calendar year.

(iii) ‘‘F’’ fire company, an exempt organization, sells fried fish dinners each Friday evening. The dinners are consumed on the premises. ‘‘F’’ operates as an eating establishment. The sale of fish dinners by ‘‘F’’ does not qualify as an isolated sale as defined by § 32.1 but constitutes an unrelated trade or business of the organization. The sale of fish dinners by ‘‘F’’ is subject to tax including those sales made during the first 3 weeks of the calendar year.

(8) Sale of food and beverages by hospitals, nursing, retirement and convalescent homes and summer camps. The sale of food and beverages, including candy and gum, by hospitals, nursing, retirement and convalescent homes and summer camps to employes, visitors, staff and the general public is subject to tax. However, the value of furnished meals to patients, residents or campers which is included in the total charge for resident or patient care or camp activity is not subject to tax.

Examples:

(i) ‘‘H’’ hospital operates an employe dining room at which employes, staff and their guests may purchase food and beverages. The dining room of ‘‘H’’ qualifies as an eating establishment. The sale of food and beverages by ‘‘H’’ is subject to tax.

(ii) ‘‘N’’ nursing home operates a dining room at which patients, employes, staff and guests may eat. The dining room of ‘‘N’’ is an eating establishment. Therefore, the sale of food or beverages by ‘‘N’’ to employes, staff and guests is subject to tax. However, the value of the food provided by ‘‘N’’ to residents and patients which is included in the charge for residents’ or patients’ care is not subject to tax.

(iii) ‘‘R’’ retirement facility operates a dining room for its residents, employes, staff and guests. Residents are required to eat one meal at the dining room each day and are automatically billed for this meal with their other charges. Residents may eat additional meals for which they are billed. Charges to the residents for required meals are not taxable. The sale of meals to employes, staff and guests, including the optional meals sold to residents is subject to tax.

(9) Sale of food and beverages by nonprofit associations which support sports programs. The sale of food and beverages by a nonprofit association which supports a sports program and which operates at a fixed location on public property is exempt from tax.

(10) Sale of food and beverages at fairs and carnivals. The term eating establishment is defined to include a fair or carnival. Therefore, the sale of food and beverage items is subject to tax when sold at a fair or carnival. Examples of taxable food and beverages include: coffee; french fries; candied applies; funnel cakes; cookies; candy; cotton candy; baked potatoes; waffles; doughnuts; ice cream by the cup, dish or cone; soup; soft drinks; yogurt; bread sticks; cider by the cup; ice-based products such as flavored ice cones; popcorn; onion rings; cooked chicken; cooked pork ribs; soft pretzels; hoagies; sandwiches; nuts and similar items. The sale of grocery type items from an identifiable location by a vendor who operates as a food retailer and maintains separate records is exempt from tax. However, if the vendor fails to maintain a separate identifiable location and separate records for the sale of grocery type items, all sales are subject to tax.

Example:

‘‘A’’ apple grower operates a stand at an apple festival. ‘‘A’’ sells cider by the glass as well as prepackaged quarts, half-gallons and gallons. The sale of apple cider by the glass is subject to tax. The sale of prepackaged quarts, half-gallons and gallons of apple cider is exempt if the sale is made from an identifiable location and ‘‘A’’ maintains separate records. If the sale is not made from an identifiable location and ‘‘A’’ fails to maintain separate records, all sales are subject to tax.

(c) Equipment and supplies. A person selling food or beverages is required to pay tax upon the purchase of utilities; equipment; fixtures; utensils, such as plates, cups, glasses, knives and forks; table cloths; napkins; straws; returnable containers and related supplies. For the taxability of similar items purchased by exempt organizations, see § 32.21 (relating to charitable, volunteer firemen’s and religious organizations and nonprofit educational institutions). The purchase of the following items in connection with the sale of food or beverages is exempt from tax:

(i) Prepared or nonprepared food and beverages for resale.

(ii) Wrapping supplies as defined by § 32.1.

(iii) Examples:

(A) ‘‘C’’ caterer provides china plates and cups, silverware, table and chairs, table cloths and napkins to its customers when catering meals. ‘‘C’’ is required to pay tax upon its purchase of these items. ‘‘C’’ is not entitled to claim the resale exemption at the time of purchase even though ‘‘C’’ separately states a specific charge for the items on the customer’s invoice.

(B) ‘‘L’’ lunch counter provides paper plates; styrofoam cups; straws; plastic knives, forks and spoons and napkins to its customers in connection with the sale of food and beverages. ‘‘L’’ may claim an exemption from the purchase of paper plates and styrofoam cups upon the basis that they qualify as wrapping supplies. ‘‘L’’ is required to pay tax upon the purchase of straws, napkins and plastic knives, forks and spoons.

The provisions of this § 60.7 adopted July 22, 1994, effective July 23, 1994, 24 Pa.B. 3589.

Sale of Food and Beverages—Airlines

Food, nonalcoholic beverages and related nonfood supplies furnished by airliner to passengers and crew members during commercial flights are not ‘‘directly used’’ in the supply of a public utility service and do not qualify for an exclusion under the ‘‘use tax’’ provisions in accordance with 72 P. S. § 7201(c). American Airlines v. Board of Finance and Revenue, 665 A.2d 417 (Pa. 1995).

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.8 Secretarial and editing services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Administrative supplies—

(i) Tangible personal property which is consumed in one of the following manners:

(A) Used but not transferred by a vendor in the performance of secretarial and editing services.

(B) Transferred by a vendor to another party in connection with the performance of the vendor’s services when the property is not a critical element of the service.

(ii) Examples of the property include sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items. Court reporting—Services performed by an individual who records and transcribes verbatim a report of proceedings in a court of law. Editing services—Services performed upon written material, film, videos and audio tape, including altering, adapting, refining, proofreading or confirming. The term also includes reviewing for clarity, authenticity and meaning, and assembling by cutting or rearranging. Mail processing services—Services that prepare property for bulk mailing or shipping, such as bursting, folding, collating, stuffing, addressing, bar coding, affixing labels, stamping, sorting, bundling or bagging in accordance with bulk mail specifications of the United States Postal Service or other transportation systems. The term does not include these services when performed in conjunction with secretarial services or the sale of tangible personal property. Secretarial services—Services which include preparing correspondence or performing routine and detailed office work, letter writing, proofreading, resume writing, typing, word processing or telephone answering services. The term does not include separately stated charges for notary seals, completion of forms, mail processing services, stenographic services or court reporting services. Stenographic services—Services performed by an individual who both records information by machine or shorthand from dictation or oral discourse and transcribes the information.

(b) Scope.

(1) Effective October 1, 1991, the sale at retail or use of secretarial or editing services is subject to tax.

(2) Services performed for a purchaser who is located in this Commonwealth are presumed to be predominately used in this Commonwealth and subject to tax. Services performed for a purchaser who is located outside this Commonwealth are presumed to be predominately used outside this Commonwealth and not subject to tax. For example:

(i) A Maryland resident purchases the services of a Pennsylvania secretarial service company to type a resume to be delivered in Maryland. The service is exempt from tax.

(ii) A Pennsylvania resident purchases services from a Pennsylvania secretarial service company to type one hundred letters and mail them to individuals throughout the country. The total charge, including charges for mail processing, is taxable.

(iii) A purchase by a Maryland resident in subparagraph (ii) is exempt even though some of the letters would be received by residents of this Commonwealth.

(3) The sale at retail or use of secretarial or editing services provided in conjunction with the performance of a nontaxable service is taxable unless the secretarial or editing service being provided is incidental to the nontaxable service. For example:

Company A receives 1,000 pamphlets, envelopes and labels from Company C. Company A is to fold and stuff the pamphlets into the envelopes and affix the mailing labels. Company A is also to type and insert a letter in every two hundredth envelope indicating that the recipient has won a prize. The typing of the letter is incidental to the nontaxable service of folding, stuffing and attaching labels and therefore is not taxable.

(c) Examples of taxable secretarial and editing services include:

(1) An individual purchases the services of a resume writer to write, format and type a resume.

(2) An individual purchases the services of a typist or word processor to type the name and address on envelopes from a prepared listing of some of the residents in the individual’s development.

(3) A sole proprietor purchases a telephone answering service from an independent contractor.

(4) A secretary types a letter from a cassette tape dictated by the author.

(5) A publishing company purchases an editing service to proofread manuscripts prior to printing.

(6) An individual purchases the service of editing a home video and inserting music.

(d) Examples of services which are not secretarial and editing services:

(1) The recording and transcribing of a deposition by a stenographer.

(2) The completion of auto registration forms by a notary.

(3) The providing of a messenger service that is not made in conjunction with a taxable sale or service.

(4) The providing of a temporary help service employe to replace a secretary who is on vacation. See § 60.4 (relating to help supply services).

(5) The folding and inserting of letters in envelopes, which are provided by the customer, and affixing postage and mailing the letters.

(e) Purchase price. The total amount charged for performing secretarial and editing services is subject to tax. The failure to separately state the charge for taxable secretarial and editing services from other nontaxable charges on the invoice requires the charging of tax on the total amount. Charges for delivery of a secretarial and editing service, including postage, handling and insurance, are also subject to tax.

(f) Exclusions.

(1) Secretarial and editing services are exempt from tax if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business; the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions, including public school districts. The manufacturing, printing, publishing, processing, farming, dairying, mining or public utility exclusion does not apply.

(2) The vendor of secretarial and editing services may claim the resale exemption upon the purchase of tangible personal property which is transferred to the purchaser or a third party in the performance of secretarial and editing services. The vendor may also purchase from another provider secretarial and editing services which the vendor resells to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or another taxable service which it may use in the performance of its secretarial and editing services.

(i) The following are examples of property which may be purchased exempt for resale when used in performing secretarial and editing services:

(A) Writing or typing paper.

(B) Envelopes.

(C) Labels.

(D) Typewriter ribbons.

(ii) The following are examples of property which is taxable when used in performing secretarial and editing services:

(A) Rulers.

(B) Staplers.

(C) Typewriters.

(D) Word processors.

(E) Administrative supplies.

(F) Postage meter devices.

(3) Persons who are engaged in the business of printing as well as rendering secretarial and editing services should refer to § § 32.1 and 32.36 (relating to definitions; and printing and related business).

The provisions of this § 60.8 adopted October 15, 1993, effective October 16, 1993, 23 Pa.B. 4906.

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.9 Premium cable services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Premium cable service—

(i) That portion of a cable television service; community antenna television service; or other distribution of television, video, audio or radio service which meets the following criteria:

(A) Is transmitted with or without wires to purchasers of the service.

(B) Consists substantially of programming uninterrupted by paid commercial advertising, such as full-length movies, sporting events, pay-per-view television service and audio and radio broadcasting.

(ii) Examples of premium cable services include Home Box Office, Cinemax, Showtime, Prism, The Disney Channel or commercial music service. Nonpremium cable service—That portion of a cable television service; community antenna television service or another distribution of television, video, audio or radio service which does not qualify as premium cable service, including the following: installation and repair of nonpremium cable service; tier packages with no premium cable service; additional premium cable outlets up to an accumulative number of ten for an indiviudal customer; public television or radio services; local origination programming which provides a variety of public service programs unique to the community; programming which provides coverage of public affairs issues which are presented without commentary or analysis such as Congressional proceedings and programming substantially related to religious subjects.

(b) Scope.

(1) Effective October 1, 1991, and continuing to December 31, 1991, the sale at retail or use of cable television services; community antenna television service or other distribution of television, video or radio service, with or without the use of wire, in excess of the minimum or basic charge were subject to tax. The following are examples of services which were taxable under this category: premium cable channels; tier packages; additional cable television outlets; installation charges made in connection with providing taxable cable television services and separately-stated charges for television, audio and radio equipment, including remote controls, or receivers. The following are examples of services which were not taxable under this category: minimum or basic cable, video and radio services and charges for the installation of minimum or basic service.

(2) Effective January 1, 1992, the sale at retail or use of premium cable service delivered to a location in this Commonwealth is subject to tax. In addition, the sale, rental or lease of television, audio or radio equipment, including remote controls, receivers, for use in connection with premium or nonpremium cable service is subject to tax.

(c) Purchase price.

(1) The total charge for premium cable services including charges for:

(i) Installation and repair of the premium cable service.

(ii) Upgrading to include additional premium cable service.

(iii) Downgrading to exclude all or some premium cable service.

(iv) Additional premium cable outlets in excess of the accumulative number of ten for an individual customer.

(v) Franchise fees relating to premium cable service.

(vi) Other charges related to premium cable service.

(2) If the charge for the cable service includes a charge for both premium and nonpremium cable service and the charge for nonpremium cable service is not separately stated, the entire charge for all cable services including nonpremium cable service is subject to tax.

(d) Exclusions.

(1) Premium cable services are exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also exempt if purchased by the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions including public school districts.

(2) The vendor of premium cable television services may claim the resale exemption upon its purchase of tangible personal property which is transferred to its purchaser or a third party in the performance of its premium cable television services. The vendor may also purchase premium cable services from another provider which the vendor resells to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of another taxable service which it may use in the performance of its premium cable television services.

(i) The following are examples of property which may be purchased exempt for resale when used in the performing of premium cable television services:

(A) Remote control.

(B) Receivers.

(C) Amplifiers.

(3) Persons who are engaged in the business of providing basic and premium cable services and are entitled to claim the processing exemption should make reference to § § 32.1, 32.32 and 42.1 (relating to definitions; manufacturing; processing; and definitions).

The provisions of this § 60.9 adopted January 8, 1993, effective January 9, 1993, 23 Pa.B. 186.

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.10 Adjustment and collection services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Adjustment services—An activity performed by a collection agency relating to the reconciliation or settlement of a debt on behalf of a creditor. Administrative supplies—

(i) Tangible personal property which is consumed in one of the following manners:

(A) Used but not transferred by a vendor in the performance of this service.

(B) Transferred by a vendor to another party in connection with the performance of the vendor’s services when the property is not a critical element of the service.

(ii) Examples of this property includes sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items. Collection agency—A person who performs adjustment or collection services on behalf of a creditor. Collection services—An activity relating to the collection of a debt which involves a collection agency, a creditor and a debtor. Creditor—A person to whom a debt is owed. Debt—An obligation to pay money or other consideration owed by a debtor to a creditor, including current account receivables, interest, fines, penalties and other charges. Debtor—A person who owes a debt to a creditor. Doing business in this Commonwealth—Maintaining a place of business within this Commonwealth as defined at § 56.1 (relating to maintaining a place of business within this Commonwealth).

(b) Scope. Effective October 1, 1991, the sale at retail or use of adjustment or collection services is subject to tax when the creditor is doing business in this Commonwealth and the debtor’s address referred for adjustment or collection services by the creditor is in this Commonwealth. The status as to whether the creditor is doing business in this Commonwealth and the address of the debtor in this Commonwealth is determined at the time the account is placed with the collection agency. The location of the collection agency does not have an effect on the taxability of the transaction.

(1) The creditor is presumed to be doing business in this Commonwealth if the debtor is located in this Commonwealth. A collection agency shall obtain a valid exemption certificate from a creditor who claims he is not doing business in this Commonwealth when the debtor is located in this Commonwealth.

(2) Adjustment and collection services provided to a Pennsylvania creditor against debtors located outside of this Commonwealth are not subject to tax.

(3) The site of the origination of the debt has no effect on whether the adjustment or collection service is taxable.

(4) A multistate creditor who does business in this Commonwealth would only be liable for adjustment and collection services performed against debtors located in this Commonwealth.

(5) Adjustment and collection services against multistate debtors are taxable when performed on behalf of a creditor who is doing business in this Commonwealth and the debtor’s address referred by the creditor for adjustment or collection is in this Commonwealth. The determination of the debtor’s address in this Commonwealth is made at the time the account is placed with the collection agency. Examples are as follows:

(i) A Maryland collection agency is hired to collect debts owed to a Maryland company which is doing business in this Commonwealth and the debtors are located in this Commonwealth. The charge for the service against Pennsylvania debtors is taxable.

(ii) A Pennsylvania company is owed money from a New York company. The Pennsylvania company obtains the services of a Pennsylvania collection agency to collect the debt. The charge for the service against a New York debtor is not taxable.

(iii) A National chain store company with locations in this Commonwealth, hires a Maryland collection agency to collect its debts. Only charges for the collection of debts against debtors located in this Commonwealth are taxable.

(iv) A National credit card company incorporated in Delaware with an office in this Commonwealth hires a Delaware collection agency to collect debts from its delinquent customers. The collection services against the debtors located in this Commonwealth are taxable.

(c) Examples of taxable services. The following are examples of taxable adjustment and collection services:

(1) The attempt to collect or the collection of debts and claims by a collection agency, including current debts such as accounts receivable or bad check charges, regardless of whether money is collected.

(2) Providing of adjustment services in the settling of debts on behalf of a creditor.

(3) Sending notices to debtors for current debts, such as precollection letters, is taxable as a collection service when the debtor’s payment is to be remitted to the collection agency; otherwise, the issuance of precollection letters may be taxable as a secretarial or computer service.

(4) Collection services performed for affiliated companies.

(5) Repossessing of property in connection with a debt owed to a creditor.

(6) Collection services provided by an attorney not in conjunction with, or incidental to, the attorney’s nontaxable performance of a legal service, or rendering of legal advice, which involve the application of legal skills.

(d) Examples of services which are not adjustment and collection services. The following are examples of services which are not adjustment and collection services:

(1) Credit card services provided by a central agency, including a fee charged to the credit card company by a clearinghouse and a fee charged to the retailer in connection with the use of credit cards.

(2) Debt counseling, adjustment services or financial budgeting services to individuals.

(3) Billing or collection of telephone charges by a local telephone company on behalf of other companies.

(4) Charges for points, taxes, insurance, escrow fees and late penalties by financial institutions in connection with loans and mortgages.

(5) Collection of bills on behalf of utility companies when the accounts were not referred for collection but is merely a customer service.

(6) Charges made by a creditor to a debtor for a dishonored check.

(7) Consideration received by the seller in connection with the sale of accounts receivable—factoring. A service fee charged by the seller in connection with the collection of accounts is taxable.

(8) Claims adjustment services performed by an independent adjuster who determines the extent of loss for insurance companies.

(9) Commissions charged for the transfer and collection of funds in connection with the sale or purchase of real or personal property, such as stocks, bonds, real estate or escrow fees.

(10) Issuance of bills or invoices for a creditor but may be subject to tax as a computer service.

(11) Collection services provided by an attorney in conjunction with, or incidental to, the attorney’s nontaxable performance of a legal service, or rendering of legal advice, which involve the application of legal skills.

(e) Purchase price.

(1) Tax shall be imposed on the total fee, contingency fee or other consideration charged or retained for providing adjustment or collection services. Charges representing the reimbursement of expenses incurred in connection with the adjustment or collection services are included in the taxable purchase price.

(2) The tax shall be separately stated on each billing to the creditor. When a collection agency collects debts from debtors located both within this Commonwealth and out-of-State for the same creditor, the collection agency has the option of billing the tax when the collection agency submits a reconciliation statement to the creditor; if the reconciliation statement is submitted to the creditor at least once every 3 months. The reconciliation statement shall set forth the individual payments of each Pennsylvania and out-of-State debtor during the period covered by the reconciliation statement.

(3) If the collection agency elects to charge tax on the reconciliation statement to the creditor, the periodic billings to the creditor shall indicate that the charging of tax will be calculated on the reconciliation statement. Examples are as follows:

(i) A collection agency is to receive 30% of the amount of debt collected. If the collection agency collects $100, the creditor is billed tax on 30% of $100 or $1.80 (30% x $100) x 6%.

(ii) In accordance with the contract of sale, a creditor is permitted to charge the debtor a 20% fee for debts referred to a collection agency. The collection agency is permitted to retain the 20% penalty fee it collects. If the agency collects a $100 debt and $20 penalty fee, the collection agency shall charge $1.20 tax ($20 x 6%) to the creditor.

(iii) A collection agency is to receive a 30% commission on the debt it collects for the creditor. The debt is comprised of a sale transaction amounting to $90 and a $10 charge for insufficient funds. The agency collects the total amount of $100 and shall charge $1.80 tax ($100 x 30%) x 6%.

(f) Exclusions.

(1) Adjustment or collection services are exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also exempt if purchased by the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions including public school districts. The manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exclusion does not apply.

(2) A collection agency may claim the resale exemption upon its purchase of tangible personal property which is transferred to its purchaser or a third party in the performance of its adjustment or collection services. The agency may also purchase adjustment or collection services from another provider which the agency resells to its customer. The agency may not claim the resale exemption upon its purchase of administrative supplies or the purchase of another taxable service which it may use in the performance of its adjustment or collection services.

(i) The following are examples of property or services which may be purchased exempt for resale when used in the rendition of performing adjustment or collection services:

(A) Adjustment or collection services which are sold to a collection agency for the purpose of selling the services to another collection agency for the purpose of resale.

(B) Paper and envelopes transferred as precollection letters or dunning letters.

(ii) The following are examples of property or services which are taxable when used in the rendition of performing adjustment or collection services.

(A) Administrative supplies.

(B) Computer services purchased by collection agencies and used in performance of adjustment or collection services.

The provisions of this § 60.10 adopted January 8, 1993, effective January 9, 1993, 23 Pa.B. 187.

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.11 Credit reporting services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Administrative supplies—

(i) Tangible personal property which is consumed in one of the following manners:

(A) Used but not transferred in the performance of this service.

(B) Transferred by a vendor to another party in connection with the performance of the vendor’s services when the property is not a critical element of the service.

(ii) Examples of the property include sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items. Credit information—Information relating to the history of financial transactions of a person or other entity including the description of the business, names of owners, related companies, financial statements, income, sales, timeliness of payments, competition, pending litigation matters, credit history, credit rating, credit verification or information from public records. Credit investigations—The obtaining of credit information. Credit reporting services—The providing of credit information by hard copy, electronic media, verbal or another method of transferring credit information.

(b) Scope. Effective October 1, 1991, the sale at retail or use of credit reporting services is subject to tax. Credit reporting services are subject to tax when the information or report is delivered to or received at a location in this Commonwealth.

(c) Examples of taxable services. The following are examples of taxable credit reporting services:

(1) Providing mercantile or consumer credit information.

(2) Performing of credit investigations.

(3) Providing a credit report by a credit reporting bureau.

(4) Verifying of credit by a credit clearinghouse or credit bureau.

(d) Examples of services which are not credit reporting services. The following are examples of services which are not credit reporting services:

(1) Processing loan applications and the computing of loan availability.

(2) Performing audits and preparation of financial statements and annual reports.

(3) Performing property or real estate appraisals.

(4) Performing personal and background investigations which are not in connection with credit investigations.

(e) Purchase price. The total amount charged for providing credit reporting services is subject to tax.

(f) Exclusions.

(1) Credit reporting services are exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also exempt if purchased by the Federal government or its instrumentalities; the Commonwealth, its instrumentalities or subdivisions including public school districts. The manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exclusion does not apply.

(2) The vendor of credit reporting services may claim the resale exemption upon its purchase of tangible personal property which is transferred to its purchaser or a third party in the performance of its credit reporting services. The vendor may also purchase credit reporting services from another provider which the vendor resells to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of other taxable services which it may use in the performance of its credit reporting services.

(i) The following are examples of property or services which may be purchased exempt for resale when used in the performing of credit reporting services:

(A) Credit reporting information which is purchased for the purpose of selling credit reporting services.

(B) Property transferred to the purchaser which contains credit information, including envelopes.

(C) Copying charges incurred in the obtaining of credit information documents which are transferred to the purchaser.

(ii) The following are examples of property or services which are taxable when used in the performing of credit reporting services:

(A) Administrative supplies.

(B) Investigative reports or documents used in the obtaining of credit information which are not transferred to the purchaser.

(C) Computer services and equipment which are used in the performance of credit reporting services including the charge for the transmitting of information to the purchaser.

(D) Copying charges incurred in the obtaining of credit information documents which are not transferred to the customer.

The provisions of this § 60.11 adopted January 8, 1993, effective January 9, 1993, 23 Pa.B. 189.

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.12 Self-storage services.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Administrative supplies—

(i) Tangible personal property which is consumed in one of the following manners:

(A) Used but not transferred by a vendor in the performance of this service.

(B) Transferred by a vendor to another party in connection with the performance of the vendor’s services when the property is not a critical element of the service.

(ii) Examples of the property include sales invoices, receipts, contracts, estimate sheets, confirmations or other similar items. Commercial warehouse—A business, such as a public warehouse, engaged in the operation of receiving, handling and storing property for others and the purchaser of the service does not have separate access to the storage area used to hold the property. Facility for goods distribution—A building which is used for the receiving, holding, handling and distribution of business inventory which is being held for subsequent sale. Self-storage service—The providing of a building, a room in a building, or a secured area within a building primarily for the purpose of storing personal property with a separate access for each purchaser of self-storage service.

(b) Scope. Effective January 1, 1992, the sale at retail or use of self-storage service at a location in this Commonwealth is subject to tax.

(c) Examples of taxable services. The following are examples of taxable self-storage services:

(1) The rental of a garage on an annual basis for the storage of a boat. If the boat is only kept in the garage for 5 months, the rental is taxable because the primary purpose for the use of the garage is storage of the boat.

(2) The rental of an entire building by a contractor for the storage of construction equipment and materials.

(3) The rental of the basement in a building for the purpose of storing business property which is not intended for sale, such as records storage, office equipment storage or construction equipment storage.

(4) The rental of an airplane hangar if the purchaser rents or leases the entire building or a secured area within the building with separate access for each purchaser.

(d) Examples of services which are not self-storage services. The following are examples of services which are not self-storage services:

(1) Rental of a safe deposit box from a bank.

(2) Storage of property in meat lockers, refrigerators or freezers.

(3) Storage of merchandise or commodities which are intended for sale.

(4) Rental of a locker in a train station.

(5) Storage of shoes for eventual distribution to the purchaser’s various retail stores.

(6) Security deposits charged and subsequently returned to the purchaser by the provider of self-storage services.

(7) Public parking garages.

(8) Rental of a garage in which one half of the area is used for administrative functions and the other half is used for storage.

(9) Rental of a shoe store in a mall and the area rented is primarily used for storage of inventory.

(10) Monthly rental amounts for an apartment which includes a separate detached storage area are not taxable unless the charges for the apartment and storage area are separately stated

(e) Purchase price.

(1) The total amount charged for providing self-storage services is subject to tax. Charges associated with the cost of self-storage such as utilities, insurance, pick-up, delivery, locks or keys are part of the taxable purchase price.

(2) If the primary use of the facility being rented is not for self-storage services, the providing of an area for storage is not taxable unless there is a separate charge for the storage area.

(f) Exclusions.

(1) Self-storage services are exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, except if used in an unrelated trade or business. The services are also exempt if purchased by the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or subdivisions including public school districts. The manufacturing, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exclusion does not apply.

(2) Safe deposit boxes rented from financial institutions.

(3) Storage of property in refrigerator or freezer units.

(4) Charges for the storage of property in commercial warehouses.

(5) Rental or lease of a facility for goods distribution.

(6) Rental of lockers in airports, bus stations, museums or other public places.

(7) The vendor of self-storage services may claim the resale exemption upon its purchase of tangible personal property which is transferred to its purchaser or a third party in the performance of its self-storage services. The vendor may also purchase self-storage services from another provider which the vendor resells to its customer. The vendor may not claim the resale exemption upon its purchase of administrative supplies or the purchase of other taxable services which it may use in the performance of its self-storage services.

(i) The following are examples of property which may be purchased exempt for resale when used in the performing of self-storage services:

(A) The purchase of tangible personal property which is transferred to the purchaser by the vendor such as storage racks, bins, covers, tarpaulins, pad locks or keys. If the vendor charges the purchaser for the use of the property, tax shall be charged by the vendor.

(B) The rental of a building for the primary purpose of subleasing the building to another is not subject to tax. The sublease of the building may be taxable depending on the use of the building by the sublessee.

(ii) The following are examples of property which is taxable when used in the performing of self-storage services:

(A) The purchase of materials, equipment or supplies used in the construction, reconstruction, remodeling, repair or maintenance of buildings which are used in the performance of self-storage services.

(B) The vendor’s purchase of utilities used in connection with the providing of self-storage services are subject to tax unless the utilities are resold through separate meters. If utilities are resold through a separate meter in the providing of self-storage services, the vendor is required to collect the applicable tax.

(C) Administrative supplies.

(g) Storage services.

(1) For the period October 1, 1991, to December 31, 1991, the total charge for the storage of tangible personal property within a building or similar structure is subject to tax.

(2) The following are examples of services which are taxable under this category:

(i) Storage of furs, jewelry and other valuables.

(ii) Safe deposit boxes.

(iii) Cold storage and freezer lockers.

(iv) Storage of raw materials, in-process materials and finished products.

(v) Storage lockers.

(vi) Storage of administrative records, such as files, folders, computer tapes, microfilm, and the like.

(vii) Vehicle, boat and aircraft storage.

(viii) Self-storage facilities.

(ix) The lease of buildings or portions of buildings for the predominant purpose of storage of tangible personal property.

(3) The following are examples of services which are not taxable under this category:

(i) Vehicle parking in a parking lot or an unenclosed parking garage.

(ii) Vehicle, boat or aircraft storage outside of a building or similar structure.

(iii) Separately stated charges for the performance of services other than storage, such as distribution, handling, packaging, assembling, inventory control, quality control, product ‘‘break bulk,’’ ‘‘pick and pack,’’ and the like which are performed in connection with the storage of tangible personal property.

The provisions of this § 60.12 adopted January 8, 1993, effective January 9, 1993, 23 Pa.B. 190.

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.14 Zero emission vehicles.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Comparable vehicle—A motor vehicle which is primarily self-propelled by a combustion engine and is similar to the category type of the zero emission vehicle which is being purchased. The four categories of motor vehicles are as follows:

(i) Passenger car.

(ii) Passenger truck.

(iii) Van.

(iv) Other qualifying motor vehicle—A motor vehicle which is something other than a passenger car, passenger truck or van. Comparable vehicle amount—The average manufacturer’s suggested retail list price (M.S.R.P.) of a comparable vehicle. Electric vehicle—A motor vehicle which operates solely by use of a battery or battery pack and which meets the applicable Federal motor vehicle safety standards. The term includes a motor vehicle which is powered mainly through the use of an electric battery or battery pack but which uses a flywheel that stores energy produced by the electric motor or through regenerative braking to assist in operation of the motor vehicle. Hybrid electric vehicle—An electric vehicle which allows power to be delivered to the drive wheels solely by a battery-powered electric motor but which also incorporates the use of a combustion engine to provide power to the battery and which meets the applicable Federal motor vehicle safety standards. The primary source of power for the motor is the electric battery or battery pack and not the combustion engine. Motor vehicle—A vehicle which is self-propelled and is required to be titled or licensed for highway use. Power unit—The batteries or battery packs which provide the power to operate a zero emission vehicle. Premium purchase amount—The amount charged for a zero emission vehicle which is in excess of the comparable vehicle amount. Zero emission vehicle—A motor vehicle which is an electric vehicle, a hybrid electric vehicle or another type of motor vehicle which produces no emissions of any criteria of pollutants under any operational mode and under any conditions and which meets the applicable Federal motor vehicle safety standards.

(b) Scope.

(1) Effective October 1, 1991, the premium purchase amount shall be excluded from the purchase price in the computation of tax for a new or used zero emission vehicle. As a result of this exclusion, the comparable vehicle amount shall become the purchase price for the purpose of computing the amount of tax due. This exclusion from tax expires on December 31, 1999.

(2) Effective October 1, 1991, the sale at retail or use of power units is excluded from tax. This exclusion from tax expires on December 31, 1999.

(3) The Department will annually establish the comparable vehicle amounts for the categories: passenger cars, passenger trucks and vans. These amounts will be published as a notice in the Pennsylvania Bulletin by the Department and be codified in subsection (d). The last published listing of amounts shall remain in effect until the date the Department publishes a replacement listing of amounts.

(4) If the Department does not establish a comparable vehicle amount for ‘‘other qualifying motor vehicle,’’ 25% of the gross purchase price shall be the

premium purchase amount unless the purchaser can provide a statement from the manufacturer or other satisfactory documentation which substantiates a higher premium purchase amount.

(c) Computation of tax—zero emission vehicle.

(1) The comparable vehicle amount shall become the purchase amount and from this amount shall be deducted any trade-in to arrive at the taxable amount of the vehicle. If the taxable amount is a negative amount, the taxable amount is zero.

(2) The taxable amount is subject to tax at the applicable tax rates.

(d) Comparable vehicle amounts.

(1) The following comparable vehicle amounts will be used from October 1, 1991, through December 31, 1993:

(i) Passenger car…$20,000

(ii) Passenger truck…$18,900

(iii) Van…$16,400

(2) The following comparable vehicle amounts will be used from January 1, 1994, through December 31, 1994:

(i) Passenger car…$18,900

(ii) Passenger truck…$14,900

(iii) Van…$17,800

(3) The following comparable vehicle amounts will be used from January 1, 1996, through December 31, 1996:

(i) Passenger car…$19,800

(ii) Passenger truck…$15,600

(iii) Passenger van…$18,600

(4) The following comparable vehicle amounts will be used from January 1, 1997, through December 31, 1997:

(i) Passenger car…$20,196

(ii) Passenger truck…$15,921

(iii) Passenger van…$18,972

(5) The following comparable vehicle amounts will be used from January 1, 1998, through December 31, 1998:

(i) Passenger car…$20,661

(ii) Passenger truck…$16,287

(iii) Passenger van…$19,408

(6) The following comparable vehicle amounts will be used from January 1, 1999, through December 31, 1999:

(i) Passenger car…$21,033

(ii) Passenger truck…$16,580

(iii) Passenger van…$19,757

The provisions of this § 60.14 adopted July 2, 1993, effective July 3, 1993, 23 Pa.B. 3136; amended June 3, 1994, effective June 4, 1994, 24 Pa.B. 2808; amended April 19, 1996, effective April 20, 1996, 26 Pa.B. 1872; amended December 27, 1996, effective January 1, 1997, 26 Pa.B. 6224; amended December 26, 1997, effective December 27, 1997, 27 Pa.B. 6866; amended December 11, 1998, effective December 12, 1998, 28 Pa.B. 6124. Immediately preceding text appears at serial pages (232219) to (232221) and (239301).

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.15 Sales tax refund procedures regarding contracts with exempt entities.

(a) The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Contract—A written or verbal agreement which involves the transfer of property or service as a construction or sales activity or as a rental or lease. The term includes a subcontract. Exempt entity—A charitable organization; volunteer firemen’s organization; nonprofit educational institution; religious organization; the Federal government or its instrumentalities; or the Commonwealth, its instrumentalities or political subdivisions, including public school districts.

(b) Under section 252 of the TRC (72 P. S. § 7252), a refund granted pursuant to a petition for refund filed with the Board of Appeals on or after October 1, 1991, in conjunction with a contract with an exempt entity will be granted to the exempt entity.

(c) A contractor, at the time of making a claim for refund with the Board of Appeals for tax paid in conjunction with a contract with an exempt entity, shall file a separate petition for refund for each exempt entity. Failure to provide the following information may result in the dismissal of the petition:

(1) The name of exempt entity.

(2) The address of exempt entity.

(3) A copy of the contract with exempt entity or in the alternative satisfactory evidence that the contract was performed for an exempt entity.

(4) Sales and Use Tax Appeal Schedule (REV-39) which describes the type of property for which the refund is requested and the corresponding dollar amount of the refund claimed on the property.

(d) The Board of Appeals may request additional information it deems necessary. Failure to provide the information may result in the denial of the petition.

(e) Upon the filing of a petition referred to in subsection (c), the Board of Appeals will notify the entity in subsection (c)(1) that a refund petition is pending at the Board of Appeals.

(f) An exempt entity may receive an assignment of rights from the contractor and file a petition for refund.

(g) If a refund is determined to be due and the contractor has a valid assignment of rights from the exempt entity, the refund will be paid to the contractor.

The provisions of this § 60.15 adopted December 3, 1993, effective December 4, 1993, 23 Pa.B. 5716.

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.16 Local Sales, Use and Hotel Occupancy Tax.

(a) General provisions.

(1) General. This section is promulgated to administer the provisions of sections 501—509 of the Pennsylvania Intergovernmental Cooperation Authority Act for Cities of the First Class (53 P. S. § § 12720.501—12720.509) and sections 3150-B—3157-B of the Second Class County Code (16 P. S. § § 6150-B—6157-B).

(2) Registration. A person making a sale, rental or lease subject to tax under this section shall apply for a license on a form prescribed by the Department.

(3) Returns. The taxes collected under this section shall be reported on a return prescribed by the Department and filed under sections 217—220 of the TRC (72 P. S. § § 7217—7220) and § 34.3 (relating to tax returns).

(4) Payment. Payment shall be made under sections 221—224 of the TRC (72 P. S. § § 7221—7224).

(5) Imposition of tax. Unless otherwise specifically noted, Article II of the TRC (72 P. S. § § 7201—7281.1) and regulations thereunder apply to the taxes imposed under this section.

(6) Exemption certificates. A claim for exemption from taxes imposed under this section shall be supported by a valid Pennsylvania exemption certificate.

(7) Direct payment permit. A purchaser may use a direct payment permit issued under § 34.4 (relating to direct payment permit) in conjunction with the sales tax imposed under this section. A purchaser may not use a direct payment permit in connection with the purchase of vehicles, food and beverages or hotel occupancies.

(8) Local tax. The term local tax means sales, use or hotel occupancy tax imposed by a county of this Commonwealth or the city of Philadelphia and administered by the Department.

(9) State tax. The term State tax means sales, use or hotel occupancy tax imposed by Article II of the TRC.

(10) Local sales and use tax. For purposes of this section, the local sales tax is the tax which is collected by the vendor and the local use tax is the tax payable if the vendor is not required or fails to collect the proper amount of local sales tax.

(11) Point of sale. Local sales tax is imposed at the point of sale. A sale of property or a service delivered to a location within this Commonwealth is deemed to occur at the place of business of the retailer. A sale of property or a service delivered by the retailer or its agent to an out-of-State destination is subject to neither the State nor the local tax. The local tax is in addition to the State tax if a sale is deemed to have occurred in a taxable county. There are no transactions which are only subject to the local tax.

(12) Tax bracket schedule. The 1% local sales and use tax is computed in accordance with the following bracket schedule:

(i) Purchase price…Tax

50¢ or less…0

51¢ but less than $1.51…1¢

$1.51 but less than $2.51…2¢

$2.51 but less than $3.51…3¢

$3.51 but less than $4.51…4¢

$4.51 but less than $5.51…5¢

$5.51 but less than $6.51…6¢

$6.51 but less than $7.51…7¢

$7.51 but less than $8.51…8¢

$8.51 but less than $9.51…9¢

$9.51 but less than $10.01…10¢

(ii) The tax on purchases in excess of $10 is 1% of each $10 of the purchase price plus the bracket charge on a fractional part of a $10 increment under subparagraph (i).

(13) Taxable county. A county or the city of Philadelphia which has adopted the local tax.

(14) Nontaxable county. A county which has not adopted the local tax.

(15) Effective date of local tax.

(i) The effective dates of the local tax in counties that have adopted the local tax are as follows:

(ii) When a county adopts the local tax or changes the rate of the local tax, the Department will publish a notice in the Pennsylvania Bulletin and codify the change in subsection (a)(15)(i).

(b) Scope.

(1) The local tax shall be remitted to the Department. If the vendor fails to collect the applicable local sales tax from the purchaser, the purchaser shall pay the local use tax directly to the Department.

(2) Property and services subject to the State tax are subject to the local sales and use tax. If a purchase is exempt from the State sales and use tax, the exemption also applies to the local tax.

(3) If the sale occurred before the effective date of the local tax, the sale is not subject to the local tax. If the sale occurs on or after the effective date of the local tax, the sale is subject to the local tax. The date of sale is the date of an invoice or other similar document. Lease payments due on or after the effective date of the local tax are subject to the local tax.

(4) The following are examples of sales which are subject to the local tax:

(i) Jeff signed a contract for the lease of a television set from an appliance store located in a taxable county prior to the effective date of the local tax. Lease payments are due on a monthly basis. The lease payments due on or after the effective date of the local tax are subject to the local sales tax.

(ii) John orders a television set from an appliance store located in a taxable county. John signs a contract of sale and receives an invoice from the vendor for the total purchase price prior to the effective date of the local tax. The television set is delivered after the effective date of the local tax. The purchase is subject to the local tax because delivery was subsequent to the effective date of the local tax.

(c) Sales of, and services to, tangible personal property and other taxable services. The sales of, and services to, tangible personal property and other taxable services subject to the State sales and use tax are also subject to the local tax if the sale originates in a taxable county. Other taxable services include: building maintenance and building cleaning, collections and adjustment, computer, credit reporting, disinfecting and pest control, employment agency, help supply, lawn care, lobbying, premium cable, secretarial and editing and self-storage.

(1) The following are examples of sales or services subject to the local tax:

(i) Mary Ellen purchases a television set from an appliance store located in a taxable county. Regardless of whether Mary Ellen takes the television set home in her car or the store delivers it to Mary Ellen’s Pennsylvania residence, the store shall collect the local tax because the sale occurred in a taxable county.

(ii) Mara, a resident of a taxable county, purchases a television set from an appliance store located in a nontaxable county. Regardless of whether Mara takes the television set home in her car or the store delivers it to Mara’s residence, the purchase is subject to the local use tax rather than the local sales tax. Mara shall pay the local use tax directly to the Department. The appliance store in the nontaxable county is not required to collect the local tax.

(iii) ABC, a corporation located in a taxable county, purchases fuel oil from a dealer in New Jersey which delivers the oil to ABC’s location. The purchase is subject to the local use tax rather than the local sales tax. ABC shall pay the local use tax directly to the Department. The oil dealer in New Jersey is not required to collect the local tax.

(iv) Bruce, a resident of a nontaxable county, subscribes to premium cable television from a cable company located in a taxable county. The cable company shall collect the local tax because the sale occurred in a taxable county.

(2) The following are examples of sales or services not subject to the local tax:

(i) Tim, a New Jersey resident, purchases a television set from an appliance store located in a taxable county. The store delivers the television set to Tim at his New Jersey home. Because the television is delivered to an out-of-State location, it is not subject to the local tax.

(ii) XYZ, a manufacturing company located in a taxable county, with offices in both the taxable county and a nontaxable county, purchases the services of a keypunch operator from a help supply vendor located in a nontaxable county. Because the keypunch operator reports for work at an office of XYZ located in a nontaxable county, the help supply services are not subject to the local tax.

(d) Utility services. The sale or use of utility services subject to the State sales and use tax, including steam, natural and manufactured gas and electricity, is subject to the local tax if the meter which registers the service is located in a taxable county. The sale or use of telephone service subject to the State sales and use tax is subject to the local tax if the telephone equipment to which the telephone number is assigned is located at an address within a taxable county. The sale or use of a telegraph service subject to the State sales and use tax which originates in a taxable county is subject to the local tax.

(1) The following are examples of sales subject to the local tax:

(i) A business located in a taxable county purchases electricity through a meter at its business location in a taxable county. Because the meter that registers the service is located in a taxable county, the service is subject to the local tax.

(ii) A business headquartered in a nontaxable county purchases natural gas for its location in a taxable county. The gas is metered at the plant located in the taxable county but billed to the business headquarters. Because the meter that registers the service is located in a taxable county, the service is subject to the local tax.

(iii) A salesperson for a business located in a taxable county makes a collect telephone call from Chicago to its service address. Because the service address of the collect call is located in a taxable county, the service is subject to the local tax.

(2) The following are examples of sales not subject to the local tax:

(i) A business headquartered in a taxable county purchases electricity for its location in a nontaxable county. The electricity is metered at the location in the nontaxable county but billed to the business headquarters. Because the meter that registers the service is not located in a taxable county, the service is not subject to the local tax.

(ii) A salesperson for a business located in a nontaxable county makes a cellular telephone call within a taxable county which is billed to the service address of the equipment located in the nontaxable county. Because the service address of the telephone call is located in a nontaxable county, the service is not subject to the local tax.

(e) Retailer with multiple locations.

(1) If a retailer has multiple business locations, the sale is deemed to occur at the place of business where the initial order for the property or service is placed, even though the order may be forwarded elsewhere for acceptance, approval of credit, shipment or billing.

(2) The following are examples of sales or services subject to the local tax:

(i) Eileen orders a television set from an appliance store in a taxable county. Regardless of whether the television set is delivered to Eileen from a location in a nontaxable county, or Eileen picks up the set at a location in a nontaxable county, the store shall collect and remit the local tax since the sale occurred in a taxable county.

(ii) Steve, a resident of a taxable county, orders a television set from an appliance store in a nontaxable county. Regardless of whether Steve picks up the set at a location in a taxable county or the set is delivered from a location in a taxable county, the purchase is subject to the local use tax rather than the local sales tax. Steve shall pay the local use tax directly to the Department.

(iii) Bob, a resident of a taxable county, purchases a professional drum from a music store in New York City. The drum is delivered to Bob from New York City. Bob does not pay the applicable State sales tax or applicable local tax to the seller. Bob is required to remit the State and local use taxes directly to the Department.

(iv) Merrill, who maintains a regular place of business in a taxable county, sells jewelry from a temporary location in a nontaxable county. Because Merrill maintains a place of business in a taxable county, Merrill shall collect the State and local sales taxes.

(f) Salesperson.

(1) Sales by salespersons who are employes of a vendor are deemed to occur at the employer’s business address from which the salesperson works. Sales by salespersons who are independent contractors who issue their own invoices are deemed to occur at the place of business of the independent contractor. If, however, the independent contractor merely solicits sales on behalf of a vendor, the sale is deemed to occur at the business location of the vendor.

(2) The following are examples of sales or services subject to the local tax:

(i) A salesperson working as an employe from an office in a nontaxable county sells encyclopedias door-to-door in a taxable county. Tim buys the encyclopedias when the salesperson visits Tim’s home in a taxable county. The purchase is subject to the local use tax rather than the local sales tax. Therefore, Tim shall pay the local use tax directly to the Department.

(ii) A salesperson working as an employe from an office in a taxable county sells encyclopedias door-to-door in a nontaxable county. Jeff buys the encyclopedias when the salesperson visits Jeff’s home in a nontaxable county. The purchase is subject to the local sales tax rather than the local use tax. Therefore, the salesperson shall collect the local sales tax and remit it to the Department.

(iii) Joe, an independent contractor, sells teddy bears by direct mail advertising. Anne purchases a teddy bear through the mail. Anne is billed by Joe on his letterhead indicating an address in a taxable county. The purchase is subject to the local sales tax. If Anne had received an invoice from a manufacturer located outside of this Commonwealth whom Joe represents, the purchase would not be subject to the local sales tax but would be subject to the local use tax if Anne is a resident of a taxable county. Anne would be required to pay the tax directly to the Department.

(g) Vehicles, motorboats and aircraft.

(1) The sale or use of vehicles, boats or aircraft required to be titled or licensed is subject to the local tax if the address of the purchaser is at a location in a taxable county. The local tax on vehicles is payable to the Department of Transportation. The local tax on aircraft is payable to the Department. The local tax on motorboats is payable to either the Department or the Fish and Boat Commission. The location of the seller or the location to which the property is delivered does not affect the taxability of the property. This subsection does not apply to the purchase or use of snowmobiles, ATVs or dirt bikes. Subsection (c) relates to the taxability of snowmobiles, ATVs and dirt bikes. See § § 31.41—31.50 and 58.8 (relating to vehicles; and commercial airport and aircraft operators) for the general rules regarding the taxability of vehicles or aircraft.

(2) A lease or rental payment, including a down payment, made in connection with the lease or rental of a motor vehicle, trailer, semitrailer, mobile home, motor boat, aircraft or other similar tangible personal property required under Federal or State laws to be registered or licensed, is taxable based upon the location of the lessor or retailer, if the lease or rental agreement was entered into during the period of October 1, 1991, through June 30, 1994. If the lease is resold to another lessor in a taxable county, the new lessor is responsible for collecting the local sales tax on the remaining lease payments. If the lease is resold to a new lessor whose business location is in a nontaxable county, the lessor is not required to collect the local sales tax. If the lessee is a resident of a taxable county, the lessee shall pay the local use tax. On or after July 1, 1994, the lease of property referred to in this paragraph required to be registered or licensed under either Federal or state laws, shall be deemed to have been completed or used at the address of the lessee. The lessee shall pay local tax to the lessor upon the down payment and each lease payment relating to the lease. The lessor shall collect the local tax from the lessee. A rental payment made upon the property referred in this paragraph on or after July 1, 1994, is taxable based upon the location of the retailer. For the purpose of this subsection, a lease means a contract for 30 days or more and rental means a contract for a period of less than 30 days.

(i) The following are examples of sales subject to the local tax:

(A) John, a resident of a taxable county, purchases an automobile from an automobile dealer located in a taxable county. Because the sale occurred in a taxable county, the dealer shall collect and remit the local tax.

(B) A New Jersey resident purchases an automobile in New Jersey and subsequently establishes a residence in a taxable county. If the date of establishing the residence in the taxable county is less than 6 months after the date of purchase of the automobile, the tax is based on the original purchase price. If the date of establishing the residence is beyond 6 months of the date of purchase, neither state nor local tax is due.

(C) Mary Ellen, a resident of a taxable county, leases an automobile from a lessor located in a nontaxable county on July 15, 1994. The lessor is required to collect the 1% local tax.

(D) Sherry ordered a new automobile prior to the effective date of the local tax in the county in which she resides. The automobile is delivered to Sherry by the dealer after the effective date of the local tax. Sherry is required to pay the 1% local tax at the time she registers the vehicle with the Department of Transportation.

(ii) The following are examples of sales not subject to the local tax:

(A) Steve, a resident of a nontaxable county, purchases a boat from a boat dealer located in a taxable county. Because the address of the purchaser is not in a taxable county, the sale is not subject to the local tax.

(B) An aircraft dealer located in a taxable county sells an aircraft to a resident located in a nontaxable county. Because the address of the purchaser is not in a taxable county, the sale is not subject to the local tax.

(h) Vending machines.

(1) An operator of a vending machine located in a taxable county, from which food or beverages, excluding candy, gum and frozen milk-based or frozen water-based products are sold, is required to collect and remit the local tax at the rate of 1% upon the sales of food and beverages. Taxable sales from vending machines located in a nontaxable county are not subject to the local tax. Sales of 50¢ or less are not taxable. On sales in excess of 50¢, the tax shall be computed using the following formula: (Gross receipts ÷ 1.07) x .01 = local tax due (Gross receipts ÷ 1.07) x .06 = State tax due

(2) An operator of a vending machine selling taxable property, other than food or beverages, is required to collect and remit the local sales tax upon each individual sale of taxable property in accordance with the local tax bracket system.

(i) Hotel occupancy tax.

(1) The occupancy of hotel rooms located in a taxable county is subject to the 6% State hotel occupancy tax and the 1% local hotel occupancy tax. The occupancy of hotel rooms which is exempt from the 6% State hotel occupancy tax is also exempt from the 1% local hotel occupancy tax.

(2) The maximum State and local hotel occupancy tax is 7% plus additional local tax which a taxable county imposes and administers.

(j) Use tax.

(1) Persons who purchase taxable property or services which are subject to the local tax and do not pay the applicable local sales tax are required to remit the local tax directly to the Department. The purchaser shall report the tax as use tax on the purchaser’s tax return.

(2) The rules for imposing State use tax upon property purchased outside of this Commonwealth or purchased exempt from tax and subsequently put to a taxable use in this Commonwealth apply to local tax. These rules apply to the establishment of a residence in a taxable county, the temporary use of property within a taxable county by a nonresident of a taxable county, the use of property by a tourist or vacationer in a taxable county, or the use of property which was purchased by a resident within 6 months of its first taxable use in a taxable county. See § 31.7 (relating to use tax).

(3) The following are examples of transactions that are subject to local tax:

(i) Anne, a resident of a nontaxable county, purchases a television set without paying local sales tax. Anne immediately takes the set to her business located in a taxable county, where it remains for more than 7 days. Anne’s use of the television is subject to the local use tax after 7 days and Anne shall remit the use tax directly to the Department.

(ii) Tim purchases a television set at an appliance store located outside this Commonwealth. The set is delivered to Tim at his residence in a taxable county. Tim is required to pay the applicable State and local use taxes directly to the Department.

(iii) Mike orders an English grammar book from a vendor located in a taxable county. The book is delivered to Mike’s residence in a nontaxable county. The vendor did not charge Mike the local tax. Mike is required to remit the local use tax to the Department.

(iv) Gregg, a resident of a nontaxable county, establishes a new residence in a taxable county. Gregg need not pay local use tax on property purchased 6 months or more prior to establishing his residence in the taxable county. However, Gregg shall pay local tax upon the purchase price of property purchased within 6 months of establishing his residence in the taxable county. Gregg is entitled to a credit for local tax paid upon the property at the time of purchase.

(k) Construction contracts and special resale exemption.

(1) Payment of tax. Persons who perform construction contracts within taxable counties are required to pay local tax upon the purchase of property or services, on or after the effective date of the local tax, which are used or installed under the performance of a construction contract. If the property or service is purchased within a taxable county, the contractor is required to pay the local sales tax. If the property is purchased prior to the effective date of the local tax, it is not subject to the local tax imposed by the county in which the contract is being performed.

(2) Special exemption on fixed-price contracts in Allegheny County. The sale to or use of materials by a contractor is exempt from tax if the materials are incorporated into and made part of real estate under a contract for the construction, reconstruction, remodeling, repairing, maintenance or sale of real estate within Allegheny County on the basis of a fixed-price contract which is not subject to change or modification, or entered into under the obligation of a formal written bid which cannot be altered or withdrawn provided the contract or bid was signed prior to July 1, 1994. This exemption also applies to purchases made by subcontractors who perform contracts pursuant to exempt fixed-price contracts, even though the subcontracts are entered into on or after July 1, 1994. This exemption does not apply to change orders entered into on or after July 1, 1994, relating to the original fixed-price contract which was entered into prior to July 1, 1994.

(3) Special resale exemption. A special resale exemption applies to the transfer of ownership of tangible personal property purchased solely for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into tangible personal property within the taxable county and thereafter transported outside the taxable county for use exclusively outside the taxable county.

(4) Examples. The following are examples of transactions which are subject to local tax:

(i) ABC Company, a construction contractor, entered into a cost-plus contract on May 1, 1994, for the construction of a building in Allegheny County. ABC purchased all materials in Allegheny County. ABC purchased bricks in January of 1994 and installed the bricks on July 15, 1994. ABC also purchased and installed concrete on July 25, 1994. The bricks purchased in January of 1994 are not subject to the Allegheny County local tax because they were purchased prior to the effective date of the Allegheny County local tax. The concrete purchased and installed on July 25, 1994, is subject to the Allegheny County local tax because the concrete was neither purchased and used prior to the effective date nor purchased and used pursuant to a fixed-price contract within Allegheny County.

(ii) Alex Corporation purchases unassembled bicycles from a nontaxable vendor. The bicycles are delivered to XYZ Corporation in Allegheny County for assembly. After the bicycles are assembled, they are delivered to Alex’s plant in a nontaxable county for employe use. Because Alex is entitled to claim the special resale exemption, there is no local tax due on the work performed in Allegheny County by XYZ Corporation.

(iii) The Brendan Company, located in a nontaxable county, entered into a fixed-price contract to purchase and install a concrete block wall for an office building in Philadelphia. The contract was signed and the materials were purchased prior to the effective date of the Philadelphia local tax. The work was done after the effective date of the Philadelphia local tax. The materials were purchased in a nontaxable county. The materials are subject to the local tax. The Philadelphia local sales tax law does not contain a provision which excludes from the local tax fixed-price contracts entered into prior to the effective date of the Philadelphia local tax.

(iv) Stephanie Company, a contractor, entered into a fixed-price contract in March of 1994 to construct a building in Allegheny County. On July 12, 1994, Stephanie Company signed a change order to the original contract for additional construction at an agreed price. Materials purchased by Stephanie Company which are used to fill the change order are subject to the Allegheny local tax.

(l) Credits against tax.

(1) Interstate credits. To the extent that State or local tax is due, a credit will be granted for State and local taxes which were legally due and paid to another jurisdiction if the other jurisdiction grants similar credit for State and local taxes paid to the Department. Credit for taxes paid will be applied to the State tax first and the remainder to the local tax.

(i) Kathy, a New Jersey resident, purchased an automobile on February 3, 1992, from a New Jersey dealer and paid the 6% New Jersey sales tax. On April 4, 1992, Kathy established her residence in a taxable county. Because Kathy established her residence in a taxable county less than 6 months after she purchased the automobile, the use of the automobile is subject to the 6% State use tax and the 1% local tax. Since Kathy paid the 6% New Jersey sales tax, Pennsylvania will grant her a credit equal to the 6% New Jersey tax and apply the credit to the State tax. Kathy will be required to pay the 1% local tax.

(ii) If Kathy had been a New York resident and had paid tax at the rate of 7%, Kathy would not owe State or local tax.

(2) Intrastate credits. To the extent that the local use tax is due upon the use of property or services in a taxable county, a credit will be granted for local sales or use tax legally due and paid upon the purchase or use of the property or services to another taxable county.

(i) Chris, a resident of a taxable county, purchases a television set in another taxable county. Chris pays the applicable local sales tax at the time of purchase and takes the television set home. Chris is permitted to take a credit for the amount of local sales tax paid at the time of purchase and can apply the credit to the amount of local use tax due in Chris’s county of residence.

(ii) Pat, a resident of a taxable county, purchases a computer in a nontaxable county. Pat takes the computer home and pays the applicable local use tax to that county. Three months later, Pat takes the computer to another taxable county to use while attending college for 4 years. Pat is permitted to take a credit for the amount of local use tax paid to Pat’s county of residence and can apply the credit to the amount of local tax due to the county in which the computer is used while attending college.

(3) Voluntary collection. A vendor who is not located in a taxable county may voluntarily collect the local tax even though not required to collect the local tax. A vendor who voluntarily collects the local tax is responsible for reporting and remitting the local tax collected.

The provisions of this § 60.16 adopted October 8, 1993, effective October 9, 1993, 23 Pa.B. 4795; amended June 17, 1994, effective June 18, 1994, 24 Pa.B. 3040; amended October 20, 1995, effective October 21, 1995, 25 Pa.B. 4536. Immediately preceding text appears at serial pages (190210) to (190218) and (197837).

This section cited in 61 Pa. Code § 60.20 (relating to telecommunications service).

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.17 Sale of food and beverages by nonprofit associations which support sports programs.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Nonprofit association—

(i) An entity which is organized as a nonprofit corporation or nonprofit unincorporated association under the laws of the Commonwealth or the United States.

(ii) An entity which is authorized to do business in this Commonwealth as a nonprofit corporation or unincorporated association under the laws of the Commonwealth, and which is organized and operated on a nonprofit basis, including the following associations or separately chartered auxiliaries thereof:

(A) Youth or athletic.

(B) Volunteer fire.

(C) Ambulance.

(D) Religious.

(E) Charitable.

(F) Fraternal.

(G) Veterans.

(H) Civic. Sports program—Subject to the limitations set forth in subparagraph (ii), a sports program shall include:

(i) Baseball, softball, football, basketball, soccer and other competitive sports formally recognized as a sport by one or more of the following:

(A) The United States Olympic Committee as specified by and under the jurisdiction of the Amateur Sports Act of 1978 (36 U.S.C.A. § § 371—396).

(B) The Amateur Athletic Union.

(C) The National Collegiate Athletic Association.

(ii) The term is limited to a program or that portion of a program which meets the following criteria:

(A) Organized for recreational purposes and conducts activities substantially for these purposes.

(B) Organized primarily for participants who are 18 years of age or younger or whose 19th birthday occurs during the year of participation or the competitive season, whichever is longer. There is no age limitation for programs operated for persons with physical handicaps or persons with mental retardation. Support—The term means the following:

(i) The nonprofit association sells food and beverages and uses the funds raised solely to pay the expenses of a sports program.

(ii) The nonprofit association sells food and beverages at a location where a sports program is being conducted.

(b) Scope.

(1) The sale of food and beverages by nonprofit associations which support sports programs is not subject to tax.

(2) The following are examples of taxable and nontaxable sales by nonprofit associations:

(i) ‘‘F’’ fraternal association sells food and beverages to fans from a food stand located on university property where basketball games are played by members of the various fraternities, most of whom are 20 years of age or older. Sales of food and beverages by ‘‘F’’ to fans are taxable since the sports program is primarily for participants who are older than 18 years of age.

(ii) ‘‘A’’ charitable association operates a food stand four times a year at a public park where food and beverages are sold to raise funds solely to pay the expenses of a sports program. Since the funds raised from the sales of food and beverages by ‘‘A’’ are used solely to support sports programs, these sales are not subject to tax even though they are made from a location other than where the sports program is being conducted.

(c) Equipment and supplies.

(1) A vendor of food or beverages (which is not otherwise an exempt organization under § 32.21 (relating to charitable, volunteer firemen’s and religious organizations, and nonprofit educational institutions)) is required to pay tax upon the purchase of utilities, equipment, fixtures, utensils—such as glasses, knives and forks, and nondisposable plates and cups—table cloths, napkins, straws, returnable containers and related supplies.

(2) The purchase of the following items in connection with the sale of food or beverages is exempt from tax regardless of whether the purchaser is an exempt entity under § 32.21:

(i) Prepared or nonprepared food and beverages for resale.

(ii) Wrapping supplies as defined by § 32.1 (relating to definitions).

(3) The following examples illustrate what items are and are not subject to tax:

(i) In connection with the sale of food and beverages at a food stand where a sports program is being conducted, ‘‘N’’ nonprofit association provides tables and chairs for its customers to use. ‘‘N’’ is not an exempt organization under § 32.21. ‘‘N’’ shall pay tax on these items at the time of purchase and may not claim the resale exemption even though the invoices separately state the charges for these items.

(ii) In connection with the sale of food and beverages at a food stand where a sports program is being conducted, ‘‘X’’ nonprofit association provides to its customers paper plates, styrofoam cups, straws, paper napkins, and plastic knives, forks and spoons. ‘‘X’’ is not an exempt organization under § 32.21. ‘‘X’’ can purchase paper plates and styrofoam cups exempt from tax on the basis that these items qualify as wrapping supplies. ‘‘X’’ shall pay tax upon the purchase of straws, paper napkins, and plastic knives, forks and spoons.

The provisions of this § 60.17 adopted August 25, 1995, effective August 26, 1995, 25 Pa.B. 3493; amended July 2, 2011, effective July 3, 2011, 41 Pa.B. 3543. Immediately preceding text appears at serial pages (234302) and (200739) to (200740) and (326001).

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.19 Computer software, hardware and related transactions.

(a) Scope. Effective July 1, 1997, the rendition of computer programming, computer integrated systems design, computer processing, data preparation or processing, information retrieval, computer facilities management and other computer-related services, as defined under repealed section 201(dd)—(ii) of the TRC (72 P. S. § 7201(dd)—(ii)), are no longer subject to Sales or Use Tax. The sale at retail or use of computer hardware and canned software, as well as services thereto, remains subject to Sales and Use Tax as the sale at retail or use of tangible personal property and is not affected by the repeal of section 201(dd)—(ii) of the TRC.

(b) The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Canned software—Computer software that does not qualify as custom software. Computer hardware—Assembly of physical equipment that is united and regulated by interaction or interdependence to accomplish a set of specific computer system functions.

(i) The term includes any connected equipment which enables the computer to store, retrieve or communicate to or from a person, another computer or another device, the results of computer operations, computer programs or computer data.

(ii) The term also includes associated parts, which encompass any component of computer system hardware that is used in connection with and that is necessary to the performance of the hardware’s operation.

(iii) Examples of computer hardware are: microcomputers; minicomputers; main-frame computers; personal computers; external hard drives; portable disk drives; memory chip; compact disc read only memory (CD-ROM) drives; external modems; printers; scanners; servers; monitors; keyboards; mouses; microphone; network interfaces; network hubs; network routers; motherboards; daughterboards; central processing units; controller cards; internal hard drives; digitizer; internal modems; network interface cards; sound cards; video cards; and network wiring and cables. Custom software—Computer software designed, created and developed for and to the specifications of an original purchaser. Original purchaser—The first person for whom the custom software was designed, created and developed, and to whom it was transferred in a sale at retail. Storage media—The term includes hard disks, compact disks, floppy disks, magnetic tape, cards and other tangible medium used for the storage of computer readable information.

(c) Application.

(1) Computer hardware.

(i) The sale at retail or use of computer hardware is subject to tax.

(ii) The sale at retail or use of the services of repairing, altering or cleaning computer hardware is subject to tax.

(iii) The sale at retail or use of maintenance, service and warranty contracts for computer hardware constitutes prepayment for services to tangible personal property and is subject to tax.

(2) Computer software.

(i) Canned software. The sale at retail or use of canned software, regardless of the method of delivery, including updates, enhancements and upgrades is subject to tax.

(A) Canned software includes custom software that is transferred pursuant to a sale at retail to a person other than the original purchaser.

(B) Computer software designed, created and developed to adapt or modify canned software to the specific needs of a particular customer does not convert the canned software to custom software. Any charge for the custom software or modifications shall be reasonable and be separately stated on the sales invoice or statement to the customer to be exempt from tax.

(C) A vendor’s transfer for consideration to a purchaser of the temporary ownership, possession or custody of a storage medium containing canned software for the purpose of being used or recorded by either the purchaser or vendor on the purchaser’s computer hardware is subject to tax.

(D) The sale at retail or use of a canned software maintenance contract constitutes a prepayment for services to tangible personal property and is subject to tax. If a canned software maintenance agreement provides that the purchaser is entitled to receive both taxable components, such as canned software updates, enhancements, upgrades or error corrections, and nontaxable components, such as consultation, support or training services, the charge for the nontaxable component is not subject to tax if that charge is separately stated on the sales invoice.

(ii) Custom software. The sale at retail or use of custom software is not subject to tax. The sale at retail or use of custom software constitutes a purchase of a nontaxable computer programming service.

(A) The sale at retail or use of multiple copies or licenses of custom software to the original purchaser is not subject to tax.

(B) The sale at retail or use of custom software installation, custom software repair and maintenance, custom software updates, enhancements and upgrades that constitute custom software is not subject to tax.

(C) A custom software vendor’s purchase of storage media used to transfer custom software to its customers, and the vendor’s purchase of any related materials, including documentation and training manuals that are transferred to the customer as part of the sale at retail of custom software, are subject to tax when purchased by the custom software vendor.

(d) Exemptions from tax.

(1) The sale at retail or use of canned software and computer hardware is exempt if purchased by qualified charitable organizations, volunteer fire companies, religious organizations and nonprofit educational institutions, unless the software is used in an unrelated trade or business; by the Federal government; or by the Commonwealth, its instrumentalities or political subdivisions, including public school districts.

(2) The manufacturing, research, mining, processing, public utility, farming, dairying, agriculture, horticulture or floriculture exemptions from tax apply to the purchase of canned computer software and computer hardware predominantly and directly used in these operations.

(3) Under section 201(c)(5) of the TRC, the manufacturing and research exemption from tax applies to the sale at retail or use of tangible personal property or taxable services by a person engaged in the business of manufacturing or researching canned software, if the property is predominately and directly used by the purchaser in the manufacture or research of canned software.

(i) The creation of custom software does not qualify as manufacturing or research.

(ii) When a purchaser of tangible personal property uses the property to both manufacture canned software and create custom software, the purchaser has the burden of establishing that the tangible personal property is predominately used in the manufacturing or research of canned software.

(4) The sale at retail of canned software and computer hardware to a vendor who will transfer ownership, custody or possession of the canned software or computer hardware for a consideration in the ordinary course of its business is exempt from tax as a sale for resale. Canned software or computer hardware used by a vendor in producing a separate computer product for resale or in providing a service does not qualify as a sale for resale.

The provisions of this § 60.19 adopted January 7, 2000, effective January 8, 2000, 30 Pa.B. 233; amended March 2, 2007, effective March 3, 2007, 37 Pa.B. 1048. Immediately preceding text appears at serial pages (319287) to (319290).

Canned Software Electronically Delivered

Petitioner sought refund of taxes paid on purchase of software license renewal to use software programs, however, under the ‘‘essence of the transaction’’ test, renewals of licenses to use ‘‘canned’’ software, whether transmitted electronically or on a physical medium, is taxable as the sale of tangible personal property; the computer program is stored on a computer’s hardware, takes up space on the hard drive, and is physically perceived by checking the computer’s files. Graham Packaging Co., LP, v. Commonwealth, 882 A.2d 1076, 1086—1087 (Pa. Cmwlth. 2005).

Software Licenses Are Tangible Personal Property

Taxpayer petitioned for review of the order of Board of Finance and Revenue denying its request for refund of sales taxes on purchase of licenses to use computer software; the sale of all canned software, whether transmitted electronically or on a physical medium, is taxable as the sale of tangible personal property, therefore licenses to use the software was sale at retail of tangible personal property and subject to sales tax. Dechert LLP v. Com., 922 A.2d 87, 90 (Pa. Cmwlth. 2007).

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.20 Telecommunications service.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Airtime—A component of a telecommunications service that is charged on a basis that reflects the time span of the communication. Basic local telephone service—The provision of an access line and dial tone, to a fixed location, for purposes of sending or receiving a telecommunication service within a local calling area, regardless of whether the purchaser has limited or unlimited access to a private or a party line. The term also includes installation service, providing and restoring access lines, touch tone service, 911 service and telecommunications relay service. Cell site—The geographic area covered by receiving and transmitting equipment that provides cellular mobile telecommunications service directly to or from a subscriber. Channel—A pathway for the transmission of information between a sending point and a receiving point. Commercial use—The use or consumption other than a residential use. Enhanced telecommunication services—

(i) Services, offered over a telecommunications network, which employ computer processing applications that include one or more of the following:

(A) Acts on the format, content, code, protocol or similar aspects of the purchaser’s transmitted information.

(B) Provides the purchaser additional, different or restructured information.

(C) Involves the purchaser’s interaction with stored information.

(ii) Examples of enhanced telecommunication services include electronic publishing, Internet access, voice mail and electronic mail services. Services utilizing any of the computer processing applications in subparagraph (i) solely for the management, control or operation of a telecommunications system or the management of a telecommunications service is not an enhanced telecommunication service. International telecommunications service—A telecommunications service that either originates in this Commonwealth and terminates outside the United States, or originates outside the United States and terminates in this Commonwealth. Interstate telecommunications service—A telecommunications service that either originates in this Commonwealth and terminates in another state, or originates in another state and terminates in this Commonwealth. IntraState telecommunications service—A telecommunications service that originates and terminates within this Commonwealth, regardless of routing. Private line—A dedicated, nontraffic sensitive telecommunications service for a single purchaser that entitles the purchaser to the exclusive or priority use of a communications channel, or group of channels, between specified locations. Residential use—The use or consumption within that portion of a structure used as a home, dwelling, private residence, condominium, housing cooperative, prefabricated building, camper, summer home, motor home or similar place of abode. The term includes the use or consumption by a condominium association or housing cooperative association that acts on behalf of residents who use the condominium or housing cooperative units as their personal residences. The term does not include the use or consumption of a telecommunications service for commercial purposes at a purchaser’s private residence. Subscriber line charge—An access charge paid directly by the purchaser of a telephone service to a local exchange carrier to defray the cost of providing local exchange access. Telecommunications service—

(i) Any one-way transmission or any two-way, interactive transmission of sounds, signals or other intelligence converted to like form, which affect or are intended to affect meaningful communications by electronic or electromagnetic means by means of wire, cable, satellite, light waves, microwaves, radio waves or other transmission media.

(ii) Except as provided in subparagraph (iii), the term includes all types of telecommunication transmissions such as:

(A) Local, toll or wide-area telephone service.

(B) Private line service.

(C) Telegraph service.

(D) Radio repeater service.

(E) Wireless communication service.

(F) Personal communications system (PCS) service.

(G) Cellular mobile telecommunication service.

(H) Specialized mobile radio service.

(I) Stationary two-way radio service.

(J) Paging service.

(iii) The term does not include:

(A) Subscriber charges for access to a video dial tone system.

(B) Charges to video programmers for the transport of video programming.

(C) Enhanced telecommunication services. Video dial tone service—A common carrier service for the transport of a video programming service to a subscriber. Video programming service—Video or information programming, whether in digital or analog format, that is provided by a cable television operator, or is of the type that would generally be considered comparable to programming provided by a cable television operator, and upon which the cable television operator pays a franchise fee. The term does not include on-line, interactive information services to the extent that access to these services is accomplished through use of a dial-up or telephone line, or a wireless or direct-to-home satellite transmission.

(b) Scope.

(1) General. Effective October 1, 1991, the sale at retail or use of an international or interstate telecommunications service charged to a service address in this Commonwealth or an intraState telecommunications service is subject to tax.

(2) Purchase price. The total amount charged for an international, interstate or intraState telecommunications service is taxable, regardless of whether the charge is based upon a flat rate or a message unit rate.

(3) Private line service. If the telecommunications service is a private line service, both of the following charges are taxable:

(i) Charges imposed for each channel termination point in this Commonwealth.

(ii) Charges for that portion of the channel within this Commonwealth determined by mileage or other reasonable method.

(4) Ancilliary services. Services that are ancillary to the provision of telecommunication services are taxable, such as directory assistance service, the connection or disconnection of telecommunications services or equipment, call forwarding, caller identification and call waiting.

(5) Prepaid telephone calling cards. The sale of prepaid telephone calling cards, which allow the holders of the cards to use a predetermined number of minutes or set dollar amount of a telecommunications service, are not subject to Pennsylvania Sales Tax. The sale of the cards are considered to be the sale of a right to future telecommunication services and not a sale of tangible personal property. Once a telecommunications service that originates within this Commonwealth is made with the use of a prepaid telephone calling card, the call is subject to tax as a telecommunications service.

(i) The purchase price subject to tax is the consideration for the telecommunication service that is charged by the telecommunication service provider. This consideration is the value, expressed in terms of money, of the units or minutes that are reduced from the card upon each use. The tax shall be remitted to the Department by the telecommunications service provider.

(ii) The telecommunications provider or other entity that sells the debit cards is the consumer of the plastic or paper cards. Because the cards are not tangible personal property purchased for resale, the telecommunications provider or other entity shall pay tax upon its purchase of the cards.

(iii) The rules pertaining to debit cards under this subsection apply whether the card is transferred to a retail customer for consideration or as part of a promotional program.

(6) Internet access. Service charges associated with the provision of Internet access by an Internet or on-line service provider, including flat rate monthly, installation and hourly charges, are considered enhanced telecommunication charges and are not subject to sales and use tax. Telecommunication charges incurred by an Internet service provider to deliver Internet access to its subscribers are subject to tax. Local, toll or long distance telephone charges incurred by a subscriber to transmit signals from a computer to the Internet service provider are subject to tax, subject to the exceptions listed in subsection (d).

(c) Service address.

(1) If telecommunications equipment is designed to originate or receive a telecommunications service at a fixed location, the service address is the location of the equipment from which the purchaser originates or receives the telecommunications service. The following are examples involving a service address at a fixed location:

(i) Bruce calls New York from his home telephone located in this Commonwealth. Because Bruce’s telephone is designed to originate a telecommunications service at a fixed location in this Commonwealth, the service address is in this Commonwealth. Because the telephone call also originates in this Commonwealth, the telecommunications service is subject to Pennsylvania Sales and Use Tax.

(ii) Jonathan places a collect call from New Jersey to Mary’s home phone in this Commonwealth. Because it is a collect call, Mary is the purchaser of the telecommunications service. Because Mary’s telephone is designed to receive a telecommunications service at a fixed location in this Commonwealth, the service address is in this Commonwealth. The collect call is subject to Pennsylvania Sales and Use Tax because it is received in this Commonwealth and its service address is in this Commonwealth.

(2) If telecommunications service equipment is designed to originate or receive a telecommunications service at a mobile location, the service address is the subscriber’s primary use of the telecommunications equipment as defined by telephone number, authorization code or location in this Commonwealth where bills are sent. If the mobile telephone switching office or similar facility first receiving the telecommunication is outside the subscriber’s assigned service area (that is, the subscriber is ‘‘roaming’’), the service address is deemed to be the location of that mobile telephone switching office or similar facility. In the case of airtime service, a mobile telecommunications service provider may elect to define service address as being the location of the initial cell site used by the service provider’s customer to originate the call or, if the customer receives a call, the cell site that connects the call to the receiver. The following are examples involving a service address at a mobile location:

(i) Cara, a Pennsylvania resident, purchases a paging service that covers Pennsylvania, New York and New Jersey. To activate the paging service, the paging service provider has antennas located throughout the tristate area that emit a signal corresponding to Cara’s pager. Cara’s pager is activated while she is attending a conference in New York City. Cara’s service address is defined as her billing address in this Commonwealth because her pager is designed to receive a telecommunications service from a mobile location. The paging service originates in this Commonwealth because the paging service provider’s signals originate from antennas located in this Commonwealth. Because the service originates in this Commonwealth and is charged to a service address in this Commonwealth, the call is subject to Pennsylvania Sales and Use Tax.

(ii) Janis, a Pennsylvania resident, calls Newark, New Jersey from her cellular telephone while driving through Scranton, Pennsylvania, which is within her assigned cellular telephone service area. The cellular telephone service provider sends Janis’s phone bills to her residence in this Commonwealth. Accordingly, the service address is deemed to be Janis’s billing address. Because the call originates in this Commonwealth and the service address is in this Commonwealth, the call is subject to Pennsylvania Sales and Use Tax.

(iii) Katie, a Pennsylvania resident, calls New York from her cellular telephone while driving through Maine, which is outside her assigned cellular telephone service area. Accordingly, the service address is defined as the mobile telephone switching office in Maine that transmits the signal. Because the service address is in Maine and the telecommunication originates and terminates outside this Commonwealth, the call is not subject to Pennsylvania Sales and Use Tax.

(iv) Mike, a New York resident, calls Ohio from his cellular telephone while driving through this Commonwealth, which is outside his assigned cellular telephone service area. Accordingly, the service address is defined as the mobile telephone switching office in this Commonwealth that transmits the signal. Because the service originates in this Commonwealth, and the service address is deemed to be in this Commonwealth, the call is subject to Pennsylvania Sales and Use Tax.

(v) Joe, a resident of Valley Forge, Pennsylvania, calls his office in Philadelphia, Pennsylvania, from his cellular telephone while driving in Cherry Hill, New Jersey. The call originates and terminates within his assigned cellular mobile telephone service area, which encompasses both this Commonwealth and New Jersey. Joe’s service provider elects to use the cell site method for determining service address and determines that the initial cell site used to originate the call was located in Cherry Hill, New Jersey. Although Joe’s cellular telephone call terminated in this Commonwealth and his billing address is in this Commonwealth, the call is not subject to Pennsylvania sales tax, because the location of the call’s service address, under the cell site method, is in New Jersey.

(3) The service address of an intraState telecommunications service is deemed to be in this Commonwealth regardless of how or where billed or paid.

Example: Gregg places a call from Philadelphia, Pennsylvania to Scranton, Pennsylvania. He charges the call to a third party located outside this Commonwealth. Because the call originates and is received in this Commonwealth, the entire charge is taxable. The fact that Gregg charges the call to a third party located outside this Commonwealth is irrelevant.

(4) If the charge for an international or interstate telecommunications service is paid by a credit or payment mechanism that does not relate to a service address, such as a debit or credit card, or when the service is charged to equipment at a location that does not constitute a service address, the service address is deemed to be the location at which the telecommunications service originated.

(i) Example: Jack calls Massachusetts from a pay telephone located in this Commonwealth and uses his prepaid telephone debit card to pay for the call. Because a prepaid telephone debit card is not related to a service address, the service address is deemed to be this Commonwealth, the origination of the call. Because the call also originates in this Commonwealth, the charge is subject to Pennsylvania Sales and Use Tax.

(ii) Example: John calls New York from a telephone in this Commonwealth and charges the call to his calling card, a credit payment mechanism related to his home telephone in Florida. Because the telecommunications service was charged to equipment at a location that did not constitute a service address from which the call either originated or terminated, the service address is deemed to be this Commonwealth, the origination of the call. Therefore, because the call originates in this Commonwealth, it is subject to Pennsylvania Sales and Use Tax.

(5) The service address of a private line telecommunications service is deemed to be in this Commonwealth to the extent that charges for the service are attributed to this Commonwealth under subsection (b)(4).

(d) Exemptions from tax. The following telecommunication services are exempt from tax:

(1) Basic local telephone service purchased directly by the purchaser solely for the purchaser’s own residential use.

(2) Subscriber line charges purchased directly by the purchaser solely for the purchaser’s own residential use.

(3) Telegrams paid for in cash at a telegraph office.

(4) Sales for resale of a telecommunications service as described in subsection (e).

(5) A telecommunications service purchased by a charitable organization as defined under § 32.1 (relating to definitions) that holds an exemption number issued by the Department under § 32.21 (relating to charitable, volunteer firemen’s and religious organizations, and nonprofit educational institutions) and satisfies the requirements for a tax-exempt purchase under § 32.21.

(6) A telecommunications service purchased by a governmental entity as defined in § 32.22 or § 32.23 (relating to sales to the United States Government or within areas subject to the jurisdiction of the Federal Government; and sales to the Commonwealth or its political subdivisions and sales by the Commonwealth and its political subdivisions).

(7) A telecommunications service that is predominately used directly in manufacturing, processing, public utility, farming, dairying, agriculture, horticulture or floriculture, as defined in § 32.1.

(8) Effective July 1, 1995, a telephone call paid for by inserting money into a telephone that accepts a direct deposit of money to operate.

(9) A telecommunications service purchased by an entity otherwise exempt from Pennsylvania Sales and Use Tax under any Federal or State law not enumerated in this subsection.

(e) Resale exemption.

(1) Purchase for resale. The purchase of a telecommunications service for resale occurs if the purchaser does not use the telecommunications service itself but rather resells the telecommunications service in the ordinary course of business. A purchase for resale does not occur when an enhanced telecommunication services provider acquires telecommunications services, regardless of whether the cost of the telecommunications services is separately stated on the invoice to the enhanced telecommunication service provider’s customer.

(2) Examples:

(i) A guest at a hotel places a long distance telephone call. The call is handled through the hotel’s switchboard. The guest is charged $5 per minute and the guest’s bill separately states this charge. The hotel may claim the resale exemption on the charge for the guest’s call that it receives from the long distance telephone company providing service to the hotel.

(ii) A university purchases telecommunications services in bulk and then resells these services to individual students, faculty members or other retail purchasers. The university may claim the resale exemption on its pur-chase of the telecommunication service that is resold to retail purchasers.

(iii) Interexchange telephone company IXC pays access charges to local exchange telephone company LEC for switched access service so that it may place a customer’s long distance telephone call. IXC may claim resale on the access charge.

(iv) ISP, an Internet service provider, purchases telecommunication services to provide Internet access to its customers. Because ISP renders an enhanced telecommunication service, it cannot claim resale upon its purchase of telecommunication services that it uses to provide its enhanced service.

(v) XYZ Co. is an information services provider located in this Commonwealth that sells sports gambling information for $5 per minute to customers who access the information through a ‘‘900’’ telephone number. XYZ Co. purchased the ‘‘900’’ telephone number from a long distance telephone company for a flat monthly fee of $2,000. Although the $5 per minute fee is listed on the customer’s telephone bill, this charge does not represent the customer’s charge for the ‘‘900’’ telephone call. Instead, the $5 per minute charge represents the purchase price of XYZ Co.’s sports gambling information retrieved by means of the ‘‘900’’ telephone number. XYZ Co. cannot claim resale upon its purchase of its $2,000 per month ‘‘900’’ telephone number because it is using this telecommunication service to render its sports information service. Accordingly, XYZ Co. shall pay Sales Tax upon its purchase of the ‘‘900’’ telephone number because the calls terminate in this Commonwealth and are charged to XYZ Co.’s service address in this Commonwealth.

(f) Credits against tax.

(1) To the extent that tax is due on the purchase of an international or interstate telecommunications service, a credit will be granted for taxes that were legally due and paid to another jurisdiction, if the other jurisdiction grants a similar credit for taxes paid to the Department. A credit cannot exceed the amount of tax owed to the Department on the same transaction.

(2) Credits against local tax will be applied in accordance with § 60.16 (relating to local sales, use and hotel occupancy tax).

(g) Local sales and use tax.

(1) A telecommunications service provider shall collect and remit local tax if the telecommunications service is provided to a service address in a county or other local jurisdiction that has enacted a local tax.

(2) In the case of airtime service, a cellular mobile telecommunications service provider may elect to use the cell site method for determining the service address as being in a county or other local jurisdiction that has enacted a local tax in a manner similar to that described in subsection (c)(2).

(h) Telecommunications equipment and supplies. The purchase, use, lease, repair or maintenance of telecommunications equipment and supplies, such as telephones and wires, is subject to Sales and Use Tax, unless the purchaser is entitled to claim an exclusion under the provisions of § 32.21, § 32.22 or § 32.34 (relating to public utilities).

The provisions of this § 60.20 adopted October 17, 1997, effective October 18, 1997, 27 Pa.B. 5432; amended December 19, 1997, effective December 20, 1997, 27 Pa.B. 6577. Immediately preceding text appears at serial pages (234303) to (234311).

Enhanced Telecommunications Service

When a service provides Internet access, it is an enhanced telecommunications service under subsection (a) and is excluded from the definition of ‘‘telecommunications service.’’ As such, it cannot fall under the exception in section 201(rr)(3)(B) of the Tax Reform Code of 1971 (72 P.S. § 7201(rr)(3)(B)) that allows taxes on ‘‘[t]elecommunication services purchased by an Internet service provider to deliver access to the Internet to its customers.’’ Thus, the service is exempt from tax as Internet access. Level 3 Commc’ns, LLC v. Commonwealth, 125 A.3d 832 (Pa. Cmwlth. 2015).

Internet Equipment Taxable

Taxpayer, an internet service provider, was not entitled to sales tax exemption for equipment used in providing internet access based on regulations that telecommunications services are taxable under the sales and use tax. Concentric Network Corp. v. Commonwealth, 897 A.2d 6, 15 (Pa. Cmwlth. 2006).

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.21 Commercial racing activities.

(a) Definitions. The following term, when used in this section, has the following meaning, unless the context clearly indicates otherwise: Commercial racing activities—

(i) A thoroughbred and harness racing event at which parimutuel wagering is conducted under the Racehorse Industry Reform Act (4 P.S. § § 325.101—325.402).

(ii) A fair harness racing event approved by the Pennsylvania State Harness Racing Commission.

(b) Scope.

(1) Effective July 11, 1996, the sale at retail or use of the following items of tangible personal property or services thereto is not subject to tax:

(i) Horses to be used exclusively for commercial racing activities. The exemption applies to interests acquired by individuals in syndicated or corporate-owned horses.

(ii) Feed, bedding, grooming supplies, riding tack, farrier services, portable stalls and sulkies solely for horses that are used exclusively for commercial racing activities.

(2) Items such as horse vans; motor vehicles; jockey or sulky driver uniforms; whips and accessories; and similar items remain subject to tax.

Example.

‘‘A’’ purchased a thoroughbred horse at a claiming race. ‘‘A’’ purchased the horse solely for racing at United Race Track, at which parimutuel wagering is conducted. The purchase of a horse by ‘‘A’’ is not subject to tax. ‘‘A’’ also purchased a specially designed trailer to transport the horse from ‘‘A’s’’ home to the race track and a sulky to carry the driver at the horse race meeting. The purchase of the sulky by ‘‘A’’ is not subject to tax. However, the purchase of the trailer by ‘‘A’’ is subject to tax because it does not represent one of the enumerated exempt items in the statute.

(3) Effective July 11, 1996, the propagation and raising of horses to be used exclusively for commercial racing activities when engaged in as a business qualifies as farming under the provisions of the sales and use tax law. Persons engaged in the business of farming are entitled to the limited exemption from sales and use tax as set forth in § 32.33 (relating to farming).

Example.

‘‘B’’ operates a riding stable at which persons may lease horses for riding purposes. ‘‘B’’ also operates a farm where riding horses (but not racing horses) are propagated and raised. ‘‘B’’ is not engaged in the business of farming because the horses are not exclusively used for commercial racing activities.

(c) Procedure for claiming exemption.

(1) Persons entitled to claim an exemption under this section are required to tender to the vendor a completed REV-1220 form in lieu of the tax.

(2) Persons claiming an exemption under subsection (b)(1) shall annotate Form REV-1220 at block ‘‘other’’ by inserting the following wording: ‘‘Horse/property will be exclusively used for commercial racing activities.’’

(3) Persons claiming an exemption under subsection (b)(3) shall annotate Form REV-1220 at block 1 by inserting the word ‘‘farming.’’

(4) If Form REV-1220 is properly annotated, the same form may be used in claiming exemption under subsection (b)(1) and (3).

The provisions of this § 60.21 adopted July 25, 1997, effective July 26, 1997, 27 Pa.B. 3683.

History

• Source: The provisions of this § 60.

61 Pa. Code § 60.23 Electric utility services.

(a) General. Chapter 28 of 66 Pa.C.S. (relating to The Electricity Generation Customers Choice and Competition Act) (act) became effective on January 1, 1997. The act includes two major changes. First, section 2804 of the act (relating to standards for restructuring of electric industry) gives the retail customer the choice of an electric generation supplier. Second, section 2804 of the act gives the Pennsylvania Public Utility Commission the authority to require the unbundling of electric utility services, tariffs and customer bills to separate the charges for generation, transmission and distribution. This statement of policy sets forth the policy of the Department in taxing unbundled charges relating to the sale to or use of electricity by nonresidential users under Article II of the TRC (72 P. S. § § 7201—7281.2).

(b) Article II of the TRC.

(1) The TRC became effective on March 4, 1971. Article II of the TRC imposes Sales and Use Tax upon certain tangible personal property and selected services.

(i) Section 201(m) of the TRC (72 P. S. § 7201(m)) defines tangible personal property to include ‘‘electricity for nonresidential use.’’

(ii) Section 202 of the TRC (72 P. S. § 7202) imposes Sales or Use Tax upon the ‘‘purchase price’’ of each ‘‘sale at retail’’ or ‘‘purchase at retail’’ of tangible personal property within this Commonwealth.

(iii) The term ‘‘sale at retail’’ is defined in section 201(k) of the TRC as any transfer for a consideration, of the ownership, custody or possession of tangible personal property.

(iv) The term ‘‘purchase at retail,’’ is defined in section 201(f) of the TRC as the acquisition for a consideration of the ownership, custody or possession of tangible personal property when the acquisition is made for the purpose of consumption or use.

(v) Section 201(g) of the TRC defines ‘‘purchase price’’ as the total value of anything paid or delivered or promised to be paid or delivered in the complete performance of a ‘‘sale at retail’’ or a ‘‘purchase at retail.’’

(2) Since the enactment of the TRC, the bundled charges for the generation, transmission and distribution of ‘‘electricity for nonresidential use,’’ together with other charges representing reimbursements to the seller for taxes, fuel adjustment costs and similar charges, have been subject to tax.

(c) Revenue-neutral reconciliation. Section 2810 of the act (relating to revenue-neutral reconciliation) provides: ‘‘It is the intention of the General Assembly that the restructuring of the electric industry be accomplished in a manner that allows Pennsylvania to enjoy the benefits of competition, promotes the competitiveness of Pennsylvania’s electric utilities and maintains revenue neutrality to the Commonwealth.’’ In maintaining revenue neutrality, section 2810 of the act further provides that it is the intention of the General Assembly not ‘‘to cause a shift in proportional tax obligations among customer classes or individual electric distribution companies’’ but ‘‘to establish this revenue replacement at a level necessary to recoup losses that may result from the restructuring of the electric industry and the transition thereto.’’ Among the taxes to which the General Assembly makes reference are the sales and use taxes collected under Article II of the TRC. To maintain revenue neutrality, both bundled and unbundled charges relating to the sale or use of ‘‘electricity for nonresidential use’’ will continue to be subject to Sales and Use Tax under Article II of the TRC to the same extent as receipts from bundled charges for ‘‘electricity for nonresidential use’’ were taxable during the Fiscal Year 1995—1996.

(d) Taxability of unbundled charges. To fulfill its responsibilities under Article II of the TRC, as well as, the recognition of the intention of the General Assembly, as provided under the act, the Department is required to impose Sales and Use Tax upon the total purchase price charged upon each separate charge for the generation, transmission or distribution in connection with providing nonresidential electric utility services as well as all related charges, services or costs for the generation, production, transmission or distribution of electricity whether or not the total amount charged is billed as a single charge by one vendor or billed separately by one or more vendors.

The provisions of this § 60.23 adopted July 17, 1998, effective July 18, 1998, 28 Pa.B. 3418.

Electricity Services Taxable

Transmission, distribution, and transition services associated with taxpayer’s purchase of electricity was not exempt from Pennsylvania sales tax even though taxpayer purchased electricity from third party generator which was delivered by a separate utility; utility that delivered electricity to taxpayer was not a mere delivery carrier, but with electricity generator, were together the ‘‘vendor’’ and therefore the services were not separate and exempt from sales tax. Spectrum Arena L.P. v. Com., 983 A.2d 641, 650-651 (Pa. 2009).

History

• Source: The provisions of this § 60.

Chapter 71 General Provisions

61 Pa. Code § 71.4 Definitions.

The following words and terms, when used in this article, have the following meanings, unless the context clearly indicates otherwise: Act—The Cigarette Tax Act, Article XII of the TRC (72 P. S. § § 8201—8297). Basic cost of cigarettes—The gross price of cigarettes from the manufacturer to a dealer in the quantities stated including freight and handling charges and the full face value of any tax which may be required by law. Cigarette stamping agent—A person who is licensed as such by the Department for the purpose of affixing cigarette tax stamps to packages of cigarettes and transmitting the proper tax to the Commonwealth. Cigarettes—Any roll for smoking made wholly or in part of tobacco, irrespective of size or shape, and whether or not the tobacco is flavored, adulterated or mixed with any other ingredient, the wrapper or cover of which is made of paper or any other substance or material, excepting tobacco. The term does not include cigars. Cigarette vending machine—A mechanical or electrical device from which cigarettes are dispensed for a consideration. Code—The Cigarette Sales and Licensing Act, Article II-A of the FC (72 P. S. § § 201-A—230-A). Cost of doing business—The dealer’s aggregate costs for its previous 12-month reporting period, as determined by accounting principles regularly employed in the determination of costs for the purpose of Federal income tax reporting, including direct and indirect costs, such as product costs, freight charges, labor costs, costs of equipment, rental and maintenance expenses,cigarette licenses, preopening expenses, management fees, rents, depreciation, selling costs, maintenance expenses, interest expenses, delivery costs, all types of license fees, all types of taxes, insurance, advertising costs and any central and regional administrative expenses. Cost of the retailer—The basic cost of cigarettes to a retailer, which includes the cost of the wholesaler and cigarette stamping agent, plus a markup to cover the retailer’s cost of doing business, which cost of doing business, in the absence of satisfactory proof of a lesser cost, is presumed to be 6% of the basic cost of cigarettes to the retailer. Cost of the stamping agent—The basic cost of cigarettes to a cigarette stamping agent. Cost of the wholesaler—The basic cost of cigarettes to a wholesaler, which includes the cost of the stamping agent, plus a markup to cover the wholesaler’s cost of doing business, which cost of doing business, in the absence of satisfactory proof of a lesser cost, is presumed to be 4% of the basic cost of cigarettes to the wholesaler. Dealer—A Pennsylvania-licensed cigarette stamping agent, wholesaler or retailer. Operating expenses—A dealer’s cost of doing business decreased by the dealer’s cost of goods sold. Promotional sales plan—The placement upon the premises of a dealer of literature, premiums, displays, goods, wares, merchandise or other material designed to stimulate, encourage or induce the purchase of cigarettes by the consumer, or a marketing plan that involves a price reduction or gift offered in conjunction with the sale of cigarettes that causes a dealer to be in violation of the code or act. Retailer—

(i) A person who, in the usual course of business, purchases or receives cigarettes from any source whatsoever for the purpose of sale to the ultimate consumer.

(ii) A person who, in the usual course of business, owns, leases or otherwise operates one or more vending machines for the purpose of sale of cigarettes to the ultimate consumer.

(iii) A person who buys, sells, transfers or deals in cigarettes for profit and is not licensed as a cigarette stamping agent or wholesaler. Sale—A transfer for a consideration, in exchange, as barter, as a gift, as an offer for sale or in distribution, in any manner or by any means whatsoever. Wholesaler—

(i) A person who, in the usual course of business, purchases cigarettes from a cigarette stamping agent or other wholesaler and receives, stores, sells and distributes within this Commonwealth at least 75% of all the cigarettes purchased by him to retail dealers or wholesale dealers or any combination who shall buy the cigarettes from him for the purpose of resale to the ultimate consumer, if the person maintains an established place of business for the receiving, storage and distribution of cigarettes.

(ii) A person who is engaged in the business of distributing cigarettes through vending machines to the ultimate consumer by means of placing the cigarette vending machines, owned or leased by him, in various outlets within this Commonwealth and who pays to the owner or lessee of the premises a commission or rental for the use of the premises, if the vending machine operator operates at least ten vending machines. In addition, the vending machine operator shall meet the other requirements for licensing of wholesalers under this article, including maintaining an established place of business for the receiving, storage and distribution of cigarettes.

(iii) A person, including a franchisee, who owns and operates at least five retail outlets in this Commonwealth, having 100% common ownership, who purchases cigarettes from a cigarette stamping agency or another wholesaler for resale to the ultimate consumer. In addition, the person shall maintain complete and accurate records of all purchases and sales in his main office and also in the retail outlet.

The provisions of this § 71.4 issued under section 6 of the Fiscal Code (72 P. S. § 6); section 1291 of the Tax Reform Code of 1971 (72 P. S. § 8291); and sections 209-A, 214-A, 215-A and 227-A of the act of April 9, 1929 (P. L. 343, No. 176) (72 P. S. § § 209-A, 214-A, 215-A and 227-A).

The provisions of this § 71.4 adopted February 13, 1998, effective February 14, 1998, 28 Pa.B. 979.

History

• Authority: The provisions of this § 71.
• Source: The provisions of this § 71.

61 Pa. Code § 71.5 Cigarette tax stamps.

(a) Method of purchase. A cigarette stamping agent shall purchase cigarette tax stamps by presenting to the Department or one of its authorized agents, Form Rev-1043, Cigarette Stamping Agency Purchase Order, listing the cigarette stamping agent’s name, license number, address, telephone number and the amount of tax stamps desired for purchase.

(b) Method of payment. Cigarette stamping agents may pay for cigarette tax stamps in exchange for any combination of the following:

(1) Cash.

(2) Approved credit up to the face amount of the security filed with and approved by the Department as required by section 1215 of the act (72 P. S. § 8215).

(i) Payment for tax stamps purchased on credit is due by the 15th of the month following the month in which the cigarette stamping agent purchased the tax stamps.

(ii) If a licensed cigarette stamping agent who purchases cigarette tax stamps on credit fails to remit full payment for accumulated cigarette tax stamps purchased on credit by the due date, the credit privileges may be suspended or revoked by the Department.

(3) Cigarette tax credits issued by the Department under § 71.6 (relating to refunds or credits for cigarette tax stamps), which shall be presented to the Department at the time the purchase order for cigarette tax stamps is placed.

(c) Affixation of tax stamps.

(1) Tax stamps shall be affixed to each individual pack of cigarettes in an aggregate denomination equal to the amount of tax imposed upon the number of cigarettes contained therein.

(2) Tax stamps shall be affixed to the bottom of each pack of cigarettes so that they are clearly visible to subsequent purchasers. Stamps shall be canceled in ink with the licensed cigarette stamping agent’s identification number.

(3) Improperly stamped cigarettes shall be treated as unstamped cigarettes and shall be subject to confiscation and forfeiture under the act. The Department will dispose of cigarettes forfeited under the act by either selling the cigarettes to a licensed cigarette stamping agent or a cigarette manufacturer, or by destroying the improperly stamped cigarettes.

The provisions of this § 71.5 issued under section 6 of the Fiscal Code (72 P. S. § 6); section 1291 of the Tax Reform Code of 1971 (72 P. S. § 8291); sections 209-A, 214-A, 215-A and 227-A of the act of April 9, 1929 (P. L. 343, No. 176) (72 P. S. § § 209-A, 214-A, 215-A and 227-A).

The provisions of this § 71.5 adopted February 13, 1998, effective February 14, 1998, 28 Pa.B. 979.

History

• Authority: The provisions of this § 71.
• Source: The provisions of this § 71.

61 Pa. Code § 71.6 Refunds or credits for cigarette tax stamps.

(a) Affixed tax stamps. A refund or credit for cigarette tax stamps purchased by a cigarette stamping agent which have been affixed to packages of cigarettes will be made to the agent upon satisfactory proof presented to the Department that the tax-stamped cigarettes have been withdrawn from the market because they are unsaleable, sold to persons exempt from the tax under the act, or lost or destroyed by fire, casualty or Act of God. A refund or credit will not be granted for cigarette tax paid upon stamped cigarettes that have been stolen.

(1) A cigarette stamping agent’s refund or credit shall be based upon the face value of the stamps, less commissions allowed the cigarette stamping agent under the act.

(2) If the cigarettes are returned to the manufacturer, the cigarette stamping agent shall give to the Department a sworn statement by the manufacturer certifying receipt of the returned cigarettes.

(b) Unaffixed tax stamps. The Department may issue a refund or a credit to present or former cigarette stamping agents for previously-purchased, unaffixed tax stamps when the Department deems a refund or credit appropriate such as when a cigarette stamping agent is no longer qualified to affix tax stamps, when a cigarette stamping agent is in liquidation, when a cigarette stamping agent possesses damaged tax stamps that are unfit for use or when a cigarette stamping agent possesses stamps that have been superseded by stamps of a newer design or denomination.

(1) The Department will issue a refund or credit for unaffixed tax stamps for the actual amount of cigarette tax paid for the stamps if satisfactory proof is presented to the Department within the time permitted under section 1253 of the act (72 P. S. § 8253). A claim for a refund or credit may not be filed when cigarette tax stamps have not been paid for in full. The Department will determine whether the cigarette stamping agent is entitled to either a refund or credit and the method of payment.

(2) Unaffixed stamps shall accompany the claim, which shall be sent to the Department by registered mail or other method approved by the Department.

The provisions of this § 71.6 issued under section 6 of the Fiscal Code (72 P. S. § 6); section 1291 of the Tax Reform Code of 1971 (72 P. S. § 8291); and sections 209-A, 214-A, 215-A and 227-A of the act of April 9, 1929 (P. L. 343, No. 176) (72 P. S. § § 209-A, 214-A, 215-A and 227-A).

The provisions of this § 71.6 adopted February 13, 1998, effective February 14, 1998, 28 Pa.B. 979.

This section cited in 61 Pa. Code § 71.5 (relating to cigarette tax stamps).

History

• Authority: The provisions of this § 71.
• Source: The provisions of this § 71.

61 Pa. Code § 71.7 Exemption from tax.

A cigarette stamping agent may sell cigarettes to purchasers who qualify for tax exempt status as enumerated in section 1209 of the act (72 P. S. § 8209) if the Department approves the purchaser’s request for an exemption certificate. The Department will evaluate the request for an exemption certificate within 90 days of receipt. To obtain an exemption certificate, a purchaser shall file an application that shall state the purchaser’s basis for exemption. Upon receipt and approval of the application by the Department, the Department will issue an exemption certificate to the purchaser. An exemption certificate shall be valid until surrendered by the purchaser or revoked by the Department for violating a provision listed in the act or the code.

The provisions of this § 71.7 issued under section 6 of the Fiscal Code (72 P. S. § 6); section 1291 of the Tax Reform Code of 1971 (72 P. S. § 8291); and sections 209-A, 214-A, 215-A and 227-A of the act of April 9, 1929 (P. L. 343, No. 176) (72 P. S. § § 209-A, 214-A, 215-A and 227-A).

The provisions of this § 71.7 adopted February 13, 1998, effective February 14, 1998, 28 Pa.B. 979.

History

• Authority: The provisions of this § 71.
• Source: The provisions of this § 71.

61 Pa. Code § 71.8 Sample cigarettes.

(a) Packages of sample cigarettes containing five or fewer cigarettes, which are to be furnished to consumers free of charge as provided in the act, shall be unstamped and prominently identified as ‘‘Sample Cigarettes Not for Sale—All Applicable State Taxes Paid.’’

(b) Packages of sample cigarettes containing six or more cigarettes shall be affixed with Pennsylvania cigarette tax stamps in accordance with the act and code.

The provisions of this § 71.8 issued under section 6 of the Fiscal Code (72 P. S. § 6); section 1291 of the Tax Reform Code of 1971 (72 P. S. § 8291); and sections 209-A, 214-A, 215-A and 227-A of the act of April 9, 1929 (P. L. 343, No. 176) (72 P. S. § § 209-A, 214-A, 215-A and 227-A).

The provisions of this § 71.8 adopted February 13, 1998, effective February 14, 1998, 28 Pa.B. 979.

History

• Authority: The provisions of this § 71.
• Source: The provisions of this § 71.

61 Pa. Code § 71.9 Cigarette stamping agent report requirements.

(a) Report due date. Every licensed cigarette stamping agent shall establish a fiscal or calendar monthly reporting period. The cigarette stamping agent shall file with the Department on or before the 20th day following the end of each fiscal or calendar month a cigarette tax report covering the preceding month on a form prescribed by the Department (see also § 71.32(a) (relating to additional cigarette stamping agent responsibilities) regarding additional reporting requirements).

(b) Penalties. A cigarette stamping agent who violates this section shall be subject to a $100 fine for the first offense, a $200 fine for the second offense and a $300 fine for the third and any further offense.

The provisions of this § 71.9 issued under section 6 of the Fiscal Code (72 P. S. § 6); section 1291 of the Tax Reform Code of 1971 (72 P. S. § 8291); sections 209-A, 214-A, 215-A and 227-A of the act of April 9, 1929 (P. L. 343, No. 176) (72 P. S. § § 209-A, 214-A, 215-A and 227-A); amended under section 3 of the Tobacco Settlement Agreement Act (35 P. S. § 5673); and section 6 of The Fiscal Code (72 P. S. § 6).

The provisions of this § 71.9 adopted February 13, 1998, effective February 14, 1998, 28 Pa.B. 979; amended April 11, 2003, effective April 12, 2003, 33 Pa.B. 1842. Immediately preceding text appears at serial page (239999).

This section cited in 61 Pa. Code § 71.32 (relating to additional cigarette stamping agent responsibilities).

History

• Authority: The provisions of this § 71.
• Source: The provisions of this § 71.

61 Pa. Code § 71.10 Cigarette dealer record requirements.

(a) Each dealer shall:

(1) Obtain invoices covering all purchases of cigarettes whether tax stamped or unstamped.

(2) Maintain receiving records of cigarettes which include the following:

(i) The date.

(ii) The invoice number.

(iii) The quantity.

(iv) The brand.

(v) The supplier name.

(3) Except for retailers, maintain records on the sale of cigarettes, including:

(i) The name and address of the purchaser.

(ii) The amount of cigarettes sold.

(iii) The charge for cigarettes sold.

(4) Retain invoices covering all purchases of Pennsylvania cigarette tax stamps.

(5) Except for retailers, maintain a record of names and addresses of all other cigarette dealers to whom cigarettes are sold.

(6) Prepare credit memoranda with the date the following transactions were completed:

(i) For wholesalers, transactions involving cigarettes returned by customers to a wholesaler’s stock.

(ii) For cigarette stamping agents, transactions involving unstamped and stamped cigarettes returned to manufacturers.

(b) Dealers shall keep and maintain the records mentioned under subsection (a) for 4 years at the location for which the license is issued.

(c) A dealer who violates subsection (b) shall be subject to a $100 fine for the first offense, a $200 fine for the second offense and a $300 fine for the third and any further offense.

The provisions of this § 71.10 issued under section 6 of the Fiscal Code (72 P. S. § 6); section 1291 of the Tax Reform Code of 1971 (72 P. S. § 8291); and sections 209-A, 214-A, 215-A and 227-A of the act of April 9, 1929 (P. L. 343, No. 176) (72 P. S. § § 209-A, 214-A, 215-A and 227-A).

The provisions of this § 71.10 adopted February 13, 1998, effective February 14, 1998, 28 Pa.B. 979.

History

• Authority: The provisions of this § 71.
• Source: The provisions of this § 71.

61 Pa. Code § 71.11 Examination of records, equipment and premises.

(a) Dealers shall provide the Department and its authorized agents the means, facilities and opportunity to examine the dealers’ books, records, cigarette inventory, premises and equipment to determine compliance with the act and code.

(b) A person who prevents or hinders the Department or designated agent from examining the items stated in subsection (a) shall be subject to a $100 fine for the first offense, a $200 fine for the second offense and a $300 fine for the third and any further offense.

The provisions of this § 71.11 issued under section 6 of the Fiscal Code (72 P. S. § 6); section 1291 of the Tax Reform Code of 1971 (72 P. S. § 8291); and sections 209-A, 214-A, 215-A and 227-A of the act of April 9, 1929 (P. L. 343, No. 176) (72 P. S. § § 209-A, 214-A, 215-A and 227-A).

The provisions of this § 71.11 adopted February 13, 1998, effective February 14, 1998, 28 Pa.B. 979.

History

• Authority: The provisions of this § 71.
• Source: The provisions of this § 71.

61 Pa. Code § 71.31 Definitions.

The following words and terms, when used in this section and § 71.32 (relating to additional cigarette stamping agent responsibilities), have the following meanings, unless the context clearly indicates otherwise: Affiliate—A person who, directly or indirectly, owns or controls, is owned or controlled by, or is under common ownership or control with, another person. For purposes of this definition, the terms ‘‘owns,’’ ‘‘is owned’’ and ‘‘ownership’’ mean ownership of an equity interest, or the equivalent thereof, of 10% or more. Cigarette—A product that contains nicotine, is intended to be burned or heated under ordinary conditions of use, and consists of or contains any of the following:

(i) A roll of tobacco wrapped in paper or in any substance not containing tobacco.

(ii) Tobacco, in any form, that is functional in the product, which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette.

(iii) A roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette described in subparagraph (i).

(iv) A roll-your-own, which means any tobacco which, because of its appearance, type, packaging or labeling is suitable for use and likely to be offered to, or purchased by, consumers as tobacco for making cigarettes. For purposes of this subparagraph, 0.09 ounce of roll-your-own tobacco shall constitute one individual cigarette. Nonparticipating tobacco product manufacturer—A tobacco product manufacturer who does not participate in the Master Settlement Agreement (published at 30 Pa.B. 5619 (October 28, 2000)) entered into on November 23, 1998, by the Commonwealth and leading United States tobacco product manufacturers in the action entitled Commonwealth v. Philip Morris Inc., et al., Philadelphia County, April term, No. 97-2443, January 13, 1999, 40 Pa.D. & C. 4th 225 (1999). Person—Any individual, unincorporated association, company, corporation, limited liability corporation, joint stock company, group committee, agency, syndicate, trust or trustee, receiver, fiduciary, partnership or conservator. Whenever used in this section or § 71.32 to establish or impose penalties, the word ‘‘person’’ when applied to a partnership, unincorporated association or other joint venture means the partners or members thereof and when applied to a corporation means all officers and directors thereof. Tobacco product manufacturer—

(i) A person that after June 22, 2000, directly and not exclusively through any affiliate does one of the following:

(A) Manufactures cigarettes anywhere that the manufacturer intends to be sold in the United States, including cigarettes intended to be sold in the United States through an importer (except where the importer is an original participating manufacturer, as that term is defined in the Master Settlement Agreement, that will be responsible for the payments under the Master Settlement Agreement with respect to the cigarettes as a result of the provisions of subsection II(mm) of the Master Settlement Agreement and that pays the taxes specified in subsection II(z) of the Master Settlement Agreement, and provided that the manufacturer of the cigarettes does not market or advertise the cigarettes in the United States).

(B) Is the first purchaser anywhere for resale in the United States of cigarettes manufactured anywhere that the manufacturer does not intend to be sold in the United States.

(C) Becomes a successor of a person described in clause (A) or (B).

(ii) The term does not include an affiliate of a tobacco product manufacturer unless the affiliate itself falls under subparagraph (i)(A), (B) or (C).

The provisions of this § 71.31 issued under section 3 of the Tobacco Settlement Act (35 P. S. § 5673); and section 6 of The Fiscal Code (72 P. S. § 6).

The provisions of this 71.31 adopted April 11, 2003, effective April 12, 2003, 33 Pa.B. 1842.

This section cited in 61 Pa. Code § 71.9 (relating to cigarette stamping agent report requirements).

History

• Authority: The provisions of this § 71.
• Source: The provisions of this § 71.

61 Pa. Code § 71.32 Additional cigarette stamping agent responsibilities.

(a) The Tobacco Settlement Agreement Act (35 P. S. § § 5671—5675), requires that the Department collect and maintain data relating to the number of Pennsylvania State Cigarette Excise Tax stamps affixed to packages of cigarettes. As part of the monthly cigarette tax report required by § 71.9(a) (relating to cigarette stamping agent report requirements), every licensed cigarette stamping agent shall complete and attach to the report a schedule, in the form as is prescribed by the Department, to account for and reconcile the number of Pennsylvania Cigarette Excise Tax stamps affixed to packages of cigarettes by the agent during the monthly period covered by the associated cigarette tax report. The schedule shall contain the following information:

(1) A listing of the name and address of each nonparticipating tobacco product manufacturer from which the cigarette stamping agent made direct purchases of packages of cigarettes that were actually manufactured by the manufacturer, and the number of Pennsylvania Cigarette Excise Tax stamps affixed to the packages of cigarettes purchased from each manufacturer.

(2) A listing of the name and address of all suppliers from which the cigarette stamping agent made purchases of cigarettes, including cigarettes purchased from one tobacco product manufacturer that were actually manufactured by another manufacturer. This listing shall include all purchases of cigarettes made by the cigarette stamping agent during the month, other than directly from the actual manufacturer of the cigarettes.

(3) For each individual supplier listed under paragraphs (1) and (2), a listing of all brands of cigarettes purchased from the supplier and the number of Pennsylvania Cigarette Excise Tax stamps affixed to cigarette packages by the cigarette stamping agent with respect to each brand.

(4) For each brand of cigarettes listed for each supplier under paragraph (3), the following additional information, if known:

(i) The name and address of the tobacco product manufacturer of the cigarettes.

(ii) The name and address of the person or entity first responsible for the cigarettes being designated or identified for sale in the United States.

(b) Every cigarette stamping agent shall keep complete and accurate records of cigarettes sold and shall preserve and keep for 4 years all invoices, bills of lading, sales records, copies of bills of sale, inventory at the close of each period for which a report is required and other pertinent papers and documents relating to the manufacture, purchase, sale or disposition of cigarettes.

(c) The books, records, other papers and documents that are required to be kept shall, at all times during the usual business hours of the day, be subject to inspection by the authorized agents and employees of the Office of Attorney General or the Department of Revenue.

(d) A monthly report that is not accompanied by the schedule prescribed by this section shall be considered incomplete. Extensions of time for filing purposes may be granted at the discretion of the Department.

(e) The failure of a licensed cigarette stamping agent to comply with this section by not furnishing the schedule required by subsection (a), or by not furnishing complete and accurate information as required by the schedule, shall be deemed a violation of section 1276(a) of the TRC (72 P. S. § 8276(a)) and the agent’s license shall be subject to suspension or revocation under section 1276(b) of the TRC.

The provisions of this § 71.32 issued under section 3 of the Tobacco Settlement Act (35 P. S. § 5673); and section 6 of The Fiscal Code (72 P. S. § 6).

The provisions of this 71.32 adopted April 11, 2003, effective April 12, 2003, 33 Pa.B. 1842.

This section cited in 61 Pa. Code § 71.9 (relating to cigarette stamping agent report requirements).

History

• Authority: The provisions of this § 71.
• Source: The provisions of this § 71.

Chapter 72 Cigarette Dealer Licenses

61 Pa. Code § 72.1 Licensing of dealers.

(a) Licensing of cigarette stamping agents.

(1) The Department may license as its agent for a 1-year period and may renew the license for further periods of 1 year if the agent is and remains of good moral character who meets the requirements imposed by the following provisions for the privilege of operating as a cigarette stamping agent:

(i) The applicant is a wholesale dealer licensed by the Commonwealth.

(ii) The applicant maintains warehousing facilities, adequate to protect the revenue, for the purpose of receiving, storing and distributing cigarettes and conducting business.

(iii) The applicant is a person of good moral character and of reasonable financial stability and is reasonably experienced in the wholesale cigarette business. To satisfy this requirement, an applicant shall provide the Department with:

(A) A detailed description of the applicant’s business activities, including a history of the applicant’s experience in the wholesale cigarette business. An applicant seeking a renewal of a license need not follow this requirement.

(B) Current financial statements prepared in accordance with generally accepted accounting principles.

(iv) The applicant, or any shareholder controlling more than 10% of the stock if the applicant is a corporation or any officer or director if the applicant is a corporation has not been convicted of any crime involving moral turpitude.

(v) The applicant has filed required State tax reports and paid any State taxes not subject to a timely perfected administrative or judicial appeal or subject to an authorized deferred payment plan.

(2) The cigarette stamping agency license is valid for one specific location only.

(3) The Department may reject an application for a new or renewal license if it finds that any of the requirements in paragraph (1) or (2) have not been met or finds that applicant or licensee has:

(i) Failed to disclose material information required.

(ii) Made a material false statement in his application.

(iii) Violated any provisions of the code, the act or this article.

(4) For purposes of this section, a person convicted of committing any felony, any infamous crime or any crime involving moral turpitude is not a person of good moral character and will not be licensed as a cigarette stamping agent.

(b) Licensing of wholesalers.

(1) Applicants for a wholesale license or renewal thereof shall meet the following requirements:

(i) The premises on which the applicant proposes to conduct business are adequate to protect the revenue.

(ii) The applicant is a person of reasonable financial stability and reasonable business experience. To satisfy this requirement, an applicant shall provide the Department with:

(A) A detailed description of the applicant’s business activities, including a history of the applicant’s experience in the wholesale cigarette business. An applicant seeking a renewal of a license is not required to follow this requirement.

(B) Current financial statements prepared in accordance with generally accepted accounting principles.

(iii) The applicant, or any shareholder controlling more than 10% of the stock if the applicant is a corporation or any officer or director if the applicant is a corporation, has not been convicted of any crime involving moral turpitude.

(iv) The applicant has not failed to disclose any material information required by the Department, including information that the applicant has complied with this article by providing a signed statement, under penalty of perjury, of adherence to State presumptive minimum prices or written approval from the Department to sell at a specific different price.

(v) The applicant has not made a material false statement in his application.

(vi) The applicant has not violated any provision of the code, the act or this article.

(vii) The applicant has filed the required State tax reports and paid any State taxes not subject to a timely perfected administrative or judicial appeal or subject to an authorized deferred payment plan.

(2) The wholesale dealer’s license is valid for one specific location only.

(c) Licensing of retailers. An applicant for a retail license or renewal thereof shall meet the following requirements:

(1) The premises in which the applicant proposes to conduct business are adequate to protect the revenues.

(2) The applicant has not failed to disclose any material information required by the Department, including information that the applicant has complied with this article by providing a signed statement, under penalty of perjury, of adherence to State presumptive minimum prices or written approval from the Department to sell at a specific different price.

(3) The applicant has not made any material false statement in the application.

(4) The applicant has not violated any provision of the act, the code or this article.

(5) The applicant has filed the required State tax reports and paid any State taxes not subject to a timely perfected administrative or judicial appeal or subject to an authorized deferred payment plan.

History

• Authority: The provisions of this Chapter 72 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 72 adopted February 13, 1998, effective February 14, 1998, 28 Pa.

61 Pa. Code § 72.2 Posting of license.

(a) Dealers shall conspicuously display their licenses at the locations for which issued. Dealers operating vending machines shall post their licenses at their business headquarters as listed in their license application.

(b) A dealer who violates subsection (a) shall be subject to a $100 fine for the first offense, a $200 fine for the second offense and a $300 fine for the third and any further offense.

History

• Authority: The provisions of this Chapter 72 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 72 adopted February 13, 1998, effective February 14, 1998, 28 Pa.

61 Pa. Code § 72.3 Assignment of license.

A dealer’s license is not assignable. An attempt to assign a dealer’s license shall immediately result in the cancellation of the license.

History

• Authority: The provisions of this Chapter 72 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 72 adopted February 13, 1998, effective February 14, 1998, 28 Pa.

61 Pa. Code § 72.4 Timing of application for renewal of existing license.

(a) A dealer shall apply for a renewal of its license by January 15 of the year in which its license expires.

(b) A dealer who files an application for renewal of its license after January 15 of the year in which its license expires is not permitted to operate under the existing license after the last day of February of that same year. In this instance, the Department will treat the application for renewal as an application for a new license and the dealer shall be prohibited from stamping or selling cigarettes until its application is approved by the Department.

History

• Authority: The provisions of this Chapter 72 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 72 adopted February 13, 1998, effective February 14, 1998, 28 Pa.

61 Pa. Code § 72.5 Denials, revocations and suspensions.

(a) Denial of license application and requests for renewal.

(1) Whenever the Department denies a license application or request for renewal, the Department will send a notice by registered or certified mail at the last known address of the applicant or dealer. The notice will set forth the basis of the Department’s denial and inform the applicant or dealer that the Department’s actions may be protested through a hearing process. To avail itself of the hearing process, the applicant or dealer shall file a complaint with the Department’s Cigarette Licensing, Marketing and Control Board within 30 days after the mailing date in the notice under section 207-A of the code (72 P. S. § 207-A).

(2) A dealer may continue to operate under its license for a 30-day period following the mailing date in the denial notice. If the dealer files an appeal with the Cigarette Licensing, Marketing and Control Board, the dealer may continue to operate under its license during the period of administrative appeal before the Board.

(b) Revocation or suspension of license. Whenever the Department determines that a dealer has committed a violation of the act or the code that would result in the suspension or revocation of that dealer’s license, the Department will file a complaint with the Cigarette Licensing, Marketing and Control Board under the procedures in section 207-A of the code. Within 30 days after the termination of a hearing, the Board shall recommend its decision to the Secretary. If the Secretary’s decision results in the suspension or revocation of the dealer’s license, the dealer shall immediately surrender its license to the Department, notwithstanding the dealer’s right of further administrative or judicial appeal.

History

• Authority: The provisions of this Chapter 72 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 72 adopted February 13, 1998, effective February 14, 1998, 28 Pa.

61 Pa. Code § 72.6 Change in status of cigarette dealer’s business.

A cigarette dealer shall immediately inform the Department, in writing, prior to or immediately after:

(1) Taking actions that would change any information on the dealer’s license application or as last reported to the Department, including a change of name or, if the dealer is a corporation or partnership, a change in the dealer’s officers, directors or partners.

(2) Filing a certificate of dissolution with the Department of State or filing a similar document in another jurisdiction.

(3) Filing a voluntary petition in bankruptcy or receivership or receiving notice of an involuntary bankruptcy petition.

(4) Merging or consolidating with another business.

(5) Terminating business activities.

(6) If the dealer is a corporation, the acquisition by any person or entity of 10% or more of the number of shares of voting stock of the corporation.

History

• Authority: The provisions of this Chapter 72 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 72 adopted February 13, 1998, effective February 14, 1998, 28 Pa.

61 Pa. Code § 72.7 Cigarette vending machines.

(a) Licenses.

(1) Each cigarette vending machine shall have a current license, evidenced by a decal issued by the Department, which shall be affixed by its adhesive to and conspicuously displayed on each machine. Each cigarette vending machine shall also have the name and address of the owner and the name and address of the operator conspicuously and visibly displayed on each machine.

(2) Each dealer, at the time of the dealer’s application for a license or request for renewal, shall provide the Department with a list identifying the location of each vending machine in this Commonwealth from which cigarettes will be sold, specifying the establishment, address and county.

(b) Notification of business relocation. A dealer that relocates vending machines shall notify the Department in writing within 10 days after the relocation. The notification to the Department shall include:

(1) The dealer’s name.

(2) The dealer’s license number.

(3) The location of the vending machine, specifying the establishment, address and county.

(c) Extra cigarette vending machine decals. A dealer may subsequently request extra decals for new vending machines which will be placed in additional locations without identifying the actual locations. These requests for decals are limited to no more than ten or 10% of the listed locations previously on file with the Department, whichever is greater. Once the new vending machines are placed in operation, the dealer shall, within 10 business days, notify the Department of the locations of the additional vending machines, specifying the establishment, address and county. The Department will revoke additional decals if the dealer fails to notify the Department of the locations of the additional vending machines.

History

• Authority: The provisions of this Chapter 72 issued under section 6 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 72 adopted February 13, 1998, effective February 14, 1998, 28 Pa.

Chapter 73 Emergency and Limited Malt Beverage Tax Credit

61 Pa. Code § 73.51 Purpose.

The Secretary of Revenue, under the authority contained in section 10.1(d) and other provisions of the act (47 P. S. § 112.1(d)) and by reason of the act provides, among other things, that the General Assembly of the Commonwealth, conscious of the financial emergency facing the brewing industry of this Commonwealth and the attendant risk of business failure and loss of employment opportunity, declares it public policy that the renewal and improvement of the capital facilities of the brewing industry be encouraged and assisted by a limited tax subsidy to be granted during the period of the emergency and further making provisions for a limited subsidy by tax credits to be allowed under certain terms, conditions and limitations, adopts this section and § § 73.52—73.57 to assist in these and other purposes and to aid and guide in the administration, operation and enforcement of the act.

The provisions of this § 73.51 issued under the Malt Beverage Tax Law (47 P. S. § 112.1 (Repealed)).

The provisions of this § 73.51 adopted August 30, 1974, effective August 31, 1974, 4 Pa.B. 1811.

History

• Authority: The provisions of this § 73.
• Source: The provisions of this § 73.

61 Pa. Code § 73.52 Definitions.

The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise: Act—The act of May 9, 1974 (P. L. 279, No. 82) (47 P. S. § 112.1), an amendment to the Malt Beverage Tax Law (47 P. S. § § 103—120.3). Amounts paid—Amounts actually paid, or at the taxpayer’s election, amounts promised to be paid under firm purchase contracts actually executed within any calendar year falling within the emergency period provided, however, that there shall be no duplication of amounts paid under this definition. Provided, further, that no amount or amounts shall constitute amounts paid until full proof thereof, as provided in the act and as provided in this chapter, shall have been submitted and filed under oath or other verification, as hereinafter required, and the Secretary has approved and certified the amounts and then only to the extent of the amounts so approved and certified by the Secretary not to exceed $100,000 within a single calendar year. Bureau—The Pennsylvania Bureau of Cigarette and Beverage Taxes. Commonwealth—The Commonwealth of Pennsylvania. Department—The Department of Revenue of the Commonwealth of Pennsylvania. Emergency period—The period from January 1, 1974, to December 31, 1976, inclusive. Qualifying capital expenditures—Amounts paid by a taxpayer during the emergency period for the purchase of items of plant, machinery or equipment intended for use by the taxpayer within this Commonwealth in the manufacture and sale of malt or brewed beverages. However, the total amount of qualifying capital expenditures made by the taxpayer within a single calendar year included within the emergency period may not exceed $100,000. Provided further that the plant, machinery and equipment shall be directly related to the utilization of the manufacture and sale of malt or brewed beverages. Provided, further, that the total amount of qualifying capital expenditures made within a single calendar year within the emergency period shall include all amounts paid as defined in this chapter and the act, and shall not exceed $100,000 in any single calendar year.

Example 1. Company expands, repairs, or improves employe parking facilities. This expenditure is not directly related to the manufacture and sale of malt beverages and hence does not qualify for tax credit.

Example 2. Company purchases new trucks to be used in the delivery of malt beverages to its customers. This expenditure is directly related to the manufacture and sale of malt beverages and hence qualifies for tax credit consideration.

Example 3. Company purchases automobiles for use by its salesmen and executives. These expenditures are not directly related to the manufacture and sale of malt beverages and hence do not qualify for tax credit.

Example 4. Company replaces a roof of a segment of its manufacturing plant, that is bottling facilities. This expenditure qualifies for tax credit. Report—The application for claiming a tax credit as provided for in section 10.1(d) of the act (47 P. S. § 112.1(d)) and all attachments thereto. The report shall be in writing, shall contain in addition to other information the Secretary shall require, a statement of the nature, amounts and dates of the qualifying capital expenditures made, including a full description of the same, with specifications, together with copies of all contracts, bills, receipts and related papers pertaining to the qualifying capital expenditures for which a tax credit is, or may be sought. The report shall be made under oath or verified so as to subject the maker of the same to the penalties of perjury for any false statement, including attachments, in the report. Secretary—The Secretary of Revenue of the Commonwealth of Pennsylvania when not otherwise qualified. Taxpayer—A manufacturer of malt or brewed beverages claiming a tax credit or credits under the act, actively engaged in the manufacture and sale of malt or brewed beverages within this Commonwealth and owning and maintaining one or more plants for the manufacture within this Commonwealth, notwithstanding whether the taxpayer has more than one plant and sales quarter or other facilities within this Commonwealth.

The provisions of this § 73.52 issued under the Malt Beverage Tax Law (47 P.S. § 112.1 (Repealed)).

The provisions of this § 73.52 adopted August 30, 1974, effective August 31, 1974, 4 Pa.B. 1811.

This section cited in 61 Pa. Code § 73.53 (relating to tax credit to be allowed and limitations).

History

• Authority: The provisions of this § 73.
• Source: The provisions of this § 73.

61 Pa. Code § 73.53 Tax Credit to be allowed and limitations.

A tax credit or credits shall be allowed to a taxpayer, as provided in this section, not to exceed in total amount the amount of qualifying capital expenditures made by the taxpayer and certified by the Secretary.

(1) The amount of qualifying capital expenditures made by the taxpayer in any single calendar year shall be the total of the amounts actually paid, and at the taxpayer’s election, amounts promised to be paid under firm purchase contracts executed during the calendar year, and certified by the Secretary, but not exceeding a total of $100,000.

(2) No taxpayer, notwithstanding the number of plants, sales quarters or other facilities of the taxpayer within this Commonwealth for the manufacture and sale of malt or brewed beverages, and further notwithstanding the actual amounts paid as defined in § 73.52 (relating to definitions) shall be certified by the Secretary to receive or shall receive a tax credit or credits in any single calendar year in excess of $100,000.

(3) The tax credit as authorized in this act shall in no event exceed the actual monetary cost to the taxpayer of the qualifying capital expenditure as defined in § 73.52 made by the taxpayer and the actual cost may not include any trade-in allowance, interest or financing charges or legal expenses or the cost of any item or expense not a direct actual cost of construction of plant or purchase and installation of machinery or equipment intended for use by the taxpayer within the Commonwealth in the manufacture and sale of malt or brewed beverages.

(4) Tax credit in any calendar year may not exceed tax paid to the Department in that calendar year.

The provisions of this § 73.53 issued under the Malt Beverage Tax Law (47 P.S. § 112.1 (Repealed)).

The provisions of this § 73.53 adopted August 30, 1974, effective August 31, 1974, 4 Pa.B. 1811.

History

• Authority: The provisions of this § 73.
• Source: The provisions of this § 73.

61 Pa. Code § 73.54 Report applying for tax credit.

A taxpayer desiring to claim a tax credit or credits under this act shall from time to time, in accordance with regulations promulgated by the Secretary, report to the Secretary the nature, amounts and dates of qualifying capital expenditure made by him and other information the Secretary shall require. If satisfied as to the correctness of the report, the Secretary shall issue to the taxpayer a certificate establishing the amount of qualifying capital expenditures made by the taxpayer and included within the report.

(1) Effective September 30, 1974, a taxpayer may no less than 4 weeks prior to making a commitment of expenditures regarding a qualifying capital expenditure notify the Secretary in writing by personal delivery or certified mail, of the renewal or improvement intended to be made and fully describe the same. The Secretary may, at his discretion, cause an examination to be made of the taxpayer’s capital facilities to ascertain what renewal and improvement, or either, of the capital facilities is intended. No report provided for in this subchapter or the act may be made or submitted by a taxpayer, nor may a tax credit for any renewal and improvement of the capital facilities be allowed, nor may a certificate establishing an amount of qualifying capital expenditures be made or tax credit allowed, whichever shall in the Secretary’s discretion be applicable, unless the foregoing written notification has been submitted by the taxpayer.

(2) When the amounts paid, as defined in this chapter, shall be for the purchase of items of plant, machinery and equipment, as defined in this chapter or in the act, the taxpayer shall within 30 days after completion of the construction or installation of these items of plant, machinery or equipment, deliver to the Secretary, in writing, by personal delivery or certified mail, notice of the completion or installation. The Secretary, at his discretion, may cause an inspection to be made of the taxpayer’s capital facilities to determine that the construction or installation has been completed and the plant, machinery or equipment has been placed into use or a valid reason for nonuse, and withhold the application of any tax credit or the issuance of a certificate provided for in this section until such construction or installation has been fully completed.

(3) Every report provided for in this section or in the act shall include and have attached thereto a full description of the items of plant, machinery or equipment, which is the subject matter of the report and which is concerned in any claim for a tax credit, including in detail the nature, amounts and dates of the qualifying capital expenditures made by the taxpayer, together with a written and signed statement, by the taxpayer or an officer thereof, under oath or verified so as to subject the maker of the same to the penalties of perjury for any false statement, including attachments, in the report, that the statements, items and amounts in the report and the attachments thereto are fully true, exact, correct and authentic, and submit exact copies of all documents, and the like, in support thereof including, but not restricted to, contracts, bills, receipts and other related papers pertaining to the qualifying capital expenditures.

(4) It shall be the duty of the taxpayer to maintain auditable records schedules and relevant supporting data regarding tax credit claims until January 31, 1980. In addition, a schedule of payments and commitments shall be accurately maintained and be explicitly identifiable as to the amounts paid as well as the qualifying capital expenditure.

(5) Every taxpayer shall keep and retain full and complete books of account records and appropriate subsidiary accounts and data as to every qualifying capital expenditure, reports with attachments and every tax credit allowed and every certificate issued under the act as to qualifying capital expenditures by the Secretary for a period of not less than 3 years after December 31, 1977, or later date as the Secretary may in writing notify the taxpayer on or prior to December 31, 1977. All records shall be subject to examination by the Department. Every taxpayer shall give to the Department, or its duly authorized representative, reasonable means, facilities and opportunity for these examinations and audits.

(6) The Secretary may, from time to time, prepare and require the use of forms deemed needed or necessary to carry out the act and this chapter.

The provisions of this § 73.54 issued under the Malt Beverage Tax Law (47 P.S. § 112.1 (Repealed)).

The provisions of this § 73.54 adopted August 30, 1974, effective August 31, 1974, 4 Pa.B. 1811.

History

• Authority: The provisions of this § 73.
• Source: The provisions of this § 73.

61 Pa. Code § 73.55 Grant of credit, conditions and limitations.

Upon receipt from a taxpayer of a certificate from the Secretary issued under section 10.1(c) of the act (47 P. S. § 112.1(c)) the Secretary shall grant a tax credit in the amount certified against any tax then due or thereafter becoming due from the taxpayer under the act. No credit will be allowed against any tax due for any taxable period ending after December 31, 1977.

(1) No tax credit or certificate for the credit provided for in the act will be credited or applied against any tax delinquent or past due under this act after the end of the calendar year in which the tax becomes due.

(2) Tax credits not utilized by taxpayer because taxpayer’s tax payments were exceeded by the tax credit allowable in any calendar year are available for utilization by the taxpayer in subsequent calendar years, but not beyond December 31, 1977.

The provisions of this § 73.55 issued under the Malt Beverage Tax Law (47 P.S. § 112.1 (Repealed)).

The provisions of this § 73.55 adopted August 30, 1974, effective August 31, 1974, 4 Pa.B. 1811.

History

• Authority: The provisions of this § 73.
• Source: The provisions of this § 73.

61 Pa. Code § 73.56 Reversal of credit allowance, liability for tax and interest, inapplicability of any statute of limitations.

(a) If the Secretary finds at any time that an expenditure has ceased to be a qualifying capital expenditure, the Secretary shall thereupon reverse any credit allowance theretofore made in respect of the expenditure and the taxpayer shall become liable for payment of the tax against which the credit was allowed, together with interest as provided by law. No statute of limitations may be applicable to prevent collection of the tax.

(b) If a qualifying capital expenditure for which a tax credit has been granted by the Department is subsequently sold, transferred, leased or otherwise disposed of by the taxpayer, then the tax credit applicable to the expenditure may, under certain conditions, be recaptured and the amount of tax credit posted as a debit on the taxpayer’s Malt Beverage Tax account in the Department. The taxpayer is required to notify the Secretary, in writing, of any disposition and the applicable information thereto.

The provisions of this § 73.56 issued under the Malt Beverage Tax Law (47 P.S. § 112.1 (Repealed)).

The provisions of this § 73.56 adopted August 30, 1974, effective August 31, 1974, 4 Pa.B. 1811.

History

• Authority: The provisions of this § 73.
• Source: The provisions of this § 73.

61 Pa. Code § 73.57 Construction and amendment of regulations.

(a) This chapter is intended to aid the efficient operation and the orderly administration and application of the act. It shall be construed for the accomplishment of these purposes.

(b) This chapter may be amended or repealed at any time in accordance with law.

(c) This chapter and section headings are intended for designation only, and may not limit or in any manner affect the meaning, contents or language of any section or paragraph or any amendments to this chapter.

The provisions of this § 73.57 issued under the Malt Beverage Tax Law (47 P.S. § 112.1 (Repealed)).

The provisions of this § 73.57 adopted August 30, 1974, effective August 31, 1974, 4 Pa.B. 1811.

History

• Authority: The provisions of this § 73.
• Source: The provisions of this § 73.

Chapter 74 Malt Beverage Tax

61 Pa. Code § 74.1 Purpose.

It is the purpose of the Malt Beverage Tax Law (47 P. S. § § 103—120.3) to provide revenue by imposing a State tax upon the sale of malt beverages by the manufacturer and importing agents for foreign manufacturers, the obligation to collect said taxes for the Commonwealth and transmit same monthly to the Commonwealth.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.2 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Act—The Malt Beverage Tax Law (47 P. S. § § 103—120.3). Consumer—Any person other than a distributor, retailer or manufacturer. Department—The Department of Revenue of this Commonwealth. Distributor—Any person engaged in the purchase and resale of malt or brewed beverages in the original sealed packages as prepared for market by the manufacturer, including the following:

(i) Imports or causes to be imported from any other state or territory of the United States, or from any foreign country, malt or brewed beverages for his own use in this Commonwealth, or for sale and delivery in and after reaching this Commonwealth.

(ii) Imports or causes to be imported from any other state or territory of the United States, or from any foreign country, malt or brewed beverages for his own use in this Commonwealth, or for sale or delivery therein, after the same have come to rest or storage therein, in the original package, receptacle or container.

(iii) Purchases or receives malt or brewed beverages in the original package, receptacle or container in this Commonwealth for his own use, or for sale and delivery therein, from any person who has imported the same from a foreign country.

(iv) Purchases or receives malt or brewed beverages in the original package, receptacle, or container in this Commonwealth for his own use therein, or for sale and delivery therein, from any person who has imported the same from any other state or territory of the United States, in case malt or brewed beverages have not, prior to the purchase or receipt, come to rest or storage in this Commonwealth. Malt or brewed beverages—Alcoholic beverages, which include beer, lager beer, ale, porter or similar fermented malt liquor, containing 0.5% or more of alcohol, by whatever name the liquors may be called. Manufacturer—Any person engaged in the brewing or manufacturing of malt or brewed beverages for sale, and for the purpose of posting bond and payment of taxes required under the provisions of the act, shall include importing agents for foreign manufacturers. Original container—Bottle, cask, keg or other container that has been securely capped, sealed or corked by the manufacturer, with the name and address of the manufacturer permanently affixed to the bottle, cask, keg or other container, or to the cap or cork used in sealing the same, or to a label securely affixed to a bottle. Person—Any individual or an unincorporated association, including a partnership, a limited partnership, or any other form of unincorporated enterprise owned by two or more individuals, or a corporation. Whenever used in this chapter to prescribe and impose a fine or imprisonment, or both, the term person, as applied to a partnership, limited partnership, or any other form of unincorporated enterprise, shall mean the partners or members thereof, and, as applied to corporations, the officers thereof. Public service license—Any railroad, pullman or steamship company licensed to serve malt or brewed beverages in club, dining or buffet cars or compartments. Retail dealer—Any person engaged in the retail sale of malt or brewed beverages either for consumption on the premises or not for consumption on the premises where sold. Sale—Any transfer for a consideration, exchange, barter, gift, offer for sale and distribution.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.11 Imposition of tax.

(a) Each manufacturer shall post an acceptable surety bond to guarantee the payment of the taxes imposed by the act. Each bond shall be in an amount equal to the highest 2 months average tax liability of the preceding 12-month period but in no event less than $5,000. A new bond or an acceptable renewal, in writing, shall be filed on or before the July 1 anniversary date of each bond. The bond may be increased or decreased based on previous years’ operations.

(b) A manufacturer shall notify the Department in writing should he desire to discontinue operations in this Commonwealth. The Department will, before the July anniversary date of the bond, prepare a field audit of the manufacturer’s records and release the surety from its obligation if all malt beverage taxes are paid.

(c) Each manufacturer shall be subject to pay to the Commonwealth the taxes imposed by this section upon all malt or brewed beverages manufactured and sold by him in this Commonwealth for use in this Commonwealth or manufactured by him outside this Commonwealth and sold to an importing distributor or any person for importation into, and use in, this Commonwealth. Every person who ships or transports malt or brewed beverages into this Commonwealth for sale, delivery or storage in this Commonwealth shall pay to the Commonwealth the taxes imposed in this section.

The provisions of this § 74.11 issued under section 15 of the Malt Beverage Tax Law (47 P. S. § 117).

The provisions of this § 74.11 amended July 1, 1983, effective July 2, 1983, 13 Pa.B 2067. Immediately preceding text appears at serial pages (70285) and (70286).

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.12 Tax rate.

(a) The tax rates per original container or standard fraction thereof are as follows:

(b) In all cases where a tax is imposed upon a 1/2 pint of eight fluid ounces or fraction thereof, the tax shall be $.0066.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.21 Payment of tax.

It is the intent and purpose of the act, to require all manufacturers and other persons whose malt or brewed beverages are sold or used in this Commonwealth to pay the tax on all such malt or brewed beverages in the month following that in which such beverages are first sold in this Commonwealth for use in this Commonwealth or first sold to an importing distributor or any person for importation into and use in this Commonwealth, except that as to malt or brewed beverages sold to public service licensees; the public service licensees, and not the manufacturer, shall report and pay the tax on all malt or brewed beverages sold by them within this Commonwealth.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.31 Refunds for manufacturers on out-of-State sales.

In the event any malt or brewed beverages upon which the tax has been paid by a manufacturer have been sold or shipped by him to a licensed or regular dealer in such malt or brewed beverages in another state, such manufacturer shall be entitled to a refund of the actual amount of tax paid by him, upon condition that the seller shall make affidavit that the malt or brewed beverages were so sold and shipped, and that he shall furnish from the purchaser an affidavit, or in cases where the total purchase price is $5 or less, a written certificate in lieu of an affidavit from the purchaser, or, upon satisfactory proof that such affidavit or certificate cannot be obtained, other evidence satisfactory to the Department that he has received such malt or brewed beverages for sale or consumption outside this Commonwealth, together with the name and address of the purchaser.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.32 Refunds for Pennsylvania manufacturers on sales to exempt parties.

In the event any malt or brewed beverages upon which the tax has been paid by a manufacturer have been sold to commissaries, ship’s stores or voluntary unincorporated organizations of the armed forces personnel operating under regulations promulgated by the Secretary of Defense, the manufacturer shall be entitled to a refund of the actual amount of tax paid by him, upon condition that he shall make affidavit and furnish proof that the malt or brewed beverages were so sold.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.33 Refunds for out-of-State manufacturers on sales to tax exempt parties.

In the event any malt or brewed beverages upon which the tax has been paid by an out-of-State manufacturer and subsequently sold by an importing distributor to commissaries, ship’s stores or voluntary unincorporated organizations of the armed forces personnel operating under regulations promulgated by the Secretary of Defense, the manufacturer shall be entitled to a refund of the actual amount of tax paid by him upon condition that he shall make affidavit and furnish proof that the malt or brewed beverages were so sold.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.34 Refunds for manufacturers on sales to public service licensee.

In the event any malt or brewed beverages upon which the tax has been paid by a manufacturer have been sold and delivered to a public service licensee who is obligated to pay the tax thereon, the manufacturer shall be entitled to a refund of the actual amount of tax paid by him, upon condition that he shall make affidavit and furnish proof satisfactory to the Department of the facts.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.35 Refunds on malt beverage rendered unsalable by reason of damage ordestruction.

In the event any malt or brewed beverages, upon which the tax has been paid by a manufacturer shall be rendered unsalable by reason of damage or destruction, such manufacturer shall be entitled to a refund of the actual amount of tax paid by him, upon condition that he shall make affidavit and furnish proof satisfactory to the Department that the malt beverages were so damaged or destroyed.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.36 Refunds on leakers, stale beer and beer which has become unsalable orover-aged.

The Department will not permit refunds on leakers, stale beer and beer which has become unsalable or over-aged.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.37 Credits.

No credits will be granted without the approval of the Department of Revenue, attention Bureau of Examination.

The provisions of this § 74.37 issued under the Tax Reform Code of 1971 (72 P.S. § 7270).

The provisions of this § 74.37 amended October 5, 1984, effective October 6, 1984, 14 Pa.B. 3624. Immediately preceding text appears at serial page (84331).

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.38 Malt beverage damaged in transit.

A manufacturer shall be entitled to deduct the tax liability from the original billing for malt beverages which have been damaged in transit on the seller’s owned and operated truck prior to being accepted by the distributor.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.39 Salable malt beverage returns.

A manufacturer shall be entitled to deduct the tax liability on salable malt beverages returned from a distributor because they were not ordered by the distributor or were a result of an overstock in distributor’s inventory.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.40 Off-premises storage.

Malt beverages returned to an off-premises location shall not be entitled to a tax refund.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.41 Time limit on refunds.

No application for refund shall be recognized or processed unless filed within two years from date of sale.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.51 Manufacturer’s reports.

(a) Each manufacturer whose malt or brewed beverages are sold in or imported into this Commonwealth shall, on or before the 15th day of each month, file with the Department, on forms prescribed by it, a verified report showing for the preceding calendar month the quantities of the malt and brewed beverages:

(1) Manufacturered by him in this Commonwealth, and constituting his beginning and ending inventory in this Commonwealth for the month.

(2) Sold by him in this Commonwealth for use in this Commonwealth or sold to an importing distributor or any person for importation into, and use in, this Commonwealth, specifically naming the distributors to whom the sales were made and the quantity sold to each.

(3) Sold to purchasers or persons outside this Commonwealth for exportation from, and use outside, this Commonwealth, or sold in other tax exempt transactions, naming the purchasers and the quantity sold to each and specifically indicating those sales or transactions to which the tax imposed by this act is not applicable.

(4) Additional information as the Department may reasonably require to assure the accuracy of the tax computation and payment and the proper administration of the act.

(b) The tax payable on malt or brewed beverages first sold in this Commonwealth for use in this Commonwealth or first sold to an importing distributor or a person for importation into, and use in, this Commonwealth during the month in the amount disclosed by the report, shall accompany the report and be paid by the manufacturer to the Department.

(c) The report shall be in the Bureau Office on the 15th of the month following the month of operations, or bear a United States postmark of the 15th to avoid the 10% penalty imposed by the act.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.52 Retention of records.

Each manufacturer, transporter for hire, bailee for hire, warehouseman, distributor and retail licensee shall maintain and keep, for 2 years, records of malt or brewed beverages manufactured, sold by a manufacturer or distributor, transported from a point outside of the Commonwealth to a point within the Commonwealth, imported or substantiating the other information required on his report, together with invoices, bills of lading and other pertinent papers, as may be required by the Department.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

61 Pa. Code § 74.61 Penalty for unlawful transportation.

It shall be unlawful for a person to transport into this Commonwealth, taxable malt or brewed beverages in containers on which the tax is not paid or provisions for the payment thereof are not made under the provisions of the TRC. The transportation of malt or brewed beverages in violation of this section shall be a misdemeanor, and, upon conviction thereof in a summary proceeding before a magistrate, alderman or district justice, the person shall be fined $10 for each container so transported, and, in default of payment thereof, shall undergo imprisonment for not more than 5 days for each container so transported. Transportation into this Commonwealth of malt or brewed beverages in containers other than in the manner prescribed by this title, shall be prima facie evidence of violation of this section.

History

• Authority: The provisions of this § 74.
• Source: The provisions of this Chapter 74 adopted March 5, 1982, effective June 23, 1979, 12 Pa.

Chapter 76 Unfair Sales of Cigarettes

61 Pa. Code § 76.1 Dealer’s cost of doing business.

(a) Cigarette stamping agent.

(1) The cost of doing business for a cigarette stamping agent is presumed to be the basic cost of cigarettes to the cigarette stamping agent for sales to wholesalers.

(2) Except as provided in subsection (e), a cigarette stamping agent may not sell cigarettes to a wholesaler at less than the cost of the stamping agent.

(b) Wholesaler.

(1) The cost of doing business for a wholesaler is presumed to be 4% of the basic cost of cigarettes to the wholesaler for sales to retailers.

(2) Except as provided in subsection (e), a wholesaler may not sell cigarettes to a retailer at less than the cost of the wholesaler.

(c) Retailer.

(1) The cost of doing business for a retailer is presumed to be 6% of the basic cost of cigarettes to the retailer for sales to the ultimate consumer.

(2) Except as provided in subsection (e), a retailer may not sell cigarettes to the ultimate consumer at less than the cost of the retailer.

(d) Application to lower dealer’s cost of doing business.

(1) A dealer who wishes to lower its cost of doing business shall submit an application to the Department.

(2) An application for permission to sell at less than a dealer’s presumed cost of doing business shall contain:

(i) A copy of the dealer’s most recently filed Federal and State Income Tax return forms, including all associated schedules and attachments.

(ii) A nonrefundable fee of $200 to cover the Department’s costs of administering the application, including the review and audit of the petitioning dealer’s financial statements. If the Department determines that a field audit is necessary to approve or disapprove a request, an hourly rate, as established by the Department, will be charged to the dealer requesting approval for time spent in preparing the field audit. This amount will be in addition to the $200 nonrefundable fee.

(e) Review and determination.

(1) The Department will review and evaluate the information provided by the cigarette dealer and will determine whether the dealer’s cost of doing business is lower than the presumed cost of doing business in effect at that time.

(2) The Department’s approval of a dealer’s application to sell at less than the presumptive cost of doing business is valid for 12 months from the effective date of the approval or until the effective date of the approval of a subsequent dealer’s application, whichever occurs first.

(3) If a dealer with permission to sell at less than the presumptive cost of doing business fails to submit a new application that is approved by the Department by the expiration of the 12-month period, the permission previously given to the dealer will be automatically revoked on the last day of the 12-month period.

(4) The Department’s approval of a petitioning cigarette stamping agent, wholesaler or retailer’s lower cost of doing business will apply to all dealers throughout this Commonwealth holding the same licenses as referenced in § 72.1 (relating to licensing of dealers). For example, if the Department approves a particular retailer’s request to lower the presumptive 6% cost of doing business to 5%, all Pennsylvania retailers would also be permitted to use 5% as their cost of doing business.

(5) In determining whether an applicant/dealer’s cost of doing business is lower than the presumed cost of doing business for that particular type of dealer, the Department will divide the applicant’s operating expenses for the applicable 12-month period by the applicant’s total cost of doing business for that same period.

Example. Wholesaler is in the business of selling cigarettes, candy and various food items to retailers throughout the United States. In its application to sell cigarettes to retailers at a price lower than the 4% presumptive cost of doing business markup, Wholesaler provides the following financial information for the year ending 12/31/XX:

The Wholesaler’s operating expenses equal $75 million, which is its total cost of doing business less its total cost of goods sold. This amount is then divided by Wholesaler’s total cost of doing business ($75 million/$650 million), which equals approximately 11.53%. This percentage represents the wholesaler’s actual percentage cost of doing business. Because this percentage is greater than the 4% presumptive cost of doing business markup, the Wholesaler is unable to show that it can sell its cigarettes at a lower cost of doing business and the Department would deny its application.

(6) In determining a dealer’s actual cost of doing business, the Department will determine the amount of the constructive cost of property or services upon which the dealer’s actual cost of doing business is calculated when the Department determines that the dealer’s financial records are not indicative of the true value of property or services received by the dealer.

(i) The constructive cost of the dealer’s receipt of property or services shall be the cost which would be charged in an arms-length transaction.

(ii) If the purchase of property or services occurs between a parent and a subsidiary, affiliate or controlled corporation, there shall be a refutable presumption that because of the common interest the transaction was not at arms-length.

Interpretation

The regulations are a correct interpretation of the express provisions of the statute. The Department of Revenue was correct in examining the total costs of all products as opposed to examining only those costs related to cigarettes. Associated Wholesalers, Inc. v. Department of Revenue, 780 A.2d 759 (Pa. Cmwlth. 2001), appeal denied 808 A.2d 573 (Pa. 2002).

History

• Authority: The provisions of this Chapter 76 issued under section 6 of the Fiscal Code (72 P.
• Source: The provisions of this Chapter 76 adopted February 13, 1998, effective February 14, 1998, 28 Pa.

61 Pa. Code § 76.2 Combination sales and inducements.

Except for in § 76.3 (relating to promotional sales plans), a dealer may not:

(1) Sell cigarettes in combination with other noncigarette merchandise if the total sales price for the cigarettes and all other noncigarette items included in the sale is less than the sum of the cost to the dealer of the cigarettes and noncigarette items. The dealer’s invoice shall contain a description of the cigarette and noncigarette merchandise, including its selling price or its wholesale value.

(2) Give cigarettes free of charge, except in the case of specially-packaged manufacturers’ samples that are designated on the package as not to be sold in accordance with § 71.8 (relating to sample cigarettes).

(3) Make a rebate, advertising allowance or other concession in connection with the sale of cigarettes whereby the cigarettes are in effect sold below their cost to the dealer.

(4) Make secret extensions to certain purchasers of special services or privileges in connection with the sale of cigarettes that are not extended to all purchasers upon like terms and conditions.

History

• Authority: The provisions of this Chapter 76 issued under section 6 of the Fiscal Code (72 P.
• Source: The provisions of this Chapter 76 adopted February 13, 1998, effective February 14, 1998, 28 Pa.

61 Pa. Code § 76.3 Promotional sales plans.

(a) Only cigarette manufacturers may sponsor or initiate a promotional sales plan that lowers the price of cigarettes below the cost of the dealer.

(b) Every dealer on whose premises a manufacturer’s promotional sales plan is being conducted shall obtain a written statement from the manufacturer which describes the promotional sales plan and indicates the plan’s duration.

(c) When a manufacturer’s promotional sales plan involves the affixation of coupons to a retailer’s inventory of cigarettes, the retailer shall receive payment from the manufacturer representing the value of the coupons prior to the retailer’s customers’ purchase of the coupon-affixed cigarettes. The retailer shall also retain documentation showing the manufacturer’s payment of the coupons’ value. For example, if the cost of the retailer for a package of cigarettes is $2 and a 50¢ coupon is affixed to the package, the retailer may accept the coupon, sell the package of cigarettes for $1.50 and be in compliance with the act and the code only if the retailer possesses evidence that the manufacturer prepaid the value of the 50¢ coupon to the retailer prior to the retailer’s sale of the package of cigarettes.

(d) Retailers may redeem manufacturer-issued coupons issued to the general public that reduce the retail purchase price of cigarettes below the cost of the retailer as long as the manufacturer reimburses the retailer for the redeemed coupon and the retailer maintains documentation showing the sale of the cigarettes to its customers and the manufacturer’s subsequent reimbursement. For example, if the cost of the retailer is $18 per carton of cigarettes and the retailer sells the carton for $18, the retailer may accept a $1 coupon that reduces the cost of the retailer to $17 and not be in violation of the code or act. However, the retailer may not sell the carton at $17 unless the retail customer tenders a valid $1 manufacturer coupon.

(e) A dealer participating in a manufacturer’s promotional sales plan which is not evidenced by a coupon and which occurs subsequent to the dealer’s purchase of cigarettes from that manufacturer is in violation of the code.

(f) A dealer may sponsor or initiate a promotional sales plan if the plan does not result in the sale of cigarettes at a price below the cost of that dealer.

This section cited in 61 Pa. Code § 76.2 (relating to combination sales and inducements).

History

• Authority: The provisions of this Chapter 76 issued under section 6 of the Fiscal Code (72 P.
• Source: The provisions of this Chapter 76 adopted February 13, 1998, effective February 14, 1998, 28 Pa.

Chapter 81 Spirituous and Vinous Liquor Taxes

61 Pa. Code § 81.15 Required records.

(a) Each manufacturer and importer shall maintain and keep for a period of 4 years records of distilled spirits rectified and wines produced, manufactured, distilled, rectified or compounded or imported into this Commonwealth together with invoices, bills of lading and other pertinent papers as may be required by the Department.

(b) Records, invoices, bills of lading and other pertinent papers required to be maintained and kept shall be original records, invoices, bills of lading and other pertinent papers and not a reproduction by microfilm or otherwise.

The provisions of this § 81.15 adopted June 4, 1976, 6 Pa.B. 1283.

History

• Source: The provisions of this § 81.

Chapter 94 Inheritance Tax Pronouncements—Statements of Policy

61 Pa. Code § 94.2 Awards received in reparation for the seizure, theft, requisition or involuntary conversion of the income of victims of Nazi persecution.

For decedents dying on or before the date upon which the awards or settlements received by a decedent’s estate in reparation for the seizure, theft, requisition or involuntary conversion of the property or income of victims of Nazi persecution are liquidated pursuant to any legally binding settlement or notice, or both, thereof, the assets are determined by the Department to have a value of zero at the decedent transferor’s death.

The provisions of this § 94.2 adopted April 16, 1999, effective April 17, 1999, 29 Pa.B. 2037.

History

• Source: The provisions of this § 94.

61 Pa. Code § 94.3 Taxation of trusts terminated under 20 Pa.C.S. § 7710.1

(a) Effective for Resident and Non-Resident Pennsylvania Inheritance Tax Returns filed on or after July 1, 2012, wherein the person responsible for filing the return has not made an election to prepay tax under section 2113(a) of the Inheritance and Estate Tax Act (act) (72 P. S. § 9113(a)) concerning trust assets reported on the return as part of a qualified spousal trust under section 2113 of the act, the Department will reserve the right to assess Pennsylvania Inheritance Tax at the highest applicable rate in effect at the time the Department issues its initial Notice of Inheritance Tax Appraisement, Allowance or Disallowance of Deductions and Assessment of Tax, unless the person responsible for filing the return requests a Future Interest Compromise from the Department in conjunction with the filing and in the manner prescribed by the Department.

(b) If a Future Interest Compromise is not requested in accordance with subsection (a), the person responsible for filing the return shall acknowledge in writing, in the form and manner provided by the Department, the person’s assumption of liability for inheritance tax consequences that result from the termination of a trust under 20 Pa.C.S. § 7710.1 (relating to nonjudicial settlement agreements—UTC 111) that occurs after the return has been filed. This assumption of liability applies to a termination made without court approval or notice to the Department. This liability does not apply to a termination made under a specified termination date as contained within the trust instrument provided to the Department.

(c) If a trust has been terminated under 20 Pa.C.S. § 7710.1, without request for a Future Interest Compromise in accordance with subsection (a), the assets of the trust will be valued for Pennsylvania Inheritance Tax purposes as of the date of termination and tax will be due and owing as of the date of termination. Interest will accrue on an inheritance tax liability as of the termination date and in accordance with section 806 of The Fiscal Code (72 P. S. § 806).

The provisions of this § 94.3 adopted November 4, 2011, effective November 5, 2011, 41 Pa.B. 5994.

History

• Source: The provisions of this § 94.

Chapter 101 General Provisions

61 Pa. Code § 101.1 Definitions.

The following words and terms, when used in this article, have the following meanings, unless the context clearly indicates otherwise: Accepted accounting principles and practices—Those accounting principles, systems or practices which are acceptable by standards of the accounting profession and which are not inconsistent with the regulations of the Department setting forth those principles and practices. Association—An unincorporated society; a body of persons united and acting together without articles of incorporation but upon the methods and forms used by incorporated bodies, for the prosecution of some common enterprise. The common enterprise shall be the conduct of a business, trade or profession or the view to ultimate enhancement in value of the property of the association which is either to be returned to the members or sold and the profits returned to the members. The term does not include associations that are purely charitable or religious organizations, recreational or social clubs, and similar agencies. Business—An enterprise, activity, profession, vocation, trade, joint venture, commerce or other undertaking of any nature if engaged in as a commercial enterprise and conducted for profit or ordinarily conducted for profit, whether by an individual, partnership, association or other unincorporated entity. Cafeteria plan—A plan qualifying under section 125 of the IRC (26 U.S.C.A. § 125). Casual employe—An individual who performs, or by agreement, refrains from performing, any service of whatever nature and is not an employe. Casual employer—A person for whom a casual employe performs, or refrains from performing, any service, provided that, if the person does not make the payment of remuneration, the term also includes the person making payment. Charitable trust—A trust operated exclusively for religious, charitable, scientific, literary or educational purposes. Claimant—A person who is subject to the tax imposed under this article, is not a spouse or child who derives more than one-half of their total support from another person. Department—The Department of Revenue of the Commonwealth. Dependent—A spouse or child who derives more than one-half of his total support during the entire taxable year from another individual. A spouse means a husband or wife. A child means and includes a natural child, an adopted child, a stepchild and a grandchild. A foster child who during the entire taxable year lives in the claimant’s home shall be considered to be a child. For purposes of determining support, all sources of income are to be considered, whether taxable income or nontaxable income. Conditions of blindness or old age may not be a factor in determining the number of a claimant’s dependents. Discriminatory plan—A plan that treats highly compensated participants more favorably in coverage, contributions or benefits. In determining whether a cafeteria plan is discriminatory, the special rules of section 125(g) of the IRC apply. Dividends—A distribution in cash or property made by a corporation, association or business trust out of accumulated earnings and profits, or out of earnings and profits of the year in which the dividend is paid. The term does not include a return of premium. Domicile—The place which an individual intends to be his permanent home and to which he intends to return whenever he may be absent. Employe—An individual from whose wages an employer is required under the IRC to withhold Federal Income Tax. For the purpose of this definition, the terms ‘‘employe,’’ ‘‘employer’’ and ‘‘wages’’ have the same meanings as in Chapter 24 of the IRC (26 U.S.C.A. § § 3401—3406), relating to collection of Income Tax at source on wages. Employe welfare benefit plan—

(i) A plan established or maintained to provide to eligible employes or their beneficiaries plan benefits, such as:

(A) Medical, surgical or hospital care or benefits in the event of sickness, accident or disability.

(B) Death benefits.

(C) Scholarships.

(D) Personal expense reimbursements, advancements or allowances such as rental vehicle, dependent care, food or housing allowances.

(ii) The term does not include:

(A) Plans that offer a benefit that defers the receipt of compensation or operate in a manner that enables participants to defer the receipt of compensation.

(B) Plans established or maintained to provide fringe benefits described in § 101.6a (relating to fringe benefits in the form of use of property or services). Employer—An individual, partnership, association, corporation, governmental body or unit or agency, or any other entity who or that is required under the IRC to withhold Federal Income Tax from wages paid to an employe. For the purpose of this definition, the terms ‘‘employe,’’ ‘‘employer’’ and ‘‘wages’’ have the same meanings as in Chapter 24 of the IRC. Fiduciary—A guardian, trustee, executor, administrator, receiver, conservator or a person acting in a trust or similar capacity, whether domiciliary or ancillary. This term is intended to be all encompassing and includes any person defined as a fiduciary under any other statute of the Commonwealth. The fact that a person is defined as a fiduciary in one statute and not in another is immaterial for the purpose of this article. Health, accident or death plan—

(i) The term means:

(A) An accident, health or term life insurance policy issued by an insurance company.

(B) A self-insured employe welfare benefit plan under which benefits are payable upon hospitalization, sickness, disability or death or for the prevention of sickness or disability.

(ii) The term does not include a program under which benefits are payable either upon hospitalization, sickness, disability, death or for the prevention of sickness or disability; or upon separation from employment or some other contingency.

Example: Under A’s benefit plan, B qualifies for a lump sum payment equal to 26 weeks’ pay upon proof of permanent disability or separation from employment. The plan does not constitute a health, accident or death plan because program benefits are also payable upon separation from employment. Instead, it constitutes a severance pay plan. Highly compensated participant—

(i) A plan participant who is one of the following:

(A) An officer.

(B) A shareholder owning more than 5% of the voting power or value of all classes of stock of the employer.

(C) An individual who, for the preceding taxable year:

(I) Received compensation from the employer in excess of the Federal limitation (after adjustment by the Secretary of the United States Treasury for inflation) set forth in section 414(q)(1)(B) of the IRC (26 U.S.C.A. § 414(q)(1)(B)).

(II) Is in the group consisting of the top 20% of all full-time employes of the employer with at least 3 years of service when ranked on the basis of compensation paid during the taxable year.

(ii) A partner or other self-employed individual.

(iii) A spouse or dependent of a highly compensated individual. Income—The total of the classes enumerated under Chapter 103, Subchapter B (relating to the determination of tax) received by a taxpayer directly, or through partnerships, associations or Pennsylvania S corporations and the amount of each class derived by the taxpayer through estates or trusts determined and computed in accordance with the requirements of this article relating to the taxation of a natural individual’s personal income, including the requirements that:

(i) There is no setoff between, or among, any different classes of Personal Income Tax income. For example, an individual’s net profit from manufacturing toys is $100, his net loss from the business of selling garden supplies is $20 and his net loss from passive ownership of investment rental properties is $10. His total net business profits are $80 which is his income, against which he may not set off his losses on rentals.

(ii) A deduction is not allowed for expenses, whether paid or incurred for the production or collection of income or for the management, conservation or maintenance of property, except:

(A) Unreimbursed employe business expenses.

(B) Costs of goods sold and expense incurred in the operation of a business.

(C) Costs of acquisition, expenses of sale and collection expenses.

(D) Expenses necessary to the production or collection of rents and royalties or for the management, conservation or maintenance of rents, royalties, patents or copyrights.

(iii) The distributive income of a Pennsylvania S corporation, partnership or other association, trust or estate is classified, determined and computed in the same way and on the same basis as the taxable income of a natural individual; and, in the case of a Pennsylvania S corporation, partnership or other association, each shareholder, partner or member shall take into income the shareholder’s, partner’s or member’s pro rata share of the income or loss in each applicable class of income received by the Pennsylvania S corporation, partnership or other association.

(iv) Married persons may not compute their tax as if they were one person; and no setoff between married persons is permitted. For example, an individual’s net profit from manufacturing toys is $100, his net loss from the business of selling garden supplies is $20, his wife’s loss from a business she operates is $20 and his net loss from passive ownership of investment rental properties is $10. His total net business profits are $80 which is his income, against which he may not set off his wife’s business losses. Individual—A natural person and includes the members of a partnership or association. Limited plan of termination—A plan that has one or more of the following attributes:

(i) The plan, when begun, is scheduled to be complete on a certain date or upon the occurrence of one or more specified events.

(ii) The number, percentage or class of employees whose services are to be terminated are specified in advance of the employees’ terminations of service.

(iii) The plan is otherwise temporary or limited. Nonresident estate or trust—An estate or trust which is not a resident estate or trust. In determining whether an estate or trust is a resident estate or trust, reference should be made to definitions of resident estates and resident trust in this section. Charitable trusts and pension or profit sharing trusts are not included within the term nonresident trusts. Nonresident individual—An individual who is not a resident of this Commonwealth. In determining whether an individual is a resident, reference should be made to the definition of a resident in this section. References to nonresidents are equally applicable to nonresident aliens. Partnership—An undertaking by two or more persons to place their money, property, labor, skill or all of these in commerce, business or a profession with a view to earning a profit which they shall share. The term includes limited and general partnerships and joint ventures. It shall be immaterial whether the undertaking is limited as to subject, time or any other factor. The term does not include an organization taxed as a corporation under the laws of the Commonwealth. Permanent place of abode—A dwelling place maintained by the taxpayer, whether or not owned by him. This term generally includes a dwelling place owned or leased by the taxpayer’s spouse. However, a mere camp or cottage, which is used only for vacations, is not a permanent place of abode. Person—An individual, employer, association, fiduciary, partnership, corporation or other entity, estate or trust, resident or nonresident, and the plural as well as the singular number. For the purpose of determining eligibility for special tax provisions, the term means a natural individual. Plan—A cafeteria plan or other wage and salary supplemental or replacement program or arrangement established or maintained by an employer or by an employe organization, or by both, for the benefit of eligible employes or their beneficiaries. The term includes temporary or permanent programs or arrangements covering hospitalization, sickness, disability or death, supplemental unemployment benefits, strike benefits, social security or retirement, a trust that forms part of a plan, and a contract of insurance. Poverty—An economic condition wherein the total amount of poverty income is insufficient to adequately provide the claimant, his spouse and dependent children with the necessities of life. Poverty income—

(i) For the purpose of determining eligibility for special tax provisions, moneys or property, including interest, gains or income derived from obligations which are statutorily free from State or local taxation under any other act of the General Assembly of the Commonwealth or under the laws of the United States, received of whatever nature and from whatever source derived, but not including the following:

(A) Periodic payments for sickness and disability other than regular wages received during a period of sickness or disability.

(B) Disability, retirement or other payments arising under workmen’s compensation acts, occupational disease acts and similar legislation by a government.

(C) Payments commonly recognized as old age or retirement benefits paid to persons retired from service after reaching a specific age or after a stated period of employment.

(D) Payments commonly known as public assistance, or unemployment compensation payments by a governmental agency.

(E) Payments to reimburse actual expenses.

(F) Payments made by employers to labor unions for programs covering hospitalization, sickness, disability or death, supplemental unemployment benefits, strike benefits, social security and retirement.

(ii) Income which must be included, includes, but is not limited to: taxable income; interest received, whether taxable or nontaxable; realized capital gains, whether taxable or nontaxable; child support; alimony; life insurance proceeds; gifts of cash or property; educational stipends; military pay received for services outside of a combat zone; awards or prizes, including lottery winnings; inheritances; and other income not specified as ‘‘Income Not Included.’’

(iii) The following income may not be included: Social Security and Medicare benefits; periodic payments for sickness and disability; workers’ compensation payments; public assistance and relief (welfare); unemployment compensation; reimbursed actual expenses; pensions or annuities, including railroad retirement benefits received by reason of retirement; and military pay received by servicemen for duty in a combat zone.

(iv) In cases where property is jointly owned, any income therefrom shall be divided according to the parties’ respective interest therein and be reported accordingly. Qualified annuity—An arrangement under which the payee is entitled to equal, or substantially equal, periodic payments, paid at least annually, for any of the following periods:

(i) The life of the participant, or, if applicable, the joint lives of the recipient and recipient’s designated beneficiary.

(ii) The life expectancy of the participant, or, if applicable, the joint life expectancies of the recipient and recipient’s designated beneficiary.

(iii) A period of at least 10 years. Resident estate—The estate of an individual who at the time of his death was a resident individual. The single controlling factor in determining if an estate is a resident estate for purposes of this article shall be whether the decedent was a resident individual at the time of his death. The residence of the fiduciary and the beneficiaries of the estate shall be immaterial. Resident individual—An individual who is domiciled in this Commonwealth unless he maintains no permanent place of abode in this Commonwealth and does maintain a permanent place of abode elsewhere and spends in the aggregate not more than 30 days of the taxable year in this Commonwealth, or who is not domiciled in this Commonwealth but maintains a permanant place of abode in this Commonwealth and spends in the aggregate more than 183 days of the taxable year in this Commonwealth. An individual may be a resident of this Commonwealth and taxable as a resident even though he would not be deemed a resident for other purposes. Resident trust—The single controlling factor in determining if a trust is a resident trust for purposes of this article shall be whether the decedent, the person creating the trust or the person transferring the property was a resident individual or person at the time of death, creation of the trust or the transfer of the property. The residence of the fiduciary and the beneficiaries of the trust shall be immaterial. A resident trust shall be one of the following:

(i) A trust created by the will of an individual who at the time of his death was a resident individual.

(ii) A trust created by a person who at the time of the creation was a resident.

(iii) A trust consisting in whole or in part of property transferred to the trust by a person who at the time of the transfer was a resident. Severance pay—A payment made upon separation from employment under:

(i) A plan which has both of the following attributes:

(A) Payments are not contingent solely upon an employee’s retirement from service or being the same age as, or older than, the earliest retirement age under a qualifying retirement benefit plan or qualifying retirement income plan sponsored by the employer.

(B) Total payments cannot exceed twice the employee’s annual compensation accruing during the year preceding the employee’s termination.

(ii) A plan under which all payments to any plan participant are completed within 120 months of the participant’s termination.

(iii) A plan under which no benefit is, or only reduced benefits are payable to, or can be taken, assigned, pledged or otherwise charged or dealt with by, any plan participant after the participant reaches normal retirement age or service.

(iv) A plan, including a stock bonus or profit-sharing plan formed by a trust that meets the requirements for qualification described in section 401 of the IRC (26 U.S.C.A. § 401) or employee stock ownership plan, with one or more of the following attributes:

(A) The amount of earnings on contributions (or allocations of contributions or earnings) and the amount of benefits are determined with regard to the current or accumulated profits or losses of the employer.

(B) The employer can contribute only in those years when it has current or accumulated profits.

(C) The employer’s contributions can fluctuate depending on the level of its profits.

(D) The employer’s contributions are made out of current or accumulated profits.

(E) Distributions are paid with respect to stock of a corporation which is held by an employee stock ownership plan.

(v) A plan under which the accrued benefit payable to each vested participant who does not die before the payment starting date is neither paid nor payable in the form of a qualified annuity.

(vi) A limited plan of termination. Special tax provisions—A refund or forgiveness of all or part of the claimant’s liability under this article. State—A state or commonwealth of the United States, the District of Columbia, the Commonwealth of Puerto Rico, a territory or possession of the United States, and a foreign country, but not a political subdivision of any of the foregoing. Supplemental unemployment benefit plan—A plan established or maintained by an employer or by an employee organization, or by both, that has all of the following attributes:

(i) No benefit is payable to, or can be taken, assigned, pledged or otherwise charged or dealt with by, any plan participant except upon lay-off or involuntary separation from the employment of the employer (whether or not the separation is temporary) resulting directly from:

(A) A reduction in force.

(B) Plant closing.

(C) Change in organizational structure.

(D) Discontinuance of an operation.

(E) The participant’s failure to meet or maintain standards of performance for the position due to inability to carry out the responsibilities of the position, health, obsolescence, failure to meet the changed responsibilities of the position or similar circumstance beyond the control of the participant.

(ii) No benefit is payable to, or can be taken, assigned, pledged or otherwise charged or dealt with by, any plan participant if the participant either:

(A) Voluntarily separates from service.

(B) Is separated or discharged from service for any of the following reasons:

(I) Refusal to accept another position with reasonably comparable compensation.

(II) The commission of illegal acts.

(III) Insubordination, failure or refusal to comply with rules or regulations or similar acts within the control of the participant.

(iii) Employer payments to provide benefits are paid to an independently controlled trust or pooled fund established or maintained for the purpose of funding or providing benefits under the plan. Tax—Interest, penalties and additions to tax, and tax which is withheld under this article by an employer on compensation paid. Taxable year—When the taxpayer or a claimant is required to file a Federal income tax return under the Internal Revenue Code of 1954, as amended, taxable year means the taxable period for which the return is required. Where the taxpayer is not required to or does not file a Federal income tax return, taxable year means the calendar year. Notwithstanding the foregoing for the first taxable period after the imposition of this tax, taxable year means the period beginning June 1, 1971, and ending with the last day of the taxable period for which the taxpayer files a Federal income tax return under the Internal Revenue Code of 1954, as amended, or December 31, 1971, if he is not required to or does not file a Federal income tax return. Taxpayer—An individual, estate or trust subject to the tax imposed by this article; a partnership having a partner who is a taxpayer under this article; and an employer required to withhold tax on compensation paid. Wage or salary supplement—

(i) Employer-provided coverage under a plan.

(ii) Separation pay, vacation pay, holiday pay, guaranteed pay, reimbursement for personal expenses, an employer payment to provide benefits under a plan and any other amount paid, under an agreement, to one or more of the following:

(A) An independently controlled trust or pooled fund established or maintained for the purpose of funding or providing benefits under the plan.

(B) An insurance company for the purchase of insurance.

(C) A third party for the benefit of the employe.

(iii) Any benefit under a plan to the extent attributable to plan coverage or contributions by the employer which were not includible in income of the employe.

(iv) Any benefit under a plan which is directly paid by the employer.

The provisions of this § 101.1 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 101.1 amended through June 12, 1975, effective June 13, 1975, 5 Pa.B. 1561; amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249; amended August 4, 2000, effective August 5, 2000, 30 Pa.B. 3938; amended January 11, 2002, effective January 12, 2002, 32 Pa.B. 250, 253. Immediately preceding text appears at serial pages (268447) to (268454).

This section cited in 61 Pa. Code § 123.3 (relating to taxability under special provisions).

History

• Authority: The provisions of this § 101.
• Source: The provisions of this § 101.

61 Pa. Code § 101.2 Accounting methods.

No one method of accounting is prescribed for taxpayers. Each taxpayer shall adopt the methods, forms and systems that best suit his needs, so long as they clearly reflect income. A method of accounting which reflects the consistent application of generally accepted accounting principles in a particular trade or business in accordance with prevailing conditions or practices in that trade or business shall be presumed to clearly reflect income, if the method is used for Federal income tax purposes.

History

• Authority: The provisions of this § 101.
• Source: The provisions of this § 101.

61 Pa. Code § 101.3 Domicile.

(a) In the case of an individual domiciled in this Commonwealth, the maintenance of a permanent place of abode in this Commonwealth is alone sufficient to make him a resident for tax purposes. Even though he remains outside this Commonwealth for the entire year, the 183-day rule applies only to taxpayers who are not domiciled in this Commonwealth. Reference should also be made to § 101.5 (relating to rules for days within and without the Commonwealth).

(b) A domicile, once established, continues until the individual in question moves to a new location with the bona fide intention of making his fixed and permanent home there. No change of domicile results from a removal to a new location if the intention is to remain there only for a limited time; this rule applies even though the individual may have sold or disposed of his former home. The burden shall be upon the individual asserting a change of domicile to show that the necessary intention existed. In determining an individual’s intention in this regard, his declarations shall be given due weight, but they may not be conclusive if they are contradicted by his conduct. The fact that an individual registers and votes in one place is important but not necessarily conclusive, especially if the facts indicate that he did this merely to escape taxation in some other place.

(c) Domicile is not dependent on citizenship; that is, an immigrant who has permanently established his home in this Commonwealth shall be domiciled here regardless of whether he has become a United States citizen or has applied for citizenship. However, a United States citizen will not ordinarily be deemed to have changed his domicile by going to a foreign country unless it is clearly shown that he intends to remain there permanently. For example, a United States citizen domiciled in this Commonwealth, who goes abroad because of an assignment by his employer or for study, research or recreation, does not lose his Commonwealth domicile unless it is clearly shown that he intends to remain abroad permanently and not to return.

(d) An individual may have only one domicile. If he has two or more homes, his domicile shall be the one which he regards and uses as his permanent home. In determining his intentions in this matter, the length of time customarily spent at each location shall be important but not necessarily conclusive. An individual who maintains a permanent place of abode in this Commonwealth is taxable as a resident even though he may be domiciled elsewhere.

(e) Ordinarily, the domicile of the wife follows that of her husband, but if they are separated in fact she may, under some circumstances, acquire her own separate domicile, even though there is no judgment or decree of separation.

(f) Domicile of a child ordinarily follows that of his father, or of his mother after the death of the father, until he reaches the age of self-support and actually establishes his own separate domicile. The domicile of a child for whom a guardian has been appointed may not be necessarily determined by the domicile of the guardian.

History

• Authority: The provisions of this § 101.
• Source: The provisions of this § 101.

61 Pa. Code § 101.4 Residents not domiciled in this Commonwealth.

(a) An individual domiciled in this Commonwealth shall be a resident for purposes of this article for a specific taxable year, unless for that year he satisfies all three of the following requirements:

(1) Maintains no permanent place of abode in this Commonwealth during the year.

(2) Maintains a permanent place of abode elsewhere during the entire year.

(3) Spends in the aggregate not more than 30 days of the taxable year in this Commonwealth.

(b) For example, an individual, although retaining his Commonwealth domicile for legal reasons, such as voting purposes, may maintain his only permanent place of abode in the District of Columbia where he is employed by the Federal government. As long as he continues to meet all three of the conditions stated in subsection (a), he shall be a nonresident of this Commonwealth for income tax purposes. However, if for any taxable year he fails to meet any one of these three conditions, he shall be subject to Commonwealth income tax as a resident for that year.

(c) Where an individual claims to be a nonresident for any taxable year, the burden shall be upon him to show that during that year he satisfied all three of the requirements set forth in subsection (a).

(d) If, at the time he entered military service, the domicile of a serviceman was in this Commonwealth, assignment to duty outside the state does not change his Commonwealth domicile. Although his military pay is not ‘‘compensation’’ as defined by this article and, therefore, not taxable, he shall file a return and pay tax on all other income taxable under this article in the same manner as any resident individual unless he satisfies all three of the conditions set out in subsection (a).

(e) Military pay of military personnel domiciled outside of this Commonwealth but living or stationed in this Commonwealth is not subject to tax under the provisions of the Soldiers and Sailors Civil Relief Act.

The provisions of this § 101.4 amended June 12, 1975, effective June 13, 1975, 5 Pa.B. 1561.

History

• Authority: The provisions of this § 101.
• Source: The provisions of this § 101.

61 Pa. Code § 101.5 Rules for days within and without this Commonwealth.

(a) In counting the number of days spent within and without this Commonwealth, presence within this Commonwealth for any part of a calendar day constitutes a day spent within this Commonwealth, except that the presence within this Commonwealth may be disregarded if it is solely for the purpose of boarding a plane, ship, train or bus for travel to a destination outside of this Commonwealth, or while traveling by motor, plane, or train through the Commonwealth to a destination outside this Commonwealth.

(b) An individual domiciled outside this Commonwealth who maintains a permanent place of abode within this Commonwealth during any taxable year and claims to be a nonresident shall keep and have available for examination by the Department adequate records to substantiate the fact that he did not spend more than 183 days of the taxable year within this Commonwealth.

This section cited in 61 Pa. Code § 101.3 (relating to domicile).

History

• Authority: The provisions of this § 101.
• Source: The provisions of this § 101.

61 Pa. Code § 101.6 Compensation.

(a) Compensation includes items of remuneration received, directly or through an agent, in cash or in property, based on payroll periods or piecework, for services rendered as an employee or casual employee, agent or officer of an individual, partnership, business or nonprofit corporation, or government agency. These items include salaries, wages, commissions, bonuses, stock options, incentive payments, fees, tips, dismissal, termination or severance payments, early retirement incentive payments and other additional compensation contingent upon retirement, including payments in excess of the scheduled or customary salaries provided for those who are not terminating service, rewards, vacation and holiday pay, paid leaves of absence, payments for unused vacation or sick leave, tax assumed by the employer, or casual employer signing bonuses, amounts received under employee benefit plans and deferred compensation arrangements, and other remuneration received for services rendered.

(b) Scholarships, stipends, grants and fellowships shall be taxable as compensation, if services are rendered in connection therewith.

(1) When used in this subsection, the following words have the following meanings, unless the context clearly indicates otherwise:

(i) Fellowship stipend or fellowship award—A fixed sum of money paid periodically for services or to defray expenses to a graduate student who is enrolled in a graduate degree program at a university.

(ii) Grant-in-aid—Financial support given by a public agency or private institution to an individual to further the individual’s education.

(iii) Postdoctoral research fellowship stipend or postdoctoral research fellowship award—A fixed sum of money paid periodically for services or to defray expenses of an individual who has obtained a doctoral degree at a university and is conducting research at a research facility.

(iv) Scholarship—A grant-in-aid to a student.

(2) Scholarships, grants, awards and other types of student aid which require no past, present or future services in return for receipt of the funds are not taxable.

Examples:

(i) John has a high school diploma and is currently employed. John’s employer promises to pay for John’s college tuition, room and board for 4 years if John agrees to return to his employer after obtaining his degree and to work for the employer for 4 consecutive years. John’s grant-in-aid is taxable compensation and is subject to Pennsylvania employer withholding and reporting.

(ii) Peter is employed by ABC Company. Peter and ABC Company agree that he will work for them for 1 year without receiving any salary. In return, after that year Peter will attend XYZ College and ABC Company will pay his tuition, room and board for the entire year. ABC’s payment of Peter’s tuition, room and board is taxable compensation and is subject to Pennsylvania employer withholding and reporting.

(iii) John is employed by XYZ Corporation. XYZ Corporation has established a ‘‘Scholarship Program’’ for the children of its employes. The program does not qualify as an employer scholarship program for Federal income tax purposes. John’s child, Erin, receives a ‘‘scholarship’’ from the plan to attend college. The fair market value of the Federally nonqualified scholarship is taxable compensation to John and is subject to Pennsylvania employer withholding.

(3) Fellowship awards or fellowship stipends made to graduate students enrolled in a graduate degree program at a university chartered by a state or foreign country on the basis of need or academic achievement for the purpose of encouraging or allowing the recipient to further his educational development are not taxable. When the fellowship awards or fellowship stipends are made as compensation for past or present employment or in expectation of future employment services they are taxable.

Example:

Jane is enrolled in a graduate degree program in biochemistry at a university. Jane is in the first year of a 3-year graduate degree program. A pharmaceutical company enters into an agreement to pay the remaining tuition, room and board expenses necessary for Jane to obtain her graduate degree. In return, Jane promises to work for the pharmaceutical company for 4 years after graduation. Jane’s receipt of these payments from her future employer constitute taxable compensation.

(4) Fellowship awards and fellowship stipends are taxable compensation for services if the recipient is required to apply his skill and training to advance research, creative work or some other project or activity, unless the recipient can show that the recipient is a candidate for a degree and the same activities are required of all candidates for that degree as a condition to receive that degree.

Example:

Steven is enrolled in a graduate degree program in education at ABC University. Degree candidates are required to teach an undergraduate education course for 5 hours a week to obtain their degree. Steven and two of the other 15 candidates in the degree program are receiving fellowship stipends. If Steven does not perform additional services for ABC University, his teaching will not make his stipend taxable compensation.

(5) For a payment received by a postdoctoral research fellow for conducting research to be excludable from the definition of compensation, the payment shall meet the following conditions. If the payment fails to meet one or more of these conditions, the payment is taxable compensation:

(i) The source of funding for the payment is a governmental agency, a private foundation as described in section 509 of the Internal Revenue Code (26 U.S.C.A. § 509), a Federally exempt organization as described in sections 501(c)(3) or (5) of the Internal Revenue Code (26 U.S.C.A. § 501(c)(3) and (5)), or a public or private university chartered by a state.

(ii) The organization which is permitting the fellow to use its facilities and which is sponsoring the fellow’s research (sponsoring organization) is a governmental agency, a Federally exempt organization as described in section 501(c)(3) of the Internal Revenue Code, or a public or private university chartered by a state.

(iii) Prior to enrollment in the sponsoring organization’s postdoctoral research fellowship program, the fellow has obtained a doctoral degree in a field of study which is related to the field of study being researched by the fellow.

(iv) The amount of the fellow’s stipend or grant is based on the scale established by the source of funding.

(v) Each fellow formulates his own research project or advances his own research project throughout the stipend or grant period.

(vi) The sponsoring agency serves only in an advisory capacity in the selection of research projects and cannot establish or control the fellow’s hours or methods of research except as control relates to legal or regulatory matters.

(vii) The fellow is not required to perform administrative work, teaching assignments or other duties for the sponsoring organization or another entity as a condition for receiving a payment and will not be penalized for not performing these duties.

(viii) The fellow is not required to enter a contractual commitment for future employment with a specified entity as a condition for obtaining or continuing to obtain the payments.

(ix) Payments to the fellow for conducting research are limited to no more than 36 months.

(x) Research results or writings made by the fellow during the program do not become the property of the sponsoring organization or another entity other than the fellow. Patent or copyright royalties or other income derived directly or indirectly from the fellow’s research results or writings may become the property of the sponsoring organization. Income or gain derived from patent or copyright royalties by the postdoctoral research fellow is taxable income to the fellow.

(xi) The fellow is not required to assist employes of the sponsoring organization in conducting research being performed by employes of the sponsoring organization.

Example:

John is a postdoctoral research fellow at ABC Cancer Research Institute. His research is being funded by the National Institute of Health. The sponsoring organization, ABC Cancer Research Institute, requires John to spend half of his time assisting its own employes on their own research project as a condition for sponsoring his research. John’s postdoctoral research fellowship stipend is taxable compensation.

(xii) The fellow does not receive fringe benefits to which an employe of the sponsoring organization is entitled, except to the extent that the benefits are at no additional cost to the sponsoring organization. For purposes of this subparagraph ‘‘fringe benefits’’ means payor provided health, life, disability income or group legal services insurance plans, payor provided automobile and payor provided dependent care assistance, educational assistance plans or retirement benefits.

(xiii) Pennsylvania unemployment compensation premiums are not required to be paid by the sponsoring organization or another entity on behalf of the fellow.

(xiv) Federal social security employment tax is not required to be paid by the sponsoring organization or another entity or the fellow with respect to the fellowship.

(xv) The fellow is not under the coverage of the sponsoring organization’s worker’s compensation insurance plan or policy.

(6) Fellowship stipends paid to medical interns and residents under an internship or residency program which conforms or substantially conforms to standards set by the American Medical Association are taxable compensation.

(c) Compensation does not mean or include any of the following:

(1) Periodic payments for periods of sickness or disability paid by or on behalf of an employer under a program or plan unless the payments are regular wages. Additionally, no amount of damages received (whether by suit or agreement and whether as lump sums or as periodic payments) if pain and suffering, emotional distress or other like noneconomic element was, or would have been, a significant evidentiary factor in determining the amount of the taxpayer’s damage. No payments made by third-party insurers for periods of sickness or disability would be considered payments of regular wages. A program or plan where any of the following occur would not be considered payment of regular wages:

(i) The periodic payments have no direct relationship to the employe’s usual rate of compensation.

(ii) The periodic payments are computed with reference to the nature of the sickness or disability and without regard to the employe’s job classification.

(iii) Periodic payments would be reduced by payments arising under Workmen’s Compensation Acts, Occupational Disease Acts, Social Security Disability or similar legislation by any government.

(iv) The periodic payments exceed the employe’s usual compensation for the period.

(2) Disability, retirement or other payments arising under workmen’s compensation acts, occupational disease acts or similar legislation by any government.

(3) Federal old age insurance benefits payable under 42 U.S.C.A. § 401, Railroad Retirement Act benefits payable under 45 U.S.C.A. § 228 or § 231 or any retired or retainer pay of a member or former member of a uniformed service computed under 10 U.S.C.A. § 1401.

(4) Payments commonly known as public assistance or unemployment compensation by a government agency.

(5) Payments made by employers to employes to reimburse actual expenses allowable as an ordinary, reasonable and necessary business expense.

(6) Payments made by an employer or labor union or elective contributions deemed to be made by an employer under a cafeteria plan for a nondiscriminatory health, accident or death plan.

Example:

P is a partnership that is engaged in providing accounting services. On a nondiscriminatory basis, it offers the following fringe benefits to both employes and partners of the firm:

Blue Cross/Blue Shield medical coverage.

Dental and eyeglass coverage with a deductible.

Group term life insurance with coverage up to the equivalent of the employe’s annual salary.

P pays the premiums on behalf of all employes and partners for all medical, dental, eyeglass and insurance coverage directly to the insurance carrier or benefit provider. P does not add the premium costs for the benefits to any employe’s gross wages and it accounts for the benefit costs as nonsalary fringe benefit expenses. In other words, the value of the benefits are not shown as an addition to any employe’s wages on the paystubs furnished to employes.

The plan is not a Federally qualifying cafeteria plan.

Conclusion: For the employes of P the employer-provided hospitalization (Blue Cross/Blue Shield), eyeglass, dental coverage and group life insurance benefits are excludable from compensation and are therefore not subject to withholding. The premiums paid on behalf of the partners, however, are not deductible or excludable from the income of the partnership or the partners.

(7) The value of meals and lodging furnished for the convenience of an employer or casual employer does not constitute compensation. Payments made to an Individual Retirement Account, as provided by the Employee Retirement Income Security Act of 1974 (ERISA), the act of September 2, 1974 (Pub. L. No. 93-406, 88 Stat. 829), are not excludable in computing income which is subject to tax under this article.

(8) Old Age or Retirement Benefit Plans.

(i) Scope. For the purpose of this section, the term plan includes Individual Retirement plans (IRA), Simplified Employee Pension Plans (SEP), Keogh plans, Federally qualified employe pension plans and similar old age or retirement benefit plans.

(ii) Contributions.

(A) Contributions to a plan made by employers or labor unions on behalf of an employe are excludable from the employe’s income, except as otherwise provided in this chapter.

(B) Contributions to a plan made by an employe or other individual directly or indirectly, whether through payroll deduction, a salary reduction agreement or otherwise, are not excludable from his income. Contributions by, on behalf of or attributable to a self-employed person are not excludable from either compensation or net profits from a business, profession or other activity.

(iii) Distributions.

(A) Amounts distributed to an individual from a plan shall be included in income to the extent that contributions were not previously included in this income except for either of the following:

(I) Distributions made upon or after his retirement from service after reaching a specific age or after a stated period of employment.

(II) Distributions transferred into another plan, where the transferred amounts are not included in income for Federal income tax purposes.

(B) To determine the portion of a distribution to be included in income, an individual shall use the cost recovery method.

Example 1:

John contributed $1,000 to his IRA. He pays tax on the $1,000 contribution. Three years later the account has earned $750 in income. The total balance of the account at that time is ($1,000 + $750 =) $1,750. John receives a distribution of $750 from his IRA. Since the amount of the distribution does not exceed $1,000, the distribution is not includable in income.

Example 2:

Same facts as Example 1, except that John receives a distribution of $1,500. Since the amount of the distribution exceeds $1,000, the excess of the distribution, $500, is includable in his income, as compensation.

(iv) Income on plan assets. Income on assets held in a plan is not includable in income.

(9) Payments made by an employer or labor union for a nondiscriminatory supplemental unemployment benefit or strike benefit plan.

(10) Federally excludable benefits provided for the convenience of the employer.

(11) Fringe benefits described in § 101.6a (relating to fringe benefits in the form of personal use of property or services).

(12) Program benefits payable on condition of hospitalization, sickness, disability or death under a health, accident or death plan.

(13) Guaranteed payments to a partner for services rendered to the partnership.

(14) Benefits payable by an employer or labor union under a supplemental unemployment benefit plan, whether payable on a periodic basis or in the form of cash, services or property.

(d) The Department may require the submission of a statement from an employer or casual employer with respect to its employes or casual employes regarding the verification or substantiation of unreimbursed and reimbursed business expenses. The statement of the employer or casual employer should verify that the expenses were required by the employer or casual employer. The statement shall set forth the types of expenses such as travel, meals, hotel and so forth that the employer or casual employer specifically requires the employe or casual employe to incur and to what extent, if any, the expenses are reimbursed. If the employer or casual employer requires the employe or casual employe to maintain an office, or office-in-home, a statement by the employer or casual employer to this effect should also be included. The Department does not require the employer or casual employer to specifically list the amount expended or to verify each expense incurred by the employe or casual employe.

(e) Compensation paid in a medium other than cash shall be valued at its current market value. Compensation paid in the form of employer-provided coverage under an employe welfare benefit plan shall be valued at cost. The cost shall be the total amount of payment made during the year by the employer on account of the plan and plan participant, except in the following situations:

(1) In the case of self-insured insurance plans, the cost shall be the annual cost for financial accounting purposes.

(2) The amount of compensation paid in the form of Federally taxable noncash fringe benefits shall be determined in the same manner as is prescribed by the Internal Revenue Service under Federal statutes and regulations.

(3) In the case of cafeteria plans, amounts specified in the plan document as being available to the participant for the purpose of selecting or purchasing benefits, when so used, shall be included in the total amount of payment made during the year by the employer on account of the plan and plan participant.

(f) Compensation in the form of incentive, qualified, restricted or nonqualified stock options shall be considered to be received:

(1) When the option is exercised if the stock subject to the option is free from any restrictions having a significant effect on its market value.

(2) When the restrictions lapse if the stock subject to the option is subject to restrictions having a significant effect on its market value.

(3) When exchanged, sold or otherwise converted into cash or other property.

(g) The following rules apply if, under a cafeteria plan, plan participants may choose between benefits consisting of cash, additional paid vacation days, and other benefits; or if, outside a cafeteria plan, plan participants can purchase additional paid vacation days:

(1) If additional paid vacation days are elected or purchased and they are used before the next calendar year, the following apply:

(i) The amount of cash foregone in exchange for the paid vacation day is excluded from income.

(ii) The vacation pay is includable in income when paid.

(2) If additional paid vacation days are purchased outside a cafeteria plan and they are not used before the next calendar year, the amount of cash foregone in exchange for the paid vacation days is excludable for Pennsylvania Personal Income Tax purposes only if both of the following apply:

(i) The value of the vacation day cannot be cashed out or used for any other purpose.

(ii) The vacation day cannot be carried over to the next taxable year.

(h) Employer payments to reimburse employes for uninsured medical or dental expenses are taxable as compensation if the employe is assured of receiving (in cash or any other benefit) amounts available but unused for covered reimbursement during the year without regard to whether the employe incurred covered expenses or not. If the amounts available for covered reimbursement cannot be cashed out or used for any other purpose during the taxable year or be carried over to any other taxable year, normal cash compensation that is forgone by an employe under a spending account or otherwise, and credited to a self-insured medical reimbursement account and drawn upon to reimburse the employe for uninsured medical or dental expenses to which section 105(b) of the IRC (26 U.S.C.A. § 105(b)) applies is excludable from tax.

(i) After December 31, 1996:

(1) Payments made after December 31, 1996, for employe welfare benefit plans under a cafeteria plan will be deemed to be an “employer contribution” for Pennsylvania Personal Income Tax purposes if the following apply:

(i) The payments were not actually or constructively received, after taking section 125 of the IRC (26 U.S.C.A. § 125) into account.

(ii) The payments were specified in a written cafeteria plan document as being available to the participant:

(A) For the purpose of selecting or purchasing benefits under a plan.

(B) As additional cash remuneration received in lieu of coverage under a plan.

(iii) The benefits selected or purchased are nontaxable under the IRC when offered under a cafeteria plan.

(iv) The payments made for the plan would be nontaxable under the Pennsylvania Personal Income Tax if made by the employer outside a cafeteria plan.

(2) If the requirements of paragraph (1) are satisfied, cafeteria plan contributions are taxed under such rules as they apply to employer payments for employe welfare benefit plans. However, if the benefits are taxable for Federal Income Tax purposes when offered under a cafeteria plan, the payments will also constitute compensation for Pennsylvania Personal Income Tax purposes. Payments also will constitute compensation if they would be taxable under the Pennsylvania Personal Income Tax if made by the employer outside a cafeteria plan. For example, although not taxable under the IRC, coverage under a dependent care plan providing for the reimbursement of expenses for household or dependent care services would constitute compensation under the Pennsylvania Personal Income Tax because it would be taxable if made by an employer outside a cafeteria plan.

(j) Compensation includes the entire cost of employer-provided coverage provided to a highly compensated participant under any discriminatory employe welfare benefit plan.

(k) Contributions made by an employer for IRC 401(k) plans under a cafeteria plan under which the employe unilaterally may elect to have the employer either make the payments as contributions to a 401(k) plan or other plan on behalf of the employe or to the employe directly in cash are not excludable from the employe’s compensation.

(l) Except as provided in § 101.6a (relating to fringe benefits in the form of use of property or services), compensation is taxable regardless of the form of the payment. Examples of taxable forms of payment include:

(1) Cash.

(2) Foreign currency.

(3) A check or other negotiable instrument.

(4) Freely transferable, readily marketable obligations or other cash equivalent.

(5) Tangible property interests, intangible personal property or other rights, claims or things that either:

(i) Can be enforced in courts of equity and transferred and have an ascertainable fair market value.

(ii) Can be reduced to cash or eliminate an expenditure.

(6) A monetary payment in reimbursement of a personal expenditure or to eliminate a personal expenditure.

(7) Below-market rate loans.

(8) A cancellation of indebtedness constituting a quid pro quo or incentive that would be taxable had the amount by which the debt had been forgiven or discharged instead been paid to the debtor in cash or property.

(m) For purposes of this section:

(1) A person who separated from service before satisfying superannuation requirements shall be deemed to be retired from service upon reaching retirement age, regardless of whether he has permanently and wholly withdrawn from active working life or not.

(2) The voluntary discontinuance of a plan within 3 years after it has taken effect, for any reason other than business necessity, will be evidence that the plan was temporary and limited.

The provisions of this § 101.6 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 101.6 adopted February 19, 1972, effective February 20, 1972, 2 Pa.B. 259; amended March 13, 1976, effective March 14, 1976, 6 Pa.B. 454; amended April 8, 1978, effective April 9, 1978, 8 Pa.B. 1055; amended through April 13, 1984, effective April 14, 1984, 14 Pa.B. 1308; amended May 15, 1992, effective May 16, 1992, 22 Pa.B. 2541; amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249; amended August 4, 2000, effective August 5, 2000, 30 Pa.B. 3938; amended January 11, 2002, effective January 12, 2002, 32 Pa.B. 250, 253. Immediately preceding text appears at serial pages (268457) to (268467).

Actual Expenses

Transferred employees reimbursement for expenses incurred in purchasing new residence are compensation and reportable as taxable income. Williamson v. Commonwealth, 525 A.2d 475 (Pa. Cmwlth. 1987).

Court rejected taxpayers request to interpret term ‘‘actual expenses’’ to mean ‘‘any’’ expenses including living expenses; rather, Department’s interpretation of term as limited to business expenses is consistent with legislative intent and previous rulings of Pa. Supreme Court. Williamson v. Commonwealth, 525 A.2d 475 (Pa. Cmwlth. 1987).

Constitutional

Retirement contributions made on behalf of partners is money that the partners would otherwise receive in their share of the net profits of the partnership, and the contributions are made, at least theoretically, at the election of the partners. On the other hand, when an employer makes contributions to an employee’s retirement plan, the contributions are not made by reducing the employee’s salary, and the employee is given no control over whether the contributions are to be made. Furthermore, the employee does not actually or constructively receive the contributions because the receipt of benefits under the retirement plan could be subject to substantial limitations and restrictions. There is, therefore, a legitimate and nonarbitrary reason for distinguishing between partners and employees, thus rendering the Department of Revenue’s regulations constitutional. Smith v. Commonwealth, 684 A.2d 647 (Pa. Cmwlth. 1996).

Contributions

The provisions of subsection (c)(8)(ii) violate the Uniformity Clause of the Pennsylvania Constitution (Article VIII, section 1) insofar as they permit employees who are similar to independent contractors to exclude unreimbursed business expenses from taxable income while denying an exclusion for such expenses to employees who are not similar to independent contractors. Ritz v. Commonwealth, 432 A.2d 169 (Pa. 1981).

Federal Treatment

Just because the Internal Revenue Code and certain Pennsylvania statutes treat rollover contributions differently from other contributions, did not mean that Pennsylvania courts would also treat them differently when interpreting 42 Pa.C.S. § 8124. Thus, debtor’s claimed exemption for an IRA is denied to the extent of $56,134.75, such amount representing the difference between the $71,134.75 debtor contributed to the IRA in 1992 and the $15,000 yearly exemption limitation under Pennsylvania law. In re Barshak, 185 Bankr. 210 (Bankr. E. D. Pa. 1995); reversed 106 F.3d 501 (3rd Cir. 1997).

An employer must withhold personal income tax from contributions to an employee’s savings plan under a salary reduction plan and Federal law is inapplicable. AMP Products Corp. v. Commonwealth, 593 A.2d 1 (Pa. Cmwlth. 1991); affirmed 608 A.2d 25 (Pa. Cmwlth. 1990).

Partnerships

Co-owners of a law firm, organized as a partnership, assume the status of self-employed individuals. Smith v. Commonwealth, 684 A.2d 647 (Pa. Cmwlth. 1996).

Post Termination Income

A post-termination ‘‘Special Incentive Compensation Plan,’’ involving payment of dividend units was compensation and not old-age or retirement payments. Bickford v. Commonwealth, 533 A.2d 822 (Pa. Cmwlth. 1987).

If a distribution to a taxpayer from an employer-sponsored profit sharing trust constitutes payment for services rendered and is a severance rather than a retirement benefit, it is compensation. Gosewisch v. Department of Revenue, 397 A.2d 1288 (Pa. Cmwlth. 1979).

Rollover Contributions

The Legislature’s failure to specifically address the rollover problem does not demonstrate an intent to exclude rolled-over funds from the protection of 42 Pa.C.S.A. § 8124, particularly since such an intent would be in conflict with the Legislature’s other purposes in enacting the statute. In re Barshak, 195 Bankr. 321 (E. D. Pa. 1996).

Self Employed

The provision that states that contributions to an IRA by a self-employed individual for the individual’s own benefit are not ordinary business expenses and cannot be excluded from net profits is reasonable. Kalodner v. Commonwealth, 615 A.2d 900 (Pa. Cmwlth. 1992); adhered to on reconsideration 636 A.2d 1230 (Pa. Cmwlth. 1994); affirmed by 675 A.2d 710 (Pa. 1995).

Union Dues

Union dues should be permitted to be excluded from income if union membership is mandated by the contract between the union and the employer. Ritz v. Commonwealth, 432 A.2d 169 (Pa. Cmwlth. 1981).

This section cited in 61 Pa. Code § 103.11 (relating to compensation).

History

• Authority: The provisions of this § 101.
• Source: The provisions of this § 101.

61 Pa. Code § 101.6a Fringe benefits in the form of use of property or services.

(a) Remuneration for services received in the form of personal or business use of property is not taxable as compensation if the following requirements are met:

(1) The property belongs to, or is held under a lease by, the employer at the time of use.

(2) No title, interest or estate therein is conferred upon, or vested in, another person.

(b) Examples of property that are excludible from tax if the requirements of subsection (a) are met include:

(1) Educational or training facilities.

(2) Housing or clothing.

(3) Day care facilities.

(4) Passenger cars and commuter highway vehicles.

(5) Aircraft or water craft.

(6) Construction or recreation vehicles.

(7) Athletic facilities or equipment.

(8) Recreational facilities or equipment.

(9) Entertainment facilities or equipment.

(10) Parking facilities.

(11) Eating facilities.

(12) Office facilities or equipment.

(13) Tools, equipment or supplies.

(c) Remuneration for services received in the form of personal or business use of services is not taxable as compensation if either:

(1) The service is provided or supplied directly by the employer or a co-employee.

(2) Rights to the service were procured beforehand by the employer.

(d) Examples of services that are excludible from tax if the requirements of subsection (c) are met include:

(1) The operation of an eating facility.

(2) Transportation in a commuter highway vehicle.

(3) Air or rail transportation of passengers or cargo.

(4) Parking.

(5) Education or training.

(6) Legal, medical, accounting or other professional or technical services or assistance, including adoption assistance.

(7) Day care services or assistance.

(8) Dependent care assistance.

(9) A tuition reduction provided to an employee or his dependents or to a teaching and research assistant.

(e) Remuneration for services received in the form of consumption of a consumable, such as food and supplies, is not taxable as compensation.

(f) This section applies even if:

(1) The use or service is offered on a discriminatory basis.

(2) The employer incurs substantial additional cost, including forgone revenue, in providing the use or service.

The provisions of this § 101.6a issued under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7254).

The provisions of this § 101.6a adopted August 4, 2000, effective August 5, 2000, 30 Pa.B. 3938.

This section cited in 61 Pa. Code § 101.1 (relating to definitions); and 61 Pa. Code § 101.6 (relating to compensation).

History

• Authority: The provisions of this § 101.
• Source: The provisions of this § 101.

61 Pa. Code § 101.7 Receipt of income.

(a) General rule. An amount, the privilege of receiving which is taxable, shall be considered as received in the year in which it is actually or constructively received unless includable for a different year in accordance with the method of accounting of the taxpayer. Under an accrual method of accounting, income shall be includable in gross income when all the events have occurred which fix the right to receive the income and the amount thereof may be determined with reasonable accuracy. Therefore, under such a method of accounting if, in the case of compensation for services, no determination may be made as to the right to the compensation or the amount thereof until the services are completed, the amount of compensation is ordinarily income for the taxable year in which the determination can be made. Under the cash receipts and disbursements method of accounting, such an amount shall be includable in gross income when actually or constructively received. Where an amount of income is properly accrued on the basis of a reasonable estimate and the exact amount is subsequently determined, the difference, if any, shall be taken into account for the taxable year in which the determination is made. To the extent that income is attributable to the recovery of bad debts for accounts charged off in prior years, it shall be includable in the year of recovery in accordance with the method of accounting of the taxpayer regardless of the date when the amounts were charged off. If a taxpayer ascertains that an item should have been included in gross income in a prior taxable year, he should file an amended return and pay an additional tax due. Similarly, if a taxpayer ascertains that an item was improperly included in gross income in a prior taxable year, he should, if within the period of limitation, file a claim for credit or refund of an overpayment of tax arising therefrom.

(b) Special rule in case of death. The taxable year of a taxpayer ends on the date of his death. See § 117.3 (relating to deceased individuals). In computing taxable income for the year, there shall be included only amounts properly includable under the method of accounting used by the taxpayer. However, if the taxpayer used an accrual method of accounting, amounts accrued only by reason of his death may not be included in computing taxable income for the year. If the taxpayer uses no regular accounting method, only amounts actually or constructively received during the year shall be included.

(c) Constructive receipt of income. Income although not actually reduced to possession shall be constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time. However, income may not be constructively received if the control by the taxpayer of its receipt is subject to substantial limitations or restrictions. Therefore, if a corporation credits its employees with bonus stock, but the stock is not available to the employees until some future date, the mere crediting on the books of the corporation does not constitute receipt. In the case of interest, dividends or other earnings credited in respect of a deposit or account in a bank, building and loan association, savings and loan association, or similar institution, the following are not substantial limitations or restrictions on the control by the taxpayer over the receipt of the earnings:

(1) A requirement that the deposit or account and the earnings thereon shall be withdrawn in multiples of even amounts.

(2) A requirement that a notice of intention to withdraw shall be given in advance of the withdrawal.

(d) Examples of constructive receipt. Interest coupons which have matured and are payable but which have not been cashed are constructively received in the taxable year during which the coupons mature, unless it is shown that there are no funds available for payment of the interest during the year. Dividends on corporate stock shall be constructively received when unqualifiedly made subject to the demand of the shareholder. However, if a dividend is declared payable on December 31 and the corporation followed its usual practice of paying the dividends by checks mailed so that the shareholders would not receive them until January of the following year, the dividends are not be considered to have been constructively received in December. Generally, the amount of dividends or interest credited on savings bank deposits or to shareholders of organizations such as building and loan associations or cooperative banks is income to the depositors or shareholders for the taxable year when credited. However, if a portion of the dividends or interest is not subject to withdrawal at the time credited, the portion may not be constructively received and does not constitute income to the depositor or shareholder until the taxable year in which the portion first may be withdrawn. Accordingly, if under a bonus or forfeiture plan a portion of the dividends or interest is accumulated and may not be withdrawn until the maturity of the plan, the crediting of the portion to the account of the shareholder or depositor may not constitute constructive receipt. However, in this case the credited portion shall be income to the depositor or shareholder in the year in which the plan matures. Accrued interest on unwithdrawn insurance policy dividends is gross income to the taxpayer for the first taxable year during which the interest may be withdrawn by him.

(e) Present economic benefit. An amount paid as a contribution shall be considered as received if an employee receives rights, such as coverage under a plan that are the following:

(1) Of a value which can in no event fall materially below the amount of the contribution.

(2) Presently belonging to the employee.

(3) Unequivocally provided for the ultimate benefit of the employee under whatever contingency and whatever circumstance the occasion for the benefit should arise.

(f) Wage and salary deductions; taxability.

(1) Except as provided in paragraph (2), any amount lawfully deducted and withheld by an employer from the remuneration of an employee and accounted for as a part of the employee’s total remuneration shall be considered to have been paid to the employee as compensation at the time the deduction is made.

(2) An amount will not be considered to have been paid to the employee because the amount is specified in a written cafeteria plan document as being available to the participant for the purpose of selecting or purchasing benefits under a plan or as additional cash remuneration received in lieu of coverage under a plan. Whether an amount is specified in a cafeteria plan document as being available to a participant shall be determined using Federal rules.

Example.

Employer M is a manufacturing company situated in this Commonwealth and under its collective bargaining agreement with a union, all nonmanagement personnel must contribute $15 per week from their gross salary toward the purchase of Blue Cross/Blue Shield coverage and $3 per week toward the purchase of group life insurance.

The plan is not a Federally qualifying cafeteria plan.

Conclusion: M shall withhold Pennsylvania Personal Income Tax from the $18 contributed by each nonmanagement employee toward benefits.

The provisions of this § 101.7 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7254).

The provisions of this § 101.7 amended August 4, 2000, effective August 5, 2000, 30 Pa.B. 3938. Immediately preceding text appears at serial pages (261967) to (261969) and (205345).

If a cash basis taxpayer actually receives a lump sum distribution from a profit sharing trust, the entire amount is taxable unless the taxpayer can demonstrate that a portion of the distribution was constructively received prior to June 1, 1971. Gosewisch v. Department of Revenue, 397 A.2d 1288 (Pa. Cmwlth. 1979).

If a taxpayer does not have a legal right to money in an employer-sponsored profit sharing trust until termination of employment, disability or death, payments to the trust are not considered to be constructively received by the taxpayer. Gosewisch v. Department of Revenue, 397 A.2d 1288 (Pa. Cmwlth. 1979).

History

• Authority: The provisions of this § 101.
• Source: The provisions of this § 101.

61 Pa. Code § 101.8 Income from sources within this Commonwealth.

(a) For a nonresident individual, estate or trust income from sources within this Commonwealth includes all income enumerated and classified under Chapter 103, Subchapter B (relating to determination of tax) to the extent it is earned, received or acquired from sources within this Commonwealth as follows:

(1) By reason of ownership or disposition of an interest in real or tangible personal property in this Commonwealth.

(2) In connection with a trade, profession or occupation carried on in this Commonwealth or for the rendition of personal services performed in this Commonwealth.

(3) As a distributive share of the income of an unincorporated business, profession, enterprise, undertaking or other activity as the result of work done, services rendered or other business activities conducted in this Commonwealth, except as allocated to another state under regulations promulgated by the Department.

(4) From intangible personal property employed in a trade, profession, occupation or business carried on in this Commonwealth.

(b) Income from intangible personal property such as interest or dividends even though paid by a Commonwealth bank or corporation may not be income from sources within this Commonwealth, except as provided in subsection (a)(4).

(c) Income derived from ownership of an interest in real or tangible personal property includes rental income from real or tangible personal property in this Commonwealth or an interest therein. Rental income does not include income attributable to the ownership of an interest in real or tangible personal property located outside of this Commonwealth, even though rental payments in respect of the property may be made from or received at a point within this Commonwealth.

(d) A trade, profession or occupation shall be carried on in this Commonwealth by a nonresident when he or a partnership or association of which he is a member occupies, has, maintains or operates an office, shop, store, warehouse, factory, agency or other place where his or its affairs are systematically and regularly carried on. This definition is not exclusive. A business shall be carried on within this Commonwealth if activities within this Commonwealth in connection with the business are conducted in this Commonwealth with a fair measure of permanency and continuity.

(e) Personal services by a nonresident shall be deemed to have been performed within this Commonwealth if, and to the extent that, his services were rendered within this Commonwealth. Compensation for personal services rendered by a nonresident individual wholly without this Commonwealth is not taxable regardless of the fact that payment may be made from a point within this Commonwealth or that the employer is a resident individual, partnership or corporation. If the personal services are performed within and without this Commonwealth, the portion of the compensation attributable to the services performed within this Commonwealth shall be determined in accordance with § 109.3 (relating to business carried on wholly within this Commonwealth). If personal services are performed within this Commonwealth, whether or not as an employee, the compensation for the services constitutes income from Commonwealth sources regardless of the following:

(1) That the compensation is received in a taxable year after the year in which the services were performed.

(2) That the compensation is received by someone other than the person who performed the services.

This section cited in 61 Pa. Code § 109.1 (relating to taxable income of nonresident individuals); 61 Pa. Code § 109.3 (relating to business carried on wholly within this Commonwealth); and 61 Pa. Code § 109.4 (relating to business carried on partly within and partly without this Commonwealth).

History

• Authority: The provisions of this § 101.
• Source: The provisions of this § 101.

61 Pa. Code § 101.9 Trusts.

(a) Charitable trust. A charitable trust shall be exempt from the personal income tax. This exemption has been granted because the trusts serve a public rather than a private interest. Accordingly, no trust may be deemed to be a charitable trust unless it is operated exclusively during the taxable year in question for religious, charitable, scientific, literary or educational purposes and serves a public interest as compared with a private interest. Additional requirements are as follows:

(1) A trust created by the will of an individual who at the time of his death was a resident individual, one created by a person who at the time of the creation was a resident, or one consisting in whole or in part of property transferred to it by a person who at the time of the transfer was a resident and which is a charitable trust may not be within the term resident trust as used in this article.

(2) A trust shall be regarded as operated exclusively for one or more exempt purposes only if it engages primarily in activities which accomplish one or more of the exempt purposes set forth in subsection (a)(1).

(3) A trust is not regarded as charitable if more than an insubstantial part of its activities is not in furtherance of an exempt purpose. A trust is not deemed to be operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private shareholders or individuals. For example, a trust is created by a resident individual and under its governing instrument income is payable to the spouse of the individual for life. Upon the death of the spouse all income of the trust is payable, at the discretion of the trustees, to charitable organizations. The trust may not be a charitable trust for a year in which the income of the trust is payable to the spouse of the individual.

(b) Influencing of legislation as purpose of trust. A trust is not deemed to be operated exclusively for one or more of the exempt purposes if a substantial part of its activities is attempting to influence legislation by propaganda or otherwise. An organization shall be regarded as attempting to influence legislation if the organization does any of the following:

(1) Contacts, or urges the public to contact, members of a legislative body for the purpose of proposing, supporting or opposing legislation.

(2) Advocates the adopting or rejection of legislation. The term legislation includes action by Congress, a State legislature, a local council or similar governing body, or the public in a referendum, initiative, constitutional amendment or similar procedure. An organization may not fail to meet the test as a charitable trust merely because it advocates, as an insubstantial part of its activities, the adoption or rejection of legislation. An organization is not deemed to be operated exclusively for one or more of the exempt purposes if it participates or intervenes directly or indirectly in a political campaign on behalf of or in opposition to a candidate for public office. Activities which constitute participation or intervention in a political campaign on behalf of or in opposition to the candidate shall include, but are not limited to, the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to a candidate.

(c) Special rule. With respect to a trust consisting in whole or in part of property transferred to it by a person who at the time of the transfer was a resident, the tax imposed by § 103.1 (relating to tax imposed on residents) applies only to the income realized from the property transferred to the trust by the resident person, from dealings with respect to the property, and to an income realized from the reinvestment of the proceeds realized from a sale or exchange of the property.

History

• Authority: The provisions of this § 101.
• Source: The provisions of this § 101.

Chapter 105 Estates and Trusts

61 Pa. Code § 105.1 Scope.

This chapter deals with the taxation of estates and trusts and their beneficiaries. This chapter does not apply to any trust which, under the governing instrument and applicable State law, is revocable by the settlor. In such case, the settlor shall be deemed to be the recipient of the income or gains of the trust. The term trust, as used in this chapter, does not apply to any business trust including any trust treated as a real estate investment trust for Federal income tax purposes.

History

• Source: The provisions of this § 105.

61 Pa. Code § 105.2 Taxability of estates, trusts, and their beneficiaries.

The income of a beneficiary of an estate or trust in respect of the estate or trust shall consist of that part of the income or gains received by the estate or trust for its taxable year ending within or with the beneficiary’s taxable year which, under the governing instrument and applicable State law, is required to be distributed currently or is in fact paid or credited to the beneficiary. The income or gains of the estate or trust, if any, taxable to the estate or trust shall consist of the income or gains received by it which has not been distributed or credited to its beneficiaries.

History

• Source: The provisions of this § 105.

61 Pa. Code § 105.3 Application of tax.

The tax imposed by Chapter 103, Subchapter A (relating to persons subject to tax) is to be paid by the beneficiary of an estate or trust if the income upon which the tax is based is received by the estate or trust and, under the governing instrument and applicable State law, is required to be distributed to the beneficiary currently or is in fact paid or credited to him. The tax imposed by Chapter 103, Subchapter A is to be paid by the estate or trusts only if the income upon which the tax is based is not required to be distributed to the beneficiary currently and is not in fact paid or credited to him.

History

• Source: The provisions of this § 105.

61 Pa. Code § 105.4 Income of estates, trusts and their beneficiaries.

(a) Income of estates and trusts. The income of a resident estate or trust shall consist of the following:

(1) The classes of income enumerated in Chapter 103, Subchapter B (relating to determination of tax) received by the estate or trust directly.

(2) The class of income enumerated in § 103.18 (relating to net gains or income derived through estates or trusts) that is, the classes of income enumerated in Chapter 103, Subchapter B received or derived from any other estate or trust.

(3) Other income not enumerated in Chapter 103, Subchapter B.

(b) Resident and nonresident trust. The income of a resident estate or trust taxable to the estate or trust shall consist of that portion of the classes of income described in a subsection (a)(1) and (2) received by the estate or trust for its taxable year and which has not been distributed, paid or credited to its beneficiaries. The income of a nonresident estate or trust taxable to the estate or trust shall consist of that portion of the classes of income described in a subsection (a)(1) and (2) received by the estate or trust from sources within this Commonwealth for its taxable year and which has not been distributed, paid or credited to its beneficiaries.

(c) Income of beneficiaries of estates and trusts. The income of beneficiaries of estates and trusts shall consist of the following:

(1) The income of a resident beneficiary of a resident or nonresident estate or trust shall consist of that portion of the classes of income of the estate or trust received by the estate or trust for its taxable year ending within or with the beneficiary’s taxable year and which, under the governing instrument and applicable State law, is required to be distributed currently to the beneficiary or is in fact paid or credited to the beneficiary.

(2) The income of a nonresident beneficiary of a resident estate or trust shall consist of that portion of the classes of income of an estate or trust received by the estate or trust from sources within this Commonwealth for its taxable year ending within or with the beneficiary’s taxable year and which, under the governing instrument and applicable state law, is required to be distributed currently to the beneficiary or is in fact paid or credited to him.

(3) An amount properly paid or credited to the beneficiary within the first 65 days of any taxable year of an estate or trust shall be considered paid or credited to the beneficiary on the last day of the preceding taxable year if the fiduciary of the trust or estate elects under this article to so treat such payments. The election under this article shall be made in a statement attached to the return for the first taxable year of the trust and any election so made shall be irrevocable for the taxable year and for all future taxable years.

(4) The income of a beneficiary derived from a resident estate or trust shall retain the same character in the hands of the beneficiary as in the hands of the estate or trust.

(5) If income or gains specified in this section are paid, credited, or required to be distributed by an estate or trust for a taxable year which does not end with or within the last taxable year of a beneficiary, because of the beneficiary’s death, the amount taxable to the beneficiary shall consist of that part of the income or gains received by the estate or trust for its taxable year in which the beneficiary’s last taxable year ends which were in fact paid or credited to such beneficiary. Income required to be distributed, but in fact distributed to his estate shall be included as income of the estate.

(d) Allocation of income between estates and trusts and their beneficiaries. Except as otherwise provided in subsection (c), for purposes of this subsection, all income distributed, paid, or credited to a beneficiary after June 1, 1971 or after the beginning of any subsequent taxable year shall be deemed to be a distribution of income received by the estate or trust for its taxable year beginning June 1, 1971, or thereafter to the extent thereof and shall represent a pro rata portion of all classes of income received by the estate or trust for such taxable year. An estate or trust shall be deemed to have retained its pro rata portion of all classes of income if the amount paid, credited, or required to be distributed to its beneficiaries is less than all of its income for its taxable year unless the estate, trust or its beneficiary establishes that a particular class of income was not distributable to the beneficiaries, and in fact was not distributed, paid or credited to them. In such a case, all of the income shall be deemed to have been retained by the estate or trust. The estate or trust shall be deemed to have retained its pro rata portion of all other classes of income if the total amount paid, credited, or required to be distributed to its beneficiaries is less than the total of all the income for its taxable year.

The provisions of this § 105.4 amended February 25, 1977, 7 Pa.B. 529.

This section cited in 61 Pa. Code § 103.18 (relating to net gains or income derived through estates or trusts).

History

• Source: The provisions of this § 105.

61 Pa. Code § 105.5 Special rules.

(a) Gifts, bequests and the like. A gift or bequest of a specific sum of money or of specific property, which is required to be paid or distributed to a beneficiary by the specific terms of the will or trust instrument and is properly paid or credited to the beneficiary, shall not be deemed to be a distribution of income by the estate or trust to the beneficiary.

(b) Amounts accumulated for charitable purposes. In the case of an estate or trust, any amount of income required by the terms of the governing instrument to be accumulated and added to the principal for ultimate distribution to, or to be held in trust for the use of, any religious, charitable, scientific, literary, or educational organization shall be deemed to have been paid, credited, or required to be distributed to a charitable trust.

(c) Accumulated income distributed by a nonresident estate or trust to a resident beneficiary. Amounts received by a resident beneficiary from a nonresident estate or trust shall be taxable to the beneficiary in the year received to the extent that such income was not subject to tax under this article. The resident beneficiary shall be allowed a credit against the tax otherwise due under this article for his pro rata share of any income tax, wage tax or tax on or measured by gross or net earned or unearned income imposed on the estate or trust with respect to such income by another state. The credit shall not exceed the proportion of the tax otherwise due. Reference should be made to § 111.4 (relating to limitation on credit).

History

• Source: The provisions of this § 105.

61 Pa. Code § 105.6 Illustration of the provisions of this chapter.

The provisions of this chapter are illustrated in general by the following examples:

(1) Example I. A resident trust shall be required under its governing instrument and applicable state law to distribute all of its income to the income beneficiary. Under the governing instrument and applicable state law, the term income shall not include net gains or net income from the sale or exchange of items of corpus. The fiscal year of the trust ends on September 30 and for the period June 1, 1971, to September 30, 1971, the trust has income as follows:

The trust paid the beneficiary $16,000 on July 15, 1971, and $16,000 on October 15, 1971. The trust has elected to treat distribution made within 65 days after the close of its taxable year as having been made at the last day of the preceding year. The trust shall be deemed to have retained the net gains and shall be subject to tax under § 103.1 (relating to tax imposed on residents) on $4,000. The beneficiary shall be deemed to have received the $4,000 of net rental income, the $8,000 of dividend income, and the $8,000 of interest income and shall be subject to tax under § 103.1 on $20,000. The additional $12,000 actually received by the beneficiary shall be deemed to have been paid from pre June 1, 1971 income and, under this chapter, shall not be subject to tax thereon.

(2) Example II. Assume the same facts as in Example I of this section and that the income is to be distributed in equal shares to A, a resident of this Commonwealth and to B, a nonresident of this Commonwealth. Assume further that the July 15 and October 15 payments were in equal shares to A and B. As in Example I of this section, the trust shall be subject to tax under § 103.1 on the $4,000 of net gains. A shall be subject to tax under § 103.1 on his share of the net rental income, the dividend income, and the interest income. B shall be subject to tax under § 103.2 only on his share of the net rental income, provided that the property involved is situated in Pennsylvania.

(3) Example III. Assume the same facts as in Example II of this section and that half of the interest income was derived from obligations which are free from tax under an act of the General Assembly of this Commonwealth. As in Examples I and II of this section, the trust shall be subject to tax under § 103.1 on the $4,000 of net gains. A and B shall be deemed to have received their pro rata share of each class of income distributable to them. Thus, A shall be subject to tax under § 103.1 on his share of the rental income, the dividend income, and half of the interest income and B shall be subject to tax under § 103.2 only on his share of the net rental income.

(4) Example IV. A resident trust shall be required under its governing instrument and applicable state law to distribute the first $10,000 of income to A, a resident of this Commonwealth. The trustees are given discretionary powers with respect to distributions of the balance of the income. Under the governing instrument and applicable state law, the term income shall not include net gains or net income from the sale or exchange of items of corpus. During the taxable year the trust realizes net gains from the sale of property of $10,000, receives dividends of $10,000, receives interest income of $10,000, of which $5,000 is from Commonwealth obligations free from any tax and distributes $15,000 to A. The trust shall be deemed to have retained the $10,000 of net gains and its pro rata share of each of the other classes of income, namely 25% of the dividend income, taxable interest, and nontaxable interest. A shall be deemed to have received only his pro rata share of each of the classes of income required to be distributed to him, or in fact paid or credited to him, namely 75% of the dividend income, taxable interest, and nontaxable interest.

(5) Example V. Assume the same facts as in Example IV of this section and that during the following taxable year the trust realizes the same income in the same amounts and distributes $25,000 to A. As in Example IV, the trust shall be deemed to have retained the $10,000 of net gains. Inasmuch as the trust has distributed more than the amount of all other classes of income received by the trust for the taxable year, the trust shall not be deemed to have retained any of the other classes of income. A shall be deemed to have received all of the other classes of income received by the trust during its taxable year and shall be subject to tax under § 103.1 on the $10,000 of dividend income and $5,000 of taxable interest income. Neither the $5,000 of nontaxable interest income nor the $5,000 paid from previously accumulated and previously taxed income shall be taxable to A.

(6) Example VI. A nonresident trust shall be given discretionary powers with respect to distributions of income. During its taxable years ended December 31, 1971, 1972, and 1973, the trust realized income as follows:

The rental income was from property located in this Commonwealth and the net gain realized in the taxable year ended December 31, 1973, was from the sale of the rental property. No distributions were made to the beneficiary until March, 1974, when the trust distributed all of its assets to A, a resident of this Commonwealth. The trust shall be taxable on the $7,000 of rental income realized in the taxable years ended December 31, 1971, on the $12,000 of actual income realized in 1972 and 1973, and on the net gain from the sale of the rental property in the taxable year ended December 31, 1973. The trust shall not be subject to tax under this chapter on the dividend and interest income realized by the trust. The resident beneficiary shall be subject to tax in 1974 on the dividend and interest income accumulated by the trust and distributed to him in that year.

History

• Source: The provisions of this § 105.

Chapter 107 Partnerships and Associations

61 Pa. Code § 107.1 General taxability of partners and members.

A partner or member of an association shall report his share of the net income of a partnership or association for its taxable year ending within or with the taxable year of the partner or member. The share of a partner of the net income of a partnership shall include his share of any guaranteed payments received from the partnership. The share of a partner of income shall be reported as net profits from the operation of a business, profession or other activity, net gains or income from disposition of property, net gains or income derived from or in the form of rents, royalties, patents and copyrights, dividends, interest, gambling or lottery winnings, or net gains or income derived through estates and trusts, depending upon which class it shall fall within.

61 Pa. Code § 107.2 Taxability of resident and nonresident partners and members.

(a) The share of a partner or member of the net income of a partnership or association shall be his share of the net income whether or not distributed.

(b) A partner or member who is a resident of this Commonwealth shall report his entire share of the net income from the partnership or association regardless of where the income was earned.

(c) A partner or member who is a nonresident of this Commonwealth shall report only income of the partnership or association from sources within this Commonwealth.

61 Pa. Code § 107.3 Determination of income.

Net income of a partnership or association shall be determined and reported on the basis of accepted accounting principles and practices after provision for all costs and expenses incurred in the conduct thereof. Deductions may not be allowed for expenses not related to the production of income, nor may taxes based on income be allowed as a deduction.

Constitutional

Retirement contributions made on behalf of partners is money that the partners would otherwise receive in their share of the net profits of the partnership, and the contributions are made, at least theoretically, at the election of the partners. On the other hand, when an employer makes contributions to an employe’s retirement plan, the contributions are not made by reducing the employe’s salary, and the employe is given no control over whether the contributions are to be made. Furthermore, the employe does not actually or constructively receive the contributions because the receipt of benefits under the retirement plan could be subject to substantial limitations and restrictions. There is, therefore, a legitimate and nonarbitrary reason for distinguishing between partners and employes, thus rendering the Department of Revenue’s regulations constitutional. Smith v. Commonwealth, 684 A.2d 647 (Pa. Cmwlth. 1996).

Partnerships

Because partners acquire the status of self-employed individuals, any contributions to a retirement plan are not expenses related to the production of income, and therefore, may not be deducted from the partnership’s net profits. Smith v. Commonwealth, 684 A.2d 647 (Pa. Cmwlth. 1996).

61 Pa. Code § 107.4 Formation of a partnership or association.

The transfer of property or anything else of value to a partnership or association in exchange for an interest therein may give rise to income or gain subject to tax under § 103.13 (relating to net gains or income from disposition of property).

61 Pa. Code § 107.5 Liquidation of a partnership or association.

The transfer of cash or property to a partner or member of a partnership or association in liquidation of his interest therein shall give rise to gain or loss to the extent of the difference between the cash and fair market value of other property received and the base of the partner or member for his partnership or association interest immediately before the distribution.

61 Pa. Code § 107.6 Tax returns.

Partnerships and associations deriving income from sources within or occupying an office within this Commonwealth shall file a tax information return annually. Reference should be made to § 117.17 (relating to partnership returns).

Chapter 108 Distributions

61 Pa. Code § 108.1 Distributions by corporations.

(a) That portion of a distribution paid or credited out of earnings and profits by a corporation to a taxpayer in his capacity as a stockholder shall be taxed as a dividend. The remaining portion shall be applied against, and reduce, the adjusted basis of the taxpayer’s stock and, to the extent that it exceeds the adjusted basis of the stock, shall be taxed as a net gain from the disposition of intangible personal property.

(b) The amount of a distribution shall be the amount of money, and the fair market value of property determined as of the date of the distribution, received, reduced, but not below zero, by the amount of any liability of the corporation assumed by the stockholder in connection with the distribution and the amount of any liability to which the property received by the stockholder is subject immediately before, and immediately after, the distribution.

(c) The portion of a distribution that is paid or credited out of earnings and profits shall be determined in accordance with the following:

(1) Every distribution shall be deemed to be made out of earnings and profits to the extent thereof and from the most recently accumulated earnings and profits.

(2) If the current taxable year’s earnings and profits equal or exceed the amount of distributions made on stock during the year, each distribution is wholly a dividend paid out of current earnings and profits.

(3) If the amount of distributions made on stock during the current taxable year exceeds the year’s earnings and profits, the following apply:

(i) The year’s earnings and profits shall be allocated proportionately to each distribution.

(ii) The remaining portion of each distribution is a dividend only to the extent of accumulated earnings and profits at the time the distribution is made.

(4) Income or gain that is taxable under, as well as income or gain that is exempt from, or not taxable under, this article shall be included in computing earnings and profits.

History

• Authority: The provisions of this Chapter 108 issued under section 354 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 108 adopted March 1, 1996, effective March 2, 1996, 26 Pa.

61 Pa. Code § 108.2 Distributions by business trusts.

A distribution paid or credited to a taxpayer in its capacity as an interest holder by a business trust is treated in the same manner as a distribution by a corporation to its stockholders.

History

• Authority: The provisions of this Chapter 108 issued under section 354 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 108 adopted March 1, 1996, effective March 2, 1996, 26 Pa.

61 Pa. Code § 108.3 Distributions by investment companies.

(a) Investment company. For purposes of this section, the term ‘‘investment company’’ includes the following:

(1) A regulated investment company, as defined in 26 U.S.C.A. § 851 (relating to the definition of regulated investment company).

(2) An incorporated or unincorporated enterprise registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C.A. § § 80a-1—80b-21).

(3) An investment company which has no or only limited powers under its governing instruments to vary its investments.

(b) Dividends and other distributions. Except as provided in subsection (c), distributions paid or credited to their shareholders with respect to their shares by investment companies are taxed in the same manner as distributions by corporations to their stockholders.

(c) Pennsylvania exempt-interest dividends. If, for any taxable year beginning on or after January 1, 1993, the total amount of the distributions that, but for this subsection, would otherwise constitute taxable dividends exceeds the accumulated income account of the investment company, the excess shall constitute excludible Pennsylvania exempt-interest dividends and shall be allocated proportionately to each distribution.

(d) Accumulated income account. Each investment company shall establish and maintain an accumulated income account and shall cumulatively adjust the account at the close of each taxable year beginning on or after January 1, 1993, as follows:

(1) By increasing the account for the sum of the following:

(i) The amount of the investment company’s current earnings and profits determined without taking into account the following:

(A) The investment company’s capital gain net income, as defined in 26 U.S.C.A. § 1222(9) (relating to other terms relating to capital gains and losses), if any.

(B) Items of interest derived by the investment company from an obligation that is statutorily free from taxation by the Commonwealth.

(C) Items of Pennsylvania exempt-interest dividend paid or credited to the investment company as a shareholder by another investment company.

(D) A distributive share of an item described in clause (B) or (C).

(E) That proportion of an amount otherwise allowable as a deduction in computing the earnings and profits which the total of the items described in clauses (B)—(D) bears to the sum of the total and other gross income of the investment company—exclusive of its capital gain net income.

(ii) The amount of the investment company’s capital gain net income.

(iii) The aggregate amount, if any, of Pennsylvania exempt-interest dividend distributions paid or credited to shareholders for the immediately preceding taxable year.

(2) By reducing, but not below zero, the account for the aggregate amount, if any, of distributions paid or credited out of earnings and profits for the immediately preceding taxable year.

(e) Special rule.

(1) For purposes of subsection (d), the amount of an investment company’s accumulated income account as of the beginning of its 1993 taxable year, the aggregate amount of Pennsylvania exempt-interest dividend distributions paid or credited to shareholders for the 1992 taxable year, and the aggregate amount of distributions paid or credited out of earnings and profits for the 1992 taxable year shall be deemed to be zero, if, at the close of its 1992 taxable year, one of the following applies:

(i) The investment company was unincorporated and had no power under its governing instruments to vary its investments except to eliminate unsafe investments and investments not consistent with the preservation of the capital or tax status of the investments of the fund, honor redemption orders, meet anticipated redemption requirements, negate gains from discount purchases, maintain a constant net asset value per unit under, and in compliance with, an order or rule of the United States Securities and Exchange Commission, or defray normal administrative expenses.

(ii) The investment company was a partnership.

(iii) The investment company had no undistributed earnings and profits.

(2) Otherwise, the amount of an investment company’s accumulated income account as of the beginning of its 1993 taxable year shall be the amount that would have been standing to the account at the close of the investment company’s 1992 taxable year had the investment company always maintained such an account in accordance with this section.

History

• Authority: The provisions of this Chapter 108 issued under section 354 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 108 adopted March 1, 1996, effective March 2, 1996, 26 Pa.

Chapter 109 Nonresident Individuals

61 Pa. Code § 109.1 Taxable income of nonresident individuals.

The income of a nonresident individual subject to taxation shall be that part of his income from sources within this Commonwealth. In determining what is income from sources within this Commonwealth reference should be made to § 101.8 (relating to income from sources within this Commonwealth).

History

• Authority: The provisions of this § 109.
• Source: The provisions of this § 109.

61 Pa. Code § 109.2 Husband and wife.

(a) Both nonresidents subject to tax. If separate returns are filed by a husband and wife both of whom are nonresidents and subject to tax, then their income from sources within this Commonwealth shall also be separately determined.

(b) Both nonresidents but only one subject to tax. If only one nonresident spouse is subject to tax, then only the income of that spouse from sources in this Commonwealth shall be subject to tax.

(c) One spouse is a nonresident. The following requirements apply:

(1) Separate returns. If either husband or wife is a nonresident and the other a resident, they shall determine their tax based on their own separate incomes and their tax liabilities shall be separate. Reference should be made to § 117.1 (relating to general requirements of a return).

(2) Joint returns. If both spouses elect to file a joint income tax return, then their income shall be determined as if they were residents and their tax liability shall be joint and several.

History

• Authority: The provisions of this § 109.
• Source: The provisions of this § 109.

61 Pa. Code § 109.3 Business carried on wholly within this Commonwealth.

A business, trade, profession or occupation, as distinguished from personal services as an employe or casual employe, is carried on by a nonresident wholly within this Commonwealth, if the activities described in § 101.8 (relating to income from sources within this Commonwealth) are carried on solely within this Commonwealth and none of the activities are carried on outside of this Commonwealth though the nonresident or his representative travels outside of this Commonwealth for purpose of buying, selling, financing or performing duties in connection with the business, and even though sales may be made to, or services performed for, or on behalf of, persons or corporations located outside of this Commonwealth. If a nonresident individual carries on a business, trade, profession or occupation wholly within this Commonwealth, all his items of income, gain, loss and deduction attributable to the business shall be deemed from sources within this Commonwealth.

The provisions of this § 109.3 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 109.3 amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249. Immediately preceding text appears at serial pages (205371) to (205372).

This section cited in 61 Pa. Code § 101.8 (relating to income tax sources within this Commonwealth).

History

• Authority: The provisions of this § 109.
• Source: The provisions of this § 109.

61 Pa. Code § 109.4 Business carried on partly within and partly without this Commonwealth.

A business, trade, profession or occupation, as distinguished from personal services as an employe or casual employe, is carried on partly within and partly without this Commonwealth if one or more of the activities described in § 101.8 (relating to income from sources within this Commonwealth), is systematically and regularly carried on within this Commonwealth and one or more of the activities is systematically and regularly carried on outside of this Commonwealth or if one or more of the activities is systematically and regularly carried on both within and without this Commonwealth.

The provisions of this § 109.4 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 109.4 amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249. Immediately preceding text appears at serial page (205372).

History

• Authority: The provisions of this § 109.
• Source: The provisions of this § 109.

61 Pa. Code § 109.5 Apportionment and allocation of income from a business carried on partly within and partly without this Commonwealth.

(a) If a nonresident individual, or a partnership of which a nonresident individual is a member, carries on a business, trade, profession, or occupation both within and without this Commonwealth, the items of income, gain, loss and deduction attributable to such business, trade, profession, or occupation shall be apportioned and allocated to this Commonwealth on a fair and equitable basis in accordance with approved methods of accounting.

(b) If the books of the business are kept so as to disclose to the satisfaction of the Department the proportion of the net amount of the items of income, gain, loss and deduction derived from or connected with Commonwealth sources, the return of the taxpayer shall disclose the total amount of such items, the net amount of such items allocated to the Commonwealth, and the basis upon which such allocation is made.

(c) If the books and records of the business do not disclose to the satisfaction of the Department the proportion of the net amount of the items of income, gain, loss and deduction attributable to the activities of the business carried on in this Commonwealth, the proportion shall, except as provided in § 109.6 (relating to rentals and gains from sale or exchange of real property), be determined by multiplying the net amount of the items of income, gain, loss and deduction of the business by the average of the following percentages:

(1) Property percentage. The property percentage shall be computed as follows:

(i) General. The percentage shall be computed by dividing the average of values, at the beginning and end of the taxable year, of real and tangible personal property connected with the business and located within this Commonwealth, by the average of the values, at the beginning and end of the taxable year, of all real and tangible personal property connected with the business and located both within and without this Commonwealth. For this purpose, real property shall include real property rented to the taxpayer and used in the business. Real property, the income or gain from which is allocated pursuant to § 109.6, shall be disregarded in computing the property percentage described in this subparagraph. Property owned by taxpayer shall be valued at original cost. The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the Department may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the property of the taxpayer.

(ii) Rented real property. The rented real property percentage shall be determined as follows:

(A) The fair market value of real property, both within and without this Commonwealth, which is rented to the taxpayer shall be determined by multiplying the gross rents payable during the taxable year by eight.

(B) Gross rents as used in this clause shall be the actual sum of money or other consideration payable directly or indirectly by the taxpayer or for its benefit for the use or possession of the property and includes the following:

(I) Any amount payable for the use or possession of real property, or any part thereof, whether designated as a fixed sum of money or as a percentage of sales, profits or otherwise.

(II) Any amount payable as additional rent or in lieu of rent such as interest, taxes, insurance, repairs or any other amount required to be paid by the terms of a lease or other arrangement.

(III) A proportionate part of the cost of any improvement to real property made by or on behalf of the taxpayer which reverts to the owner or lessor upon termination of a lease or other arrangement, based on the unexpired term of the lease commencing with the date the improvement is completed (or the life of the improvement if its life expectancy is less than the unexpired term of the lease). But if a building is erected on leased land by or on behalf of the taxpayer, the value of the land shall be determined by multiplying the gross rent by eight, and the value of the building shall be determined in the same manner as if owned by the taxpayer. The proportionate part of the cost of an improvement (other than a building on leased land) is generally equal to the amount of amortization allowed in computing Pennsylvania net income, whether the lease does or does not contain an option of renewal.

(C) Gross rents shall not include the following:

(I) Any portion of a payment or credit to the proprietor of the business or to a partner in the partnership conducting the business for the use of real property.

(II) Amounts payable as separate charges for water and electric service furnished by the lessor.

(III) Amounts payable for storage if no designated space under the control of the taxpayer as a tenant is rented for storage purposes.

(IV) That portion of any rental payment which, in the discretion of the Department, is applicable to property subleased by the taxpayer and not used by him or it in the carrying on of the business.

(2) Payroll percentage. The payroll percentage shall be determined as follows:

(i) The percentage computed by dividing the total wages, salaries and other personal service compensation paid or incurred during the taxable year to employes or casual employes in connection with the business carried on within this Commonwealth, by the total of all wages, salaries and other personal service compensation paid or incurred during the taxable year to employes or casual employes in connection with the business carried on both within and without this Commonwealth.

(ii) Compensation shall be paid in connection with business carried on in this Commonwealth if one of the following occurs:

(A) The service of the individual is performed entirely within this Commonwealth.

(B) The service of the individual is performed both within and without this Commonwealth, but the service performed without this Commonwealth is incidental to the service of the individual within this Commonwealth.

(C) Some of the service is performed in this Commonwealth and the base of operations or if there is no base of operations, the place from which the service is directed or controlled is in this Commonwealth, or the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the residence of the individual is in this Commonwealth.

(3) Sales percentage. The sales percentage shall be determined as follows:

(i) The sales factor is a fraction, the numerator of which shall be the total sales of the taxpayer in this Commonwealth during the tax period, and the denominator of which shall be the total sales of the taxpayer everywhere during the tax period.

(ii) Sales of tangible personal property shall be in this Commonwealth if the property is delivered or shipped from outside this Commonwealth into this Commonwealth to a purchaser, other than the United States Government, regardless of the f.o.b. point or other conditions of the sale; or the property is shipped from this Commonwealth to any place and the purchaser is the United States Government, or the property is shipped from the Commonwealth to another state, and the taxpayer is not taxable in the state of the purchaser.

(iii) For purposes of apportioning business income, a person shall be taxable in another state if in that state he is subject to a net income tax, a franchise tax measured by net income, or a franchise tax for the privilege of doing business. Also, a person shall be taxable in another state if that state has jurisdiction to subject him to a net income tax regardless of whether, in fact, the state does not impose such tax.

(iv) Sales, other than sales of tangible personal property, shall be in this Commonwealth if one of the following occur:

(A) The income producing activity is performed in this Commonwealth.

(B) The income producing activity is performed both in and outside this Commonwealth and a greater proportion of the income producing activity is performed in this Commonwealth than in any other state, based on costs of performance.

The provisions of this § 109.5 amended under sections 354, 408 and 603 of the Tax Reform Code of 1971 (72 P. S. § § 7354, 7408 and 7603).

The provisions of this § 109.5 amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249. Immediately preceding text appears at serial pages (205372) to (205375).

This section cited in 61 Pa. Code § 109.6 (relating to rentals and gains from the sale or exchange of real property).

History

• Authority: The provisions of this § 109.
• Source: The provisions of this § 109.

61 Pa. Code § 109.6 Rentals and gains from the sale or exchange of real property.

Income from and deductions connected with the rental of real property, and gain and loss from the sale, exchange, or other disposition of real property shall not be subject to allocation under § 109.5 (relating to apportionment and allocation of income from a business carried on partly within and partly without this Commonwealth), but considered as entirely derived from or connected with the state in which such real property is located.

This section cited in 61 Pa. Code § 109.5 (relating to apportionment and allocation of income from a business, carried on partly within and partly without this Commonwealth).

History

• Authority: The provisions of this § 109.
• Source: The provisions of this § 109.

61 Pa. Code § 109.7 Earnings of salesmen.

If the commission for sales made or other compensation for services performed by a nonresident traveling salesman, agent or other employe or casual employe depends directly upon the volume of business transacted by him, his items of income derived from or connected with Commonwealth sources include that proportion of the amount of the items attributable to the business which the volume of business transacted by him within this Commonwealth bears to the total volume of business transacted by him within and without this Commonwealth.

The provisions of this § 109.7 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 109.7 amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249. Immediately preceding text appears at serial pages (205375) to (205376).

This section cited in 61 Pa. Code § 109.8 (relating to earnings of nonresident employes or casual employes and officers).

History

• Authority: The provisions of this § 109.
• Source: The provisions of this § 109.

61 Pa. Code § 109.8 Earnings of nonresident employes or casual employes and officers.

If a nonresident employe or casual employe, including corporate officers but excluding employes or casual employes provided for in § 109.7 (relating to earnings of salesmen) performs services for an employer or casual employer both within and without this Commonwealth, his income derived from Commonwealth sources includes that proportion of his total compensation for services rendered as an employe or casual employe which the total number of working days employed within this Commonwealth bears to the total number of working days employed both within and without this Commonwealth. However, any allowance claimed for days worked outside of this Commonwealth shall be based upon the performance of services which, of necessity, obligate the employe or casual employe to perform out-of-State duties in the service of his employer or casual employer. In making the allocation provided for in this section, no account may be taken of nonworking days, including Saturdays, Sundays, holidays, days of absence because of illness or personal injury, vacation or leave with or without pay.

The provisions of this § 109.8 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 109.8 amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249. Immediately preceding text appears at serial page (205376).

History

• Authority: The provisions of this § 109.
• Source: The provisions of this § 109.

61 Pa. Code § 109.9 Other methods of allocation.

This chapter is designed to apportion and allocate to this Commonwealth in a fair and equitable manner the income of a nonresident from sources within this Commonwealth. If the methods provided under this chapter do not so allocate and apportion those items, the Department may require a taxpayer to apportion and allocate those items under such method as it will prescribe as long as the prescribed method results in a fair and equitable apportionment and allocation.

History

• Authority: The provisions of this § 109.
• Source: The provisions of this § 109.

Chapter 111 Credits Against Tax

61 Pa. Code § 111.1 Tax withheld.

A credit will be allowed to a taxpayer for any amounts of tax withheld from compensation by an employer under this chapter.

This section cited in Pa. Code § 111.3 (relating to income taxes imposed by other states).

History

• Authority: The provisions of this § 111.
• Source: The provisions of this § 111.

61 Pa. Code § 111.2 Tax paid under previous act.

A credit is to be allowed to a taxpayer for any amounts of tax withheld by an employer and paid to the Commonwealth or paid as estimated tax to the Commonwealth pursuant to the invalid Article III of the Tax Reform Code of 1971 (72 P. S. § § 7301—7361).

History

• Authority: The provisions of this § 111.
• Source: The provisions of this § 111.

61 Pa. Code § 111.3 Income taxes imposed by other states.

Before the allowance of any credit under § 111.1 (relating to tax withheld), a resident taxpayer will be allowed a credit against tax otherwise due under this chapter for amounts paid to another state for any income tax, wage tax, or other tax on or measured by gross or net earned or unearned income imposed upon income which is also subject to tax under this article. For example, if a resident taxpayer earns wages in Delaware and pays an income tax thereon to the State of Delaware, he shall be entitled to a credit against the Commonwealth income tax liability imposed upon wages.

History

• Authority: The provisions of this § 111.
• Source: The provisions of this § 111.

61 Pa. Code § 111.4 Limitation on credit.

(a) Credit allowed. The credit allowed shall be limited to that portion of tax due under this chapter determined by applying to the total of such tax a fraction, the numerator of which shall be the amount of the taxable income of the taxpayer subject to tax in the other jurisdiction and the denominator of which is the entire taxable income of the taxpayer.

(b) Example of limitation on credit. A resident taxpayer earns $10,000 of wages in New York State on or after June 1, 1971. New York State permits him deductions after that date totaling $2,000, and he pays after that date a total tax of $500. In addition, he has intangible capital gains of $5,000. His total Commonwealth taxable income is $15,000 ($10,000 in wages and $5,000 in capital gains) and his total Commonwealth income tax liability is $330 (2.2% of $15,000). The credit of the taxpayer for New York income tax paid is limited to $220 (10,000/15,000 x 330). The deductions permitted in New York State have no effect upon the credit allowed in this Commonwealth. No credit will be permitted for tax withheld or paid to another state on income earned before June 1, 1971. In addition, no credit will be permitted for tax withheld or previously paid to another state which is subsequently determined an overpayment and which is then refunded.

The provisions of this § 111.4 amended December 29, 1978, 8 Pa.B. 3825. Immediately preceding text appears at serial page (36040).

Income Subject to Tax in Another Jurisdiction

Where taxpayers filed both Delaware and Pennsylvania personal tax returns, the taxpayers’ entire Pennsylvania income was not subject to tax by Delaware, since the Delaware system, like those systems in other graduated income tax states, uses out-of-state income merely as a measure of the tax rate, rather than actually taxing that income. Peet v. Commonwealth, 705 A.2d 497 (Pa. Cmwlth. 1998); exceptions overruled, decision adhered to by 719 A.2d 828 (Pa. Cmwlth. 1998).

This section cited in 61 Pa. Code § 105.5 (relating to special rules).

History

• Authority: The provisions of this § 111.
• Source: The provisions of this § 111.

61 Pa. Code § 111.5 Proof required to establish credit.

Credit will not be allowed under this section unless the taxpayer has proved to the satisfaction of the Department the amount of tax paid to the other state. A Form W-2 indicating income tax withheld for another state will not be sufficient to establish credit under this section. The mere fact that tax was withheld does not establish the fact that a taxpayer has been liable for the payment of tax to another state. Therefore, when claiming a credit for taxes paid to another state, a taxpayer shall file with his Pennsylvania tax return a copy of the tax return filed with the other state. The return will be considered as prima facie evidence of the amount of income tax, if any, paid to the other state.

The provisions of this § 111.5 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 111.5 adopted October 24, 1975, 5 Pa.B. 2844; amended February 17, 2006, effective February 18, 2006, 36 Pa.B. 822. Immediately preceding text appears at serial page (247468).

History

• Authority: The provisions of this § 111.
• Source: The provisions of this § 111.

Chapter 113 Withholding of Tax

61 Pa. Code § 113.1 Employers required to withhold tax.

An individual, partnership, association, corporation, organization, fiduciary, governmental body, unit, agency or other entity who is an employer, makes payment of compensation and maintains an office or transacts business within this Commonwealth is subject to this chapter, whether or not a paying agency is maintained within this Commonwealth.

(1) The phrase ‘‘transacting business within this Commonwealth’’ includes having or maintaining within this State, directly or indirectly, an office, distribution house, sales house, warehouse or other place of business, or operating within this Commonwealth by any agent or other representative under the authority of the employer or its subsidiary, irrespective of whether the place of business or agent or other representative is located in this Commonwealth permanently or temporarily, or whether the employer is licensed to do business in this Commonwealth.

(2) The term ‘‘agent’’ is broader than the term employe and includes anyone acting under the authority of the principal in an agency capacity. It does not matter that an agent may engage in business on his own account, for other persons or as an independent contractor acting as an agent.

The provisions of this § 113.1 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 113.1 amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249. Immediately preceding text appears at serial page (205379).

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.2 Compensation subject to withholding.

All compensation shall be subject to withholding of tax by an employer. Regulations for residents and nonresidents shall be as follows:

(1) Residents. The following procedure shall be utilized by employers withholding Commonwealth Income Tax from a resident:

(i) If a Commonwealth resident renders service in this Commonwealth, his employer shall withhold Commonwealth tax from his compensation.

(ii) If the employer is subject to the jurisdiction of this Commonwealth and a Commonwealth resident is rendering services as his employee in another state, the following procedure shall be followed:

(A) If the other state does not have an income tax, he shall withhold on the compensation he pays to the employee.

(B) If the other state does have an income tax and the employer is withholding the tax, the employer is not required to withhold Commonwealth tax.

(C) If the employer is not withholding income tax for the state in which the services are rendered, he shall withhold Commonwealth tax.

(iii) If a Commonwealth resident is rendering services partly within and partly outside this Commonwealth, the following procedure shall be followed:

(A) If the other state does not have an income tax, he shall withhold on the entire compensation he pays to the employee.

(B) If the other state does have an income tax and the employer is withholding the tax, the following employer shall also withhold the following Commonwealth income tax on compensation for services rendered within this Commonwealth:

(I) The amount of compensation attributable to services within this Commonwealth shall be that proportion of the total compensation which the total number of working days employed within this Commonwealth bears to the total number of working days employed both within and outside this Commonwealth, exclusive of nonworking days. Nonworking days are normally considered to be Saturdays, Sundays, holidays, and days of absence because of illness or personal injury, vacation, or leave with or without pay.

(II) With respect to earnings of a traveling salesman or other employee whose compensation depends directly on the volume of business transacted by him, the amount attributable to services within this Commonwealth shall be that proportion of the compensation received which the volume of business transacted by him within this Commonwealth bears to the total volume of business transacted by him both within and outside this Commonwealth.

(C) If the employer is not withholding income tax for the state in which the services are rendered, he shall withhold Commonwealth tax on the entire compensation.

(2) Nonresident. The following procedure shall be utilized by employers withholding Commonwealth income tax from a nonresident:

(i) The tax shall be deducted and withheld on compensation paid to nonresident employees for services performed in this Commonwealth. Accordingly, if a nonresident employee performs all of his services in this Commonwealth, the tax shall be deducted and withheld from all compensation paid him.

(ii) If a nonresident employee performs services partly within and partly outside this Commonwealth, only compensation for services within this Commonwealth shall be subject to withholding.

(A) The amount of compensation attributable to services within this Commonwealth shall be that proportion of the total compensation which the total number of working days employed within this Commonwealth bears to the total number of working days employed both within and outside this Commonwealth, exclusive of nonworking days. Nonworking days are normally considered to be Saturdays, Sundays, holidays, and days of absence because of illness or personal injury, vacation, or leave with or without pay.

(B) With respect to earnings of a traveling salesman or other employee whose compensation depends directly on the volume of business transacted by him, the amount attributable to services within this Commonwealth shall be that proportion of the compensation received which the volume of business transacted by him within this Commonwealth bears to the total volume of business transacted by him both within and outside this Commonwealth.

(iii) The portion of compensation allocable to the Commonwealth may be determined by the employer on the basis of the preceding year’s experience, or on the basis of an estimate for the current year made by the employee or his employer. In either case, the employer shall make any necessary adjustment during the year to assure that the proper amount is withheld for the current year.

(iv) An employer shall withhold on all compensation paid to a nonresident who works partly within and partly outside this Commonwealth unless the employer maintains adequate current records to determine accurately the amount of compensation from Commonwealth sources.

(3) Tips.

(i) Every employee who, in the course of his employment, receives in any calendar month cash tips which are wages as defined in section 3401(a) of the IRC (26 U.S.C.A. § 3401(a)) shall report those tips in one or more written statements furnished to his employer on or before the 10th day following that month.

(ii) Employers are required to deduct and withhold tax only on tips of which the employer has the control, receipt, custody or payment or tips that are reported by the employee and only to the extent that the employer can collect the tax by deducting it from the employee’s compensation exclusive of tips.

The provisions of this § 113.2 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 113.2 amended December 26, 2003, effective December 27, 2003, 33 Pa.B. 6423. Immediately preceding text appears at serial pages (261983) to (261984) and (205381).

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.3 Computing withholding of Commonwealth personal income tax.

(a) The Pennsylvania Personal Income Tax to be withheld shall be at the rate prescribed in Article III of the TRC (72 P. S. § § 7301—7361). For example, the rate applicable to the first pay period beginning on or after:

January 1, 1983 is 2.45

July 1, 1984 is 2.35

January 1, 1986 is 2.20

September 1, 1986 is 2.10

(1) Regular compensation. Computation of withholding tax on regular compensation shall be made in accordance with the following:

(i) For a payroll period an employer shall compute the tax to be withheld from the compensation of an employee by multiplying the compensation by the rate prescribed in Article III of the TRC.

(ii) The term “payroll period” means a period for which a payment of compensation is ordinarily made to an employee by his employer and may be a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual or annual period.

(2) Supplemental or other compensation. If supplemental, such as commissions, overtime pay, vacation pay, bonuses, and so forth, or other compensation is received by an employee, an employer shall determine the tax to be withheld by adding the supplemental or other compensation for the current payroll period and multiplying the amount by the rate prescribed in Article III of the TRC.

(b) In addition to the tax required to be withheld, an employer and employee may agree that an additional amount be withheld from the employee’s compensation. The agreement shall be in writing, and the amount deducted and withheld under the agreement between the employer and employee shall be considered as tax required to be deducted and withheld, and statutes and regulations applicable to the tax are applicable with respect to an amount deducted and withheld under the agreement.

(c) Except as provided in subsection (d):

(1) Any amount lawfully deducted by an employer from the remuneration of an employee shall be deemed to be a part of the employee’s remuneration and to have been paid to the employee as compensation at the time the deduction is made.

(2) Any amount paid by an employer on behalf of an employee without deduction from the remuneration of, or other reimbursement from, the employee on account of any liability or obligation of, or payment required from, an employee shall be deemed to be paid to the employee as compensation at the time the payment is made.

(3) Any payment made to an employee, third party or fund under a cash or deferred arrangement under which an employee may unilaterally elect to have the employer make payments to the third party or fund for the benefit of the employee or to the employee directly in cash shall be deemed to be paid to the employee as compensation at the time the payment is made.

(4) Any payment made to an employee, third party or fund under an arrangement under which an employee may unilaterally choose between two or more benefits consisting either of cash and coverage under a plan or coverage under two or more plans shall be deemed to be paid to the employee as compensation at the time the payment is made.

(d) Amounts specified in a cafeteria plan document as being available to the employee for the purpose of selecting or purchasing benefits under a plan or as additional cash remuneration received in lieu of coverage under a plan are excludible from tax and withholding if the following apply:

(1) They were not actually or constructively received, after taking section 125 of the IRC (26 U.S.C.A. § 125) into account.

(2) The benefits selected or purchased are nontaxable under the IRC when offered under a cafeteria plan described in section 125 of the IRC.

(3) The payments made for the plan would be nontaxable under § 101.6 (relating to compensation) if made by the employer outside a cafeteria plan described in section 125 of the IRC.

The provisions of this § 113.3 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 113.3 amended January 20, 1984, effective January 21, 1984, 14 Pa.B. 222; amended January 2, 1987, effective January 3, 1987, 17 Pa.B. 59; amended December 26, 2003, effective December 27, 2003, 33 Pa.B. 6423. Immediately preceding text appears at serial pages (205381) to (205382).

This section cited in 61 Pa. Code § 113.11 (relating to special deposits and trust accounts).

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.3a Employer identification number.

An employer shall use both the Federal and Pennsylvania employer identification numbers to report all Pennsylvania withholding. Employers who have not yet received a Federal employer identification number will be assigned a temporary Pennsylvania number until the Federal employer identification number is obtained, at which time the Department shall be notified. If an employer has multiple divisions using the same Pennsylvania employer identification number but remitting and reconciling withholding tax separately, the employer shall request a separate Pennsylvania number for each division.

The provisions of this 113.3a issued under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 113.3a adopted December 26, 2003, effective December 27, 2003, 33 Pa.B. 6423.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.3b Registration.

Every employer having an office or transacting business within this Commonwealth and making payment of wages for the first time to one or more nonresident individuals performing services on behalf of the employer within this Commonwealth or to one or more resident individuals shall, within 10 business days of the payment, register with the Department by completing and filing Form PA-100 Pennsylvania Combined Registration Form available on its website or at its Harrisburg or district offices.

The provisions of this 133.3b issued under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 113.3b adopted December 26, 2003, effective December 27, 2003, 33 Pa.B. 6423.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.4 Time and place for filing reconciliation and withholding statements.

(a) An employer shall furnish a wage and tax withholding statement to each of his employees on or before January 31 following the year of payment of compensation, or within 30 days from the date of the last payment of compensation if employment or the business is terminated.

(1) An employer shall use the combined Federal-State Wage and Tip Withholding Statement (Form W-2) issued by the Internal Revenue Service or one that conforms thereto with the word ‘‘Commonwealth’’ printed, stamped or typed thereon. The statement must show the name of employer, address and identification number of the employer; the name, address and Social Security number of the employee; the total compensation paid during the taxable year; and the total amount of Pennsylvania tax withheld during the taxable year.

(2) The wage and tax withholding statements required in this chapter shall be in addition to a requirement of the Federal or a local government.

(b) Every employer who withholds tax under this chapter shall file with the Department an annual withholding reconciliation statement, on a form provided by the Department, along with a copy of all employee wage and tax withholding statements, by the following:

(1) A going business for tax withheld in the prior year, annually, by January 31.

(2) A terminated business within 30 days after the end of the month in which business or payment of compensation ceased.

(c) The annual withholding reconciliation statement and accompanying wage and tax withholding statements as required under subsection (b) shall be forwarded to the Department by electronic transmission as specified in instructions of the Department. If an employer is required to furnish nine or less wage and tax withholding statements under subsection (a), the employer may forward the annual withholding reconciliation statement and accompanying wage and tax withholding statements to the Department by first class mail.

(d) For purposes of this section, the term ‘‘electronic transmission’’ means the process of sending digital or analog data over a communication medium to one or more computing, network, communication or electronic devices.

The provisions of this 113.4 amended under section 354 of the Tax Reform Code of 1971 (72 P.S. § 7354).

The provisions of this § 113.4 amended December 26, 2003, effective December 27, 2003, 33 Pa.B. 6423; amended November 16, 2018, effective November 17, 2018, 48 Pa.B. 7214. Immediately preceding text appears at serial pages (302156) and (333485).

This section cited in 61 Pa. Code § 119.25 (relating to failing to furnish or furnishing a false withholding statement).

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.5 Payment of taxes and filing of deposit statements.

(a) Every employer paying compensation shall, on a semimonthly, monthly, or quarterly basis, file a completed, signed, deposit statement on forms provided by the Department and forward a remittance in payment of the Commonwealth personal income tax required to be withheld.

(b) Remittance for the full amount of income tax withheld, plus interest, if applicable, made payable to the Pennsylvania Department of Revenue shall accompany the semimonthly, monthly, or quarterly deposit statement. Additional requirements shall be as follows:

(1) Employers are to use the preaddressed envelopes and preprinted forms furnished them for this purpose.

(2) If the packet of employer preprinted forms is lost or damaged, a request for duplicate forms, listing the name and identification number of the employer, should be sent to the Department.

(3) An employer required to file a deposit statement of tax withheld who has never received a preprinted form should use general forms provided for this purpose, which may be obtained from the Department of Revenue, Bureau of Accounts Settlement, License and Bonding Division, Post Office Box 8057, Harrisburg, Pennsylvania 17105.

(c) Remittances and deposit statements shall be forwarded in accordance with instructions issued by the Department. The place of deposit for each employer will be included with the information the Department forwards to all employers relating to payment of taxes and filing of deposit statements.

The provisions of this § 113.5 amended June 1, 1984, effective June 2, 1984, 14 Pa.B. 1868. Immediately preceding text appears at serial page (36046).

This section cited in 61 Pa. Code § 113.6 (relating to employer’s filing dates and filing of deposit statements).

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.6 Employer’s filing dates and filing of deposit statements.

Determination of basis for filing shall be as follows:

(1) A semimonthly, monthly, or quarterly basis of filing shall be noted by an employer on his first deposit statement on forms provided for this purpose when he is required to begin withholding.

(2) If the aggregate amount withheld for each quarterly period can reasonably be expected to be $1,000 or more, an employer shall pay the tax semimonthly with the accompanying deposit statement within three banking days after the close of each semimonthly period. The semimonthly period ends on the 15th day and the last day of the month.

(3) If the aggregate amount withheld for each quarterly period is reasonably expected to be at least $300 but less than $1,000, an employer shall pay the tax monthly with the accompanying deposit statement on or before the 15th day of the month succeeding the months of January to November, inclusive, and on or before the last day of January following the month of December.

(4) If the aggregate amount withheld for each quarterly period is reasonably expected to be less than $300, the employer shall remit quarterly payments with accompanying deposit statements on or before the last day of April, July, October, and January for the four quarters ending on the last day of March, June, September, and December.

(5) An employer who has temporarily ceased to pay compensation, including one engaged in seasonal activities, or whose withholding is zero, shall continue to file deposit statements on the same basis as he had been, but shall enter on the face of the deposit statement the word ‘‘None.’’

(6) An employer shall be permitted to change to a less frequent basis only at the beginning of a calendar year. Changes to a more frequent basis of filing shall be made at the beginning of any quarter that follows a quarter in which the $300 or $1,000 limits discussed in this section are exceeded. Notification of such changes shall be made by an employer in writing to the Department of Revenue, Bureau of Accounts Settlement, License and Bonding Division, P.O. Box 8057, Harrisburg, Pennsylvania 17105.

(7) The last deposit statement of tax withheld for any employer who discontinues his business or permanently ceases to pay compensation shall be marked ‘‘Final’’ on the face thereof, and shall be filed within 30 days after the end of the month in which business or payment of wages ceases, irrespective of the usual reporting period due date. This deposit statement and remittance shall be forwarded together with the Reconciliation Statement and Federal-State Wage and Tax Withholding Statements (form W-2) in accordance with instructions issued by the Department. The place of deposit for each employer will be included with the information under § 113.5 (relating to payment of taxes and filing of deposit statements).

The provisions of this § 113.6 amended June 1, 1984, effective June 2, 1984, 14 Pa.B. 1868. Immediately preceding text appears at serial pages (36047) to (36048).

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.7 Correcting mistakes.

An overpayment or underpayment of tax shall be corrected in the following manner:

(1) If the correct amount of tax is withheld, but because of an underpayment or an overpayment an incorrect amount is remitted to the Commonwealth, proper adjustment may be made within the same calendar year on the first return or later returns filed after the error is discovered. In the case of such an overpayment, the employer shall file an application for refund if the error is not corrected by the end of the year.

(2) If no tax or less than the correct amount of tax (other than on tips), is deducted from any compensation, the employer is authorized and required to deduct the amount of the undercollection from later payments to the employees. The employer shall remit the correct amount with his deposit statement and shall be liable for any underpayment, plus applicable interest or penalties. Reimbursement shall be a matter for settlement between the employer and the employee.

(3) If in any filing period more than the correct amount of tax is deducted from any wage payment, the employer is authorized to make an appropriate adjustment in his withholding for a subsequent period or periods in the same taxable year. If the over withholding is not offset by the last withholding period of the year, the employee shall report the amount actually withheld on his yearly income tax return.

The provisions of this § 113.7 amended March 28, 2008, effective March 29, 2008, 37 Pa.B. 1476. Immediately preceding text appears at serial pages (302158) to (302159).

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.8 Records to be kept.

(a) All employers are required to retain, preserve, and make available for examination and inspection by the Department, their Commonwealth withholding tax records. Such records shall include the following:

(1) The names, addresses, Social Security numbers, and occupations of employe receiving compensation.

(2) The amount and description where compensation is paid in any medium other than cash, and dates of all compensation payments.

(3) The periods of employment of employees.

(4) The periods for which the employes are paid while absent due to sickness or personal injuries and the amount and weekly rate of such payments.

(5) The identification number of the employer.

(6) Duplicate copies of returns filed and the dates and amounts of remittances made.

(b) For resident or nonresident employees performing services partly within and partly outside this Commonwealth, the employer shall maintain adequate current records which accurately show the amount of compensation from Commonwealth sources, if such employer has not withheld on all of the compensation paid to the employee.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.9 Use of prescribed forms.

(a) An employer shall not be excused from filing a return under this regulation by reason of the fact that no return form has been furnished to him. Copies of the prescribed return forms so far as possible will be regularly furnished employers by the Department, without application therefor. Employers not so supplied with the proper return forms should make application therefor to the Department in ample time to have the returns prepared, verified, and filed on or before the due date.

(b) If the prescribed form is not available, a statement by the employer disclosing the amount of taxes due together with remittance thereof, if filed within the prescribed time, may be accepted as a tentative return, so as to relieve the employer from liability for additions under Chapter 119 (relating to liabilities and assessment—procedure and administration) if without unnecessary delay such tentative return is supplemented by a return made on the proper form.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.10 Extensions of time.

For good cause shown, upon written application by an employer, the Department may grant a reasonable extension of time for filing Return Form RIT-501 or Return Form RIT-W-3.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.11 Special deposits and trust accounts.

(a) If any employer fails to withhold or truthfully account for or remit the taxes withheld or fails to file deposit statements, the Department may serve notice requiring such employer to withhold and deposit such taxes in a bank designated by the Department, in a separate account in trust for and payable only to the Department.

(b) The employer shall deposit such taxes with the designated bank on the last day of each of the payroll periods of the employer as defined in § 113.3 (relating to computing withholding of Commonwealth personal income tax).

(c) The Department will notify the depository bank of the time or times the employer would have ordinarily made payments of withheld tax, and the bank shall forward on or about such times, to the Department, such funds as shall have been deposited by the employer. The amounts forwarded by the bank shall be credited against the tax liability of the employer. Nothing in this section shall excuse an employer from timely filing of all returns and statements nor from payment of any interest or penalties which may become due or assessed. Notice shall remain in full force and effect until notice of cancellation is served on the employer and the depository bank by the Department.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.12 Liability of employer for withheld taxes.

Every employer required to deduct and withhold tax from compensation of an employe shall be liable for the payment of such tax whether or not it is collected from the employee by the employer. For purposes of assessment and collection, any amount required to be withheld and remitted to the Department and additions to tax, penalties, and interest with respect thereto shall be considered the tax of the employer. If the employer fails to withhold taxes and thereafter the tax is paid, the tax which was required to be withheld shall not be collected from the employer. Such payment does not relieve the employer from liability for penalties, interest, or additions to the tax applicable with respect to such failure to withhold. Any amount of tax withheld shall constitute a special fund in trust for the Department, which shall be enforceable against the employer, his representative or any other person receiving any part of the fund.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.13 Failure of employer to withhold.

If an employer fails to deduct and withhold tax as prescribed in this chapter and thereafter the tax against which such tax may be credited is paid, the tax which was required to be deducted and withheld shall not be collected from the employer, but the employer shall not be relieved of the liability for any penalty, interest or additions to the tax imposed with respect to such failure to deduct and withhold.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.14 Designation of third parties to perform acts required of employers.

In case a fiduciary, agent or other person has the control, receipt, custody, disposal of or pays the compensation of an employe or a group of employees employed by one or more employers, the Department is authorized to designate such ficuciary, agent, or other person to perform such acts as are required of employers under this article. All provisions of this article which are applicable to an employer shall be applicable to a fiduciary, agent, or other person.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.15 When withholding not required.

Notwithstanding any provision of this article to the contrary, an employer on and after January 1, 1975, shall not be required to withhold any tax upon payment of wages to an employee if such employee can certify:

(1) That he incurred no personal income tax liability for the preceding tax year; and

(2) That he anticipates no liability for personal income tax for the current year.

The provisions of this § 113.15 adopted June 12, 1975, 5 Pa.B. 1561.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

61 Pa. Code § 113.16 Enforceable trust fund.

(a) For purposes of assessment and collection of deducted tax and withheld tax that is not paid over to the Department, all taxes deducted and withheld from employees under this article or under color of this article shall constitute a trust fund for the Commonwealth and shall be enforceable against the employer, his representative, any person knowingly receiving a disbursement of any part of the fund, any person receiving a disbursement of any part of the fund without giving fair and valuable consideration therefore or any other person who is required to collect, account for and pay over the tax. The taxes will not be enforceable against a person receiving a disbursement from an employer if, before the negligent failure to truthfully account for and pay it over to the Commonwealth is discovered, the money is expended in payment of a genuine, uncontested and enforceable obligation, judgment, claim, lien or other liability of the person existing at the time the money was obtained or otherwise superior to the rights of the Commonwealth.

(b) Tax deducted from the State wages of an employee shall be considered to have been withheld at the time of payment of the State wages against which the deduction was charged.

(c) If an employer fails or refuses to pay over any withheld tax or to deposit it in a separate account in trust for and payable to the Department or otherwise identify and segregate it from other funds, it shall be deemed that:

(1) Withheld tax would be on deposit in the general operating account of the employer at the time of payment of the State wages from which deduction was made.

(2) The employer would disburse withheld tax last.

(3) Once withheld tax is disbursed, subsequent deposits would not replenish it.

(4) The lowest intermediate balance of cash on deposit in the general operating account is withheld tax that constitutes a trust fund for the Commonwealth that is enforceable against the employer or any person receiving any part of the fund.

(5) Any excess of the tax deducted over the lowest intermediate balance is withheld tax that has been received by the employer and disbursed.

The provisions of this § 113.16 issued under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 113.16 adopted December 26, 2003, effective December 27, 2003, 33 Pa.B. 6423.

History

• Authority: The provisions of this § 113.
• Source: The provisions of this § 113.

Chapter 115 Estimated Tax

61 Pa. Code § 115.1 Purpose of declaration of estimated tax.

The declaration of estimated tax provides a taxpayer a means of paying Commonwealth personal income tax on a current basis if the taxpayer has taxable income not subject to withholding.

History

• Source: The provisions of this § 115.

61 Pa. Code § 115.2 Persons required to file a declaration.

(a) Except as provided in subsections (b) and (c), every resident and nonresident individual shall file a declaration of estimated tax together with payment of such tax, if he expects his income or income from sources within this Commonwealth, other than compensation on which Commonwealth personal income tax is withheld, to exceed $1,000 during the taxable year. An individual means a natural person and shall include members of a partnership or association. An estate or trust shall not be required to file a declaration. Estimated tax is the amount which an individual estimates to be his tax due, less the amount which he estimates to be the sum of any credits allowable under the act.

(b) An individual having a total estimated tax for the taxable year of $50 or less may, if he elects, file his declaration of estimated tax together with payment of such tax at any time on or before January 15 of the succeeding year.

(c) An individual having an estimated taxable income from farming which is at least 2/3 of his total estimated taxable income for the period may, if he elects, file his annual income tax return with full remittance of tax due at any time up to March 1 of that year. Such payment shall be considered as his declaration due on or before January 15 of that year.

History

• Source: The provisions of this § 115.

61 Pa. Code § 115.3 Computing the estimated tax for residents and nonresidents.

(a) Effective January 1, 1978, resident individuals shall be required to file a declaration of estimated tax and pay at the rate prescribed in Article III of the TRC of 1971 (72 P. S. § § 7301—7370) of their income. Income means the same as compensation; net profits, net gains or income from the disposition of property, net gains or income derived from or in the form of rents, royalties, patents and copyrights, dividends, interest, gambling and lottery winnings, net gains or income derived through estates or trusts.

(b) Effective January 1, 1978, nonresident individuals shall be required to file a declaration of estimated tax and pay tax at the rate prescribed in Article III of the TRC of 1971 (72 P. S. § § 7301—7370) of their income from sources within this Commonwealth. Income means the same as those items listed in subsection (a) derived from sources within this Commonwealth.

(1) By reason of ownership or disposition of any interest in real or tangible personal property in this Commonwealth. Income from intangible personal property shall constitute income from sources within this Commonwealth only to the extent that such income is from property employed in a trade, profession, occupation or business carried on in this Commonwealth.

(2) In connection with a trade, profession or occupation carried on in this Commonwealth or for the rendition of personal services performed in this Commonwealth.

(3) As a distributive share of the income of an unincorporated business, profession, enterprise, undertaking or other activity as the result of work done, services rendered or other business activities conducted in this Commonwealth.

(c) For purposes of computing a declaration of estimated tax an individual’s income shall be included only once in the enumerated categories in subsection (a) even though in fact such income may fall within two categories.

(d) For purposes of computing a declaration of estimated tax an individual may not offset a gain in one of the enumerated classes of income with a loss in another class of income. A loss may be used to offset a gain in the same class of income up to the amount of the gain, but only if the class of income is one in which net income is to be reported.

The provisions of this § 115.3 amended through January 20, 1984, effective January 21, 1984, 14 Pa.B. 222. Immediately preceding text appears at serial pages (40479) to (40480).

History

• Source: The provisions of this § 115.

61 Pa. Code § 115.4 Tax year of less than 12 months.

(a) If a taxpayer has an interim tax year of less than 12 months (for example, a fiscal year taxpayer in the year 1971 or taxpayers changing over to a different accounting tax year), he shall file a declaration within the time period specified in subsection (b) if he expects his total Commonwealth taxable income to exceed $1,000. No declaration of estimated tax shall be required if the short taxable year is one of the following:

(1) A period of less than 4 months.

(2) A period of at least 4 months but less than 6 months, and the basic tax requirements are met after the first day of the fourth month.

(3) A period of at least 6 months but less than 9 months, and the requirements for filing of estimated tax are met after the first day of the 6th month.

(4) A period of 9 months or more, and the requirements for filing of estimated tax are first met after the first day of the ninth month.

(b) A declaration of estimated tax shall be filed as follows, if the requirements for filing a declaration of estimated tax are met:

(1) Prior to the first day of the fourth month of the short taxable year, the declaration shall be filed on or before the 15th day of the fourth month of such short taxable year.

(2) After the first day of the fourth month but before the second day of the sixth month, the declaration shall be filed on or before the 15th day of the sixth month.

(3) After the first day of the sixth month but before the second day of the ninth month, the declaration shall be filed on or before the 15th day of the ninth month.

History

• Source: The provisions of this § 115.

61 Pa. Code § 115.5 Joint declaration of husband and wife.

(a) A husband and wife may make a joint declaration of estimated tax as if they were one taxpayer, even though one spouse is expected to have no income during the taxable year. A joint declaration shall show the social security number and full name of each spouse.

(b) If a husband and wife make a joint declaration, their liability with respect to the estimated tax shall be joint and several.

(c) The fact that a joint declaration of estimated income tax is made by a husband and wife shall not preclude them from filing separate final returns. In case a joint declaration is made but a joint return is not filed for the same taxable year, the estimated income tax payments for such year may be treated as payments on account of the tax liability of either the husband or wife for the taxable year or may be divided between them in such manner as they may agree.

(d) A spouse shall not offset a gain in one class of income with a loss of income of the other spouse in another class of income. A spouse shall not offset a gain in the same class of income with a loss of income of the other spouse in the same class of income.

History

• Source: The provisions of this § 115.

61 Pa. Code § 115.6 Minors, incompetents or other persons under disability.

The declaration of estimated tax for an individual who is unable to make a declaration by reason of minority or other disability shall be made and filed by his guardian, committee, fiduciary or other person charged with the care of his person or property, or by his duly authorized agent.

History

• Source: The provisions of this § 115.

61 Pa. Code § 115.7 Amended declarations.

(a) If, after a declaration is filed, the estimated tax is substantially increased or decreased by a change in income, an amended declaration shall be filed on or before the next date for payment of an installment of estimated tax. The remaining unpaid installments shall be proportionately increased or decreased as the case may be, to reflect any increase or decrease in the estimated tax by reason of such change.

(b) If an amended declaration is filed after September 15 and on or before the following January 15 and shows an increase in estimated tax, the increase shall be paid at the time of filing such an amended declaration. However, if such taxpayer files his annual income tax return with full remittance of tax due by January 31, he shall be relieved from filing such an amended declaration.

History

• Source: The provisions of this § 115.

61 Pa. Code § 115.8 Filing and payment of estimated tax for 1971.

(a) If he meets the requirements, a calendar year taxpayer shall file a declaration no later than November 15 and pay his estimated tax in full or 50% of the tax due when filing his declaration and the remaining 50% on or before January 15, 1972. An individual whose total estimated tax is $50 or less may, if he elects, file his declaration at any time up to January 15 of the following calendar year. Payment of the estimated tax may thereafter also be made up to January 15 of the following year.

(b) A fiscal year taxpayer who might normally file prior to November 15, 1971 may delay his filing until November 15. However, all payments due to that date shall be paid on or before November 15. A fiscal year taxpayer shall adapt his declaration periods to the calendar year provisions.

(c) Every taxpayer required to file a declaration of estimated tax shall file a completed, signed deposit statement (Return Form RIT-1040ES).

(d) Remittance for the estimated tax due, plus interest if applicable, made payable to the Department shall accompany the deposit statement.

(1) Taxpayers shall use the envelopes and preaddressed forms (Return Form RIT-PA40ES) furnished them for this purpose.

(2) If the packet of preaddressed forms of the taxpayer is lost or damaged, a request for duplicate forms listing the name, address, and social security number of the taxpayer shall be sent to the Department.

(3) A taxpayer required to file a declaration of estimated tax who has never received a preaddressed form shall request a return form by writing to the Department of Revenue, Personal Income Tax Bureau, Harrisburg, Pennsylvania 17129.

(e) Remittances and deposit statements shall be forwarded to Commonwealth P.O. Box 3800 Harrisburg, Pennsylvania 17129.

History

• Source: The provisions of this § 115.

61 Pa. Code § 115.9 Filing and payments of estimated tax for years beginning 1972.

(a) A calendar year taxpayer shall file a declaration and pay his estimated tax as follows:

(1) If he first meets the requirement for filing of estimated tax on or before April 1, he shall file a declaration no later than April 15 and pay his estimated tax in full with his declaration; or in four equal installments. The first installment on filing the declaration, and the second, third, and fourth installments on or before the succeeding June 15, September 15, and January 15, respectively.

(2) If he first meets the requirement for filing of estimated tax after the first of April but before June 2, he shall file by June 15 and pay his estimated tax in full with his declaration; or in three equal installments. The first installment on filing the declaration, and the second and third installments on or before the succeeding September 15 and January 15, respectively.

(3) If he first meets the requirement for filing of estimated tax after the first of June but before September 2, he shall file no later than September 15 and pay his estimated tax in full with his declaration; or in two equal installments. The first installment on filing the declaration, and the balance by the succeeding January 15.

(4) If he first meets the requirement for filing of estimated tax after the first of September, he shall file by the succeeding January 15 and pay the estimated amount in full with his declaration. However, if such taxpayer files his annual income tax return with full remittance of tax due by January 31, he shall be excused from filing January 15 estimated declaration.

(b) A fiscal year taxpayer shall adapt his declaration period to the calendar year provisions herein contained. For example, if the fiscal year begins on February 1, 1972, the declaration together with the first payment shall be due May 15, 1972. The remaining installments shall be due on or before July 18, 1972, October 15, 1972, and February 15, 1973.

(c) Every taxpayer required to file a declaration of estimated tax shall file a completed, signed deposit statement (Return Form RIT-PA40ES).

(d) Remittance for the estimated tax due, plus interest if applicable, made payable to the Department shall accompany the deposit statement. Taxpayers shall use the envelopes and pre-addressed forms. (Return Form RIT-PA40ES) furnished them for this purpose. If the packet of preaddressed forms of the taxpayer is lost or damaged a request for duplicate forms listing the name, address, and social security number of the taxpayer should be sent to the Department. A taxpayer required to file a declaration of estimated tax who has never received a pre-addressed form should request a Return Form by writing to the Department of Revenue, Personal Income Tax Bureau, Harrisburg, Pennsylvania 17129.

(e) Remittances and deposit statements shall be forwarded to Commonwealth P.O. Box 3800, Harrisburg, Pennsylvania 17129.

History

• Source: The provisions of this § 115.

61 Pa. Code § 115.10 Use of prescribed forms.

(a) A taxpayer shall not be excused from filing a declaration of estimated tax under this regulation by reason of the fact that no return form (RIT-PA40ES) has been furnished to him. Copies of the prescribed return forms so far as possible will be regularly furnished taxpayers by the Department without application therefor. Taxpayers not so supplied with the proper forms should make application therefor to the Department in ample time to have the declaration prepared, verified, and filed on or before the due date.

(b) If, through no fault of the taxpayer, the prescribed form is not available, a signed statement by the taxpayer disclosing the amount of estimated tax due together with remittance thereof, if filed within the prescribed time, may be accepted as a tentative declaration, so as to relieve the taxpayer from liability for additions, if without unnecessary delay such tentative declaration is supplemented by a declaration made on the proper form.

History

• Source: The provisions of this § 115.

61 Pa. Code § 115.11 Final return.

Every individual who files declarations of estimated income tax shall file a final return at the close of his taxable year.

History

• Source: The provisions of this § 115.

Chapter 117 Return and Payment of Tax

61 Pa. Code § 117.1 General requirements of a return.

Every taxpayer having an item of income or loss within the meaning of this article for the taxable year shall file a tax return on or before the date when the Federal income tax return of the taxpayer is due or would be due if the taxpayer were required to file a Federal income tax return under the Internal Revenue Code. Consequently, returns are due on or before April 15 for the calendar year taxpayers and on or before the 15th day of the fourth month following the close of the fiscal year for fiscal year taxpayers.

The provisions of this § 117.1 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 117.1 amended January 25, 2013, effective January 26, 2013, 43 Pa.B. 535. Immediately preceding text appears at serial page (324635).

This section cited in 61 Pa. Code § 109.2 (relating to husband and wife); 61 Pa. Code § 117.7 (relating to time for filing returns and paying tax); and 61 Pa. Code § 119.20 (relating to additions).

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.2 Returns of married individuals.

(a) Liability for tax. If husband and wife determine their income tax liability on a separate return under this article, their income tax liabilities under this article shall be separate. If husband and wife determine their income tax liabilities on a joint return under this article, their income tax liabilities shall be joint and several.

(b) Different residences. If either husband or wife is a resident and the other is a nonresident, they shall file separate income tax returns under this article, on Form No. PA-40, in which event their income tax liabilities shall be separate unless both elect to determine their joint taxable income as if they were residents. If such election is made, then the income tax liabilities of husband and wife shall be joint and several.

(c) Separate returns. If separate returns are filed the following apply:

(1) If the husband and wife file separate income tax returns under this article, and if the sum of credits or payments by either spouse (including withheld and estimated taxes) exceeds the amount of the tax for which such spouse is separately liable, such excess will be applied by the Department to the credit of the other spouse if the sum of such payments by the other spouse is less than the amount of the tax for which such other spouse is separately liable. The excess of any credits due will then be refunded to the taxpayer.

(2) If the sum of the credits or payments made by both spouses with respect to the taxes for which they are separately liable (including withheld and estimated taxes) exceeds the total taxes due, refund of the excess may be made payable to each individually, jointly, or in the event that either is deceased, to the survivor, at the discretion of the Department.

(3) Notwithstanding anything in this subsection to the contrary, either spouse may request any overpayment made by him or her be applied only against his or her separate liability.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.3 Deceased individuals.

(a) The return of any deceased individual shall be made and filed by his executor, administrator, or other person charged with caring for his property.

(b) If the decedent was married, the surviving spouse and the executor, administrator, or other person charged with caring for his property may not file a joint return. The return of the deceased individual shall cover the period beginning with the taxable year in which his death occurs and ending with his date of death.

This section cited in 61 Pa. Code § 101.7 (relating to receipt of income); and 61 Pa. Code § 145.5 (relating to retruns by persons other than taxpayer).

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.4 Minority or other disability.

A minor or other taxpayer under a disability shall be subject to the same requirements for making returns of income as are other individuals. The return for an individual who is unable to make a return by reason of minority or other disability, shall be made and filed by his guardian, committee, fiduciary, or other person charged with the care of his person or property, or by his duly authorized agent.

This section cited in 61 Pa. Code § 145.5 (relating to returns by persons other than taxpayer).

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.5 Estates and trusts.

(a) The fiduciary of an estate or trust shall make and file the return and pay the tax on the taxable income of such estate or trust. If two or more fiduciaries are acting jointly, the return may be made and filed by any one of them.

(b) Liability for the payment of tax on the taxable income of an estate attaches to the person of the executor or administrator up to and after his discharge if, prior to distribution and discharge, he had notice of his tax obligations or failed to exercise due diligence in ascertaining whether or not such obligations existed. Liability for the tax also follows the assets of the estate distribution to heirs, devisees, legatees, and distributees who may be required to discharge the amount of the tax due and unpaid to the extent of the distributive shares received by them. The same considerations apply to trusts.

(c) The estate of a minor, incompetent, or other person under a disability, or, in general, of an individual in receivership or bankruptcy shall not be a taxable entity separate from the person for whom the fiduciary is acting, in that respect differing from the estate of a deceased person or of a trust.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.6 Returns made by agents.

The return of income may be made by an agent if the person liable for the making of the return is unable to make it by reason of illness or continuous absence from this Commonwealth for a period of at least 60 days before the date prescribed by law for making the return. A return may also be made by an agent if the taxpayer requests permission, in writing, of the Department, and the Department determines that good cause exists for permitting the return to be so made. However, assistance in the preparation of the return may be rendered under any circumstances. If a return is made by an agent, it shall be accompanied by the power of attorney, except that an agent holding a valid and subsisting general power of attorney authorizing him to represent his principal in making, executing and filing the income return, may submit a certified copy thereof. The agent, as well as the taxpayer, may incur liability for the penalties provided for erroneous, false or fraudulent returns.

This section cited in 61 Pa. Code § 117.10 (relating to signing returns and other documents); and 61 Pa. Code § 145.5 (relating to returns by persons other than taxpayer).

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.7 Time for filing returns and paying tax.

All persons required to make and file returns under § 117.1 (relating to general requirements of a return) shall, without assessment, notice or demand, pay the tax required to be reported as due on a return at the time prescribed in § 117.1 for filing a return, determined without regard to any extension of time for filing the return. Payment of the tax should accompany the return when filed.

The provisions of this § 117.7 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 117.7 amended January 25, 2013, effective January 26, 2013, 43 Pa.B. 535. Immediately preceding text appears at serial page (324637).

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.8 Place for filing returns and paying tax.

All returns should be filed with the Department of Revenue, the Personal Income Tax Bureau, P. O. Box 8111, Harrisburg, Pennsylvania 17129, on or before the respective due date. All payments of tax should be made payable to the Department and mailed to the same address. If a payment of tax is made, the taxpayer should include his name, address, and identifying number on the payment so as to insure proper credit therefor.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.9 Form of return.

Persons filing returns should use the envelopes and preaddressed prescribed forms furnished to them by the Department. A taxpayer shall not be excused from making a return, however, by the fact that no return form has been furnished to him or the one that was furnished becomes lost or damaged. Taxpayers not supplied with or in possession of the proper form should make application therefor to the Department listing their name, address, and identification number and sending such request to the Department of Revenue, the Personal Income Tax Bureau, Harrisburg, Pennsylvania 17127. Such request should be made in ample time to have their returns prepared, certified, and filed on or before the due date. Each taxpayer should carefully prepare his return and set forth fully and clearly the information required to be included therein. Returns which have not been so prepared will not be accepted as meeting the requirements of this article.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.9a Amended return.

If after a taxpayer files his final tax return, facts are discovered or events transpire which would increase the taxable income or tax of the taxpayer or both, it shall be the duty of the taxpayer to file an amended return with the Personal Income Tax Bureau within 30 days from the date of the determination of such increase. The amended return shall indicate the changes made, and a statement shall be attached setting forth what facts or events gave rise to the need for such amended return. If the amended return indicates additional taxes are owed, a check for such additional amount shall be attached to the amended return. Examples of events causing an increase in income or tax liability include, but are not limited to, the following:

(1) Deductions for business expenses which are later reimbursed.

(2) Gains or losses from the sale or exchange of property acquired prior to June 1, 1971, calculated using the June 1, 1971 basis.

(3) Credits for taxes paid to other states when such tax credits or tax liability are subsequently reduced, for whatever reason.

(4) Any other increase in any of the eight classes of income.

The provisions of this § 117.9a adopted February 20, 1981, effective June 23, 1979, 11 Pa.B. 726.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.10 Signing returns and other documents.

(a) In general. Each individual, including the fiduciary, shall sign the income tax return required to be made by him, except that the return may be signed for the taxpayer by an agent who is duly authorized in accordance with § 117.6 (relating to returns made by agents) to make such return. Other returns, statements, or documents required under this article or of the regulations thereunder to be made by any person with respect to the tax imposed hereunder shall be signed in accordance with any regulations contained therein, or any instructions issued with respect to such returns, statements, or other documents.

(b) Return of decedent. If a return for a decedent is filed by the appointed legal representative, it should be signed by him on the line indicated for taxpayer, as such legal representative. For example, he should sign ‘‘John Doe, Administrator of the Estate of Samuel Smith, Deceased,’’ or ‘‘John Doe, Executor of the Last Will and Testament of Samuel Smith, Deceased.’’ If no legal representative has been appointed when the return of the decedent is due to be filed, the surviving spouse, or other person or persons entitled to receive the property of the decedent should sign his own name as taxpayer for and on behalf of the decedent and indicating his date of death.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.11 Returns of partnerships.

Returns, statements, and other documents required to be made by partnerships under this article, with respect to the tax imposed shall be signed by any one of the partners. The signature of a partner on a return, statement, or other document made by or for a partnership of which he is a member shall be prima facie evidence that such partner is authorized to sign such return, statement, or other document.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.12 Authenticity of signature.

The name of an individual signed to a return, statement, or other document shall be prima facie evidence for all purposes that the return, statement, or other document was actually signed by him.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.13 Certification of returns.

(a) Persons signing returns. If a return, declaration, statement, or other document made under the provisions of this article, with respect to any tax imposed is required by this article, or the form and instructions, issued with respect to such return, declaration, statement, or other document, to contain or be certified by a written declaration that it is made under the penalties of perjury; such return, declaration, statement, or other document shall be so certified by the person signing it. Such certification shall also apply to the copies of returns, declarations, statements, or other documents that the statements contained therein are true and that such copy filed is a true and correct copy.

(b) Persons preparing returns. The following requirements apply:

(1) In general. Except as provided in paragraph (2), if a return, declaration, statement or other document is prepared for a taxpayer by another person for compensation or as an incident to the performance of other services for which such person receives compensation, and the return, declaration, statement or other document requires that it shall contain or be certified by a written declaration that it is prepared under the penalties of perjury, the preparer shall so certify the return, declaration, statement, or other document. A person who renders mere mechanical assistance in the preparation of the return, declaration, statement, or other document as, for example, a stenographer or typist, shall not be considered as preparing the return, declaration, statement, or other document.

(2) Exception. The certification required by paragraph (1) shall not be required on the returns, declarations, statements, or other documents which are prepared for any of the following:

(i) An employe either by his employer or by an employee designated for such purpose by the employer.

(ii) An employer as a usual incident of the employment of one regularly or continuously employed by such employer.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.14 Extension of time.

(a) In general. The Department is authorized to grant a reasonable extension of time for filing any return, declaration, statement or other document which relates to the tax imposed by this article and which is required under the provisions of this article. However, except in cases of taxpayers who are outside the United States, such extensions of time will not be granted for more than six months. An extension of time for filing income tax returns will not operate to extend the time for payment of the tax or any installment thereof.

(b) Application for extension of time. The procedures to follow in applying for an extension of time are the following:

(1) If a taxpayer is granted an extension of time for filing his federal income tax return he will automatically be granted an extension of time for filing his Commonwealth income tax return. The extension period granted by this Commonwealth will be equivalent to the extension period granted by the Internal Revenue Service. A copy of the letter or form granting the federal extension shall accompany the return Form PA-40 of the taxpayer.

(2) If a taxpayer has not been granted an extension for filing his federal income tax return, he may request an extension of time for filing his Com- monwealth tax return. This extension will not exceed a period of six months except for a taxpayer who is outside the United States. A taxpayer shall file an application for extension of time to file. Applications should be submitted in sufficient time for the Department to consider and act upon them prior to the regular due date of the return. An application for extension of time to file may be obtained by writing to the Department of Revenue, Personal Income Tax Bureau, Harrisburg, Pennsylvania 17129.

(c) Taxpayer unable to sign. If a taxpayer is unable by reason of illness, absence, or other good cause to sign a request for an extension, any person standing in close personal or business relationship to the taxpayer may sign the request on his behalf and shall be considered as a duly authorized agent for this purpose, if the request sets forth the reasons for a signature other than that of the taxpayer and the relationship existing between the taxpayer and the signer.

(d) Form of application. The application for an extension of time for filing a return, statement, or other document may be made in the form of a letter. However, in the case of an individual income tax return, the application for an extension of time for filing shall be made on Form RIT-119. An application for extension of time to file may be obtained by writing to the Department of Revenue, Personal Income Tax Bureau, Harrisburg, Pennsylvania 17129.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.15 Records.

(a) In general. Except as provided in subsection (b), a person subject to tax under this article, or a person required to file a return of information with respect to income, shall keep permanent books of account or records, including inventories, sufficient to establish the amount of gross income, deductions allowable, credits or other matters required to be shown by the person and any return of the tax or information.

(b) Wage earners. Individuals whose gross income include salaries, wages or similar compensation for personal services rendered shall be required, with respect to the income, to keep the records to enable the Department to determine the correct amount of income subject to tax. It is not necessary, with respect to the income, that an individual keep the books of account or records required by subsection (a).

(c) Notice of Department requiring returns, statements or the keeping of records. The Department may require a person, by notice served upon him, to make returns, render a statement or keep specific records as will enable the Department to determine whether or not the person is liable to tax under this article.

(d) Retention of records. The books of records required by this section shall be kept at all times available for inspection by authorized personnel of the Department, and shall be retained so long as the contents thereof may become material in the administration of the tax imposed under this article.

(e) Form of records. The records required by this section shall be kept accurately, but no particular form is required for keeping the records. The forms and systems of accounting shall be used as will enable the Department to ascertain whether liability for taxes incurred exists and, if so, the amount thereof.

(f) Copies of returns, schedules and statements. A person who is required, by this section or by instructions applicable to any form prescribed, to keep any copy of any return, schedule, statement or other document shall keep the copy as part of his records.

(g) Records of claimants. A person (including an employe) who, under this chapter, claims a refund, credit or abatement shall keep a complete and detailed record with respect to the tax, interest, addition to the tax, additional amount or assessable penalty to which the claim relates.

(h) Records of employes or casual employes. While not mandatory, except in the case of claims, it is advisable for each employe or casual employe to keep permanent, accurate records showing the name and address of each employer or casual employer for whom he performs services as an employe or casual employe, the dates of beginning and termination of the services, the information with respect to himself which is required by this chapter to be kept by employers or casual employers and the receipts furnished him by an employer or casual employer.

(i) Place and period for keeping records. The records required by this article shall be kept, by the person required to keep them, at one or more convenient safe locations accessible to authorized personnel of the Department, and shall at all times be available for inspection by the personnel. Every person required by this article to keep records in respect of a tax, whether or not the person incurs liability for the tax, shall maintain the records for at least 4 years after the due date of the tax for the return period to which the records relate, or the date the tax is paid, whichever is later. The records of claimants shall be maintained for at least 3 years after the date the claim is filed.

The provisions of this § 117.15 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 117.15 amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6246. Immediately preceding text appears at serial pages (205401) to (205402).

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.16 Identification number.

(a) Designations. The identifying number to be used by an individual is his social security number which is called an account number. But the number to be used by an individual engaged in a trade or business and required to file returns for Federal employment tax or Federal excise tax purposes is called an employer identification number. The identifying number for all persons other than individuals is also an employer identification number. Thus, it is possible for an individual to have both an account number and an employer identification number.

(b) Use of numbers. Every person required to make a return, statement, or other document with respect to his liability, or to matters relating to or dealing with his liability, for the tax imposed under this article, shall include his account number or his employer identification number, as the case may be, in any such return, statement, or other document filed. If such person is an individual engaged in a trade or business, he shall include his account number in the return, statement, or other document, and shall also include his employer identification number. A fiduciary or agent making a return, statement, or other document for another person shall include therein the identifying number of such other person but not the identifying number of the person acting as fiduciary or agent. An income tax return or a declaration of estimated income tax filed jointly by a husband and wife should include the identifying numbers of both.

(c) Number of person to be used if return is made by another. The following procedures apply if a return is made by another person:

(1) If a return, statement, or other document with respect to any person is required to be made by another person, the account number or the employer identification number, as the case may be, of the person with respect to whom the return, statement, or other document is required to be made, shall be used as follows:

(i) Requested of such person by the person required to make such return, statement, or other document.

(ii) Furnished by such person to the person required to make the return, statement, or other document.

(iii) Included in the return, statement, or other document by the person required to make it.

(2) A request should state the identifying number which is required to be furnished under authority of law. An individual who receives amounts of income for which a return, statement, or other document shall be made by the payer thereof, and which is payable to the trade name of a sole proprietorship operated by him, shall furnish his employer identification number to the payer of such amounts. If such individual is not required to secure an employer identification number, he shall furnish his account number to the payer. If an amount is made payable to a fiduciary or agent for a named or otherwise designated trust, estate, minor, incompetent, or other person, the identifying number of such trust, estate, and the like and not the identifying number of the person acting as fiduciary or agent, shall be included by the payer in the return or statement of information made by him with respect to such payment. In the case of dividends on stock made payable to a person other than the record owner of the stock, the identifying number and name of the record owner shall be included by the payer in the return or statement of information made by him with respect to such dividends.

(d) Multiple payees. If an information return or statement is required to be made by any person with respect to a payment made by him to more than one person, the identifying number of only one of such payees is required to be requested of such payees by the payer, furnished to the payer by such payees, and included by the payer (clearly linked with the name of the payee to whom it belongs if the surnames are different) in the return or statement of information made by him with respect to such payment. If the multiple payees are husband and wife, the account number of the husband shall be requested and furnished and shall be included by the payer in the return or statement of information made by him with respect to the payment. If the multiple payees are an adult and a minor, the account number of the adult shall be requested and furnished and shall be included by the payer in the return or statement of information made by him with respect to the payment.

(e) Applications. Each person shall use as his account number or employer identification number that number which has been assigned to him and which he uses as a means of identification when filing any returns, statements, or other documents for Federal tax purposes. The following requirements apply:

(1) An application for an identifying number shall be made by every person required under this section to include his identifying number in any return, statement, or other document required to be filed by him or to furnish his identifying number to another person for inclusion in any return, statement, or other document required to be filed by such other person. However, any person who has an identifying number, either an account number or an employer identification number, assigned to him previously shall not make application for another number of the same kind under this section.

(2) An individual needing an account number shall complete an application form which may be obtained from any district director of the Internal Revenue Service or any district office of the Social Security Administration. The application, together with any supplementary statement, shall be prepared in accordance with the form, instructions, and regulations applicable thereto and shall set forth fully and clearly the data therein called for. The application shall be filed in accordance with the instructions on the form. An account number will be assigned to the applicant in due course upon the basis of information reported on the application. A card showing the name and account number of the individual to whom the number has been assigned will be furnished to the individual. In appropriate cases, the Department may require such information as may be necessary to assign an identifying number to any person.

(3) Any person needing an employer identification number may obtain an application from any District Director of the Internal Revenue Service Center or any district office of the Social Security Administration. The application, together with any supplementary statement, shall be prepared in accordance with the form instructions, and regulations applicable thereto, and shall set forth fully and clearly the data therein called for. The application shall be signed by one of the following:

(i) The individual, if the person is an individual.

(ii) A responsible and duly authorized member or officer having knowledge of its affairs, if the person is a partnership or other unincorporated organization.

(iii) The fiduciary, if the person is a trust or estate. The application for an employer identification number should be filed approximately one month in advance of the first required use of the number to permit issuance of the number in time for compliance with such requirement. The application shall be filed in accordance with the instructions on the requisite form. An employer identification number will be assigned to the applicant in due course upon the basis of the information reported on the application.

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.17 Partnership returns.

(a) In general. Every partnership having any income derived from sources within this Commonwealth shall make a return for the taxable year setting forth all items of income, loss, and deduction. The return shall state specifically the items of partnership gross income and the deductions allowable and shall include the names and addresses of all the partners and the amount of the distributive shares of income, gain, loss, deduction, or credit allocated to each partner. The return shall be made for the taxable year of the partnership, irrespective of the taxable years of the partners.

(b) Partnerships with Commonwealth source income. Every partnership engaged in trade or business, or having income from sources, within this Commonwealth shall file a partnership return in accordance with this section, whether or not its principal place of business is outside of this Commonwealth, and whether or not all of its members are nonresident partners.

(c) Partnerships having no Commonwealth source income. If a Commonwealth resident is a partner in a partnership having no Commonwealth source income, he shall file a return with the Department. The return shall state specifically the items of partnership gross income and the deductions allowable therefrom and shall include the names and addresses of all resident partners and the amount of the distributive shares of income, gain, loss, deduction, or credit allocable to each such resident partner.

(d) Time for filing. A copy of the Federal partnership information return Form 1065 shall be filed on or before the 15th day of the fourth month following the close of each taxable year of the partnership.

This section cited in 61 Pa. Code § 107.6 (relating to tax returns).

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

61 Pa. Code § 117.18 Return of information as to payment in excess of $10.

(a) A person making a distribution, to a taxpayer, out of a pension or profit sharing plan, other than by reason of death, disability or retirement, shall make an annual information return, to the Department of Revenue, Bureau of Personal Income Tax, with respect to the distribution, to the extent that the distribution exceeds that portion contributed to the plan by the taxpayer.

(1) Information returns shall be filed on or before February 28 of each year for distributions made to a taxpayer in the preceding calendar year.

(2) Separate information returns shall be prepared for each taxpayer receiving a distribution, and the return shall substantially conform to Internal Revenue Service Form 1099R.

(i) The returns shall show the following:

(A) The name, address and identification number of the person making the distribution.

(B) The name, address and Social Security number of the taxpayer receiving the distribution.

(C) The amount or value of the distribution made and the amounts contributed by the employer and by the employe, respectively.

(ii) A copy of the return shall be supplied to the employe.

(3) With prior approval of the Director of the Pennsylvania Personal Income Tax Bureau, a person required to make information returns may be permitted to submit a magnetic tape or computer printed listing in lieu of copies of Form 1099R.

(b) On or before February 28 of each year, a Pennsylvania information return for recipients of dividends and other taxable or nontaxable distributions on shares of stock or beneficial interests shall be made by any of the following:

(1) An investment company making a distribution exceeding $10 to a taxpayer or other investment company if the investment company making payment received interest exempt from tax under the laws of the Commonwealth but is not a regulated investment company, as defined at 26 U.S.C.A. § 851 (relating to definition of regulated investment company).

(2) A corporation that has an election in effect under 26 U.S.C.A. § 1362 (relating to election; revocation; termination) making a distribution exceeding $10 to a taxpayer if the corporation is not required to make an information return on REV Form 20-S, ‘‘Pennsylvania S Corporation Information Return.’’

(3) An investment company making a distribution exceeding $10 to a taxpayer or other investment company if the investment company making payment received interest exempt from State taxation under the laws of the United States.

(4) A regulated investment company, as defined in paragraph (1), making a distribution exceeding $10 to a taxpayer or other investment company if the regulated investment company making payment received interest on State or local bonds that is taxable under this article.

(5) A corporation, association, business trust or investment company making a distribution exceeding $10 to a taxpayer if it is not required to make an information return on Federal Form 1099-DIV.

(6) A personal holding company or foreign corporation, each as defined at 26 U.S.C.A. § 7701 (relating to definitions), making a distribution exceeding $10 to a taxpayer.

(c) Pennsylvania information return. The Pennsylvania information return shall be made in one of the following ways:

(1) The Pennsylvania information return may be made on a Pennsylvania Form 99-DIV ‘‘Information Return for Recipients of Dividends and Distributions’’ or other form acceptable to the Department and shall show the following:

(i) The payer’s name, address and Federal identification number.

(ii) The recipient’s name, address and Federal identification number.

(iii) The amount of dividends, nontaxable distributions, and, in the case of investment companies, Pennsylvania exempt-interest dividends paid.

(2) If a regulated investment company furnishes Federal Form 1099-DIV to a recipient in compliance with Federal Income Tax requirements, the Pennsylvania information return may be made by attaching or providing one of the following:

(i) A separate statement showing the ratio of Pennsylvania exempt-interest dividends paid to total ordinary dividends reported on the Federal form.

(ii) A separate statement showing other information, if the statement and Federal form contain sufficient information to enable distributees to compute the correct amount of Pennsylvania exempt-interest dividends.

(3) If a regulated investment company is not required to furnish Federal Form 1099-DIV, the Pennsylvania information return may be made by separate statement showing the amount of dividends, nontaxable distributions and Pennsylvania exempt-interest dividends paid or containing sufficient information to enable distributees to compute the amount of taxable dividend distributions and any adjustment to basis or taxable gain for the taxable year.

(d) Unless an extension is granted by the Department, on or before February 28 of each calendar year beginning on or after January 1, 1997, an information return shall be furnished to each recipient of distributions who makes a written request therefor or who is one of the following:

(1) A resident individual, estate or trust or other taxpayer.

(2) An investment company.

(e) An investment company, corporation, association, business trust or personal holding company may rely on its business records in determining the identity and place of residence of recipients.

The provisions of this § 117.18 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 117.18 adopted September 27, 1974, 4 Pa.B. 2078; amended March 1, 1996, effective March 2, 1996, 26 Pa.B. 887; amended November 13, 1998, effective November 14, 1998, 28 Pa.B. 5669. Immediately preceding text appears at serial pages (211399) to (211401).

History

• Authority: The provisions of this § 117.
• Source: The provisions of this § 117.

Chapter 119 Liabilities and Assessment—Procedure and Administration

61 Pa. Code § 119.1 Payment on notice and demand.

Payment of tax due under this article shall be payable by taxpayer upon receipt of notice and demand from the Department.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.2 Assessment.

(a) In general. The Department is authorized and required to make inquiries necessary to the determination and assessment of taxes imposed by this article. The Department is further authorized and required to make the determinations and assessments of the taxes. Certain inquiries and determinations may, by direction of the Department, be made by other officials. The term taxes includes interest, additional amounts, additions to the taxes and assessible penalties.

(b) Failure to file return. If a taxpayer fails or neglects to file a return as required by this article, the Department may make an estimated assessment of the proper amount of tax due and owing by the taxpayer. This estimated assessment may be based upon information available to the Department at the time of the estimated assessment. A notice of assessment of the estimated amount will be sent to the taxpayer at his last known address.

(c) False or fraudulent returns. If an examination of a return by the Department discloses that a taxpayer has filed a false or fraudulent return or that the tax disclosed by the return is less than the tax disclosed by the examination, the Department may issue a notice of assessment of additional tax due sent to the taxpayer’s last known address. For purposes of this subsection, the term income as it relates to a trade or business, means the total of the amounts received or approved from the sale of goods or services, to the extent required to be shown on the return, without reduction for the cost of the sales or services. An item may not be considered as omitted from income if information, sufficient to apprise the Department of the nature and amount of the item, is disclosed in the return or in a schedule or statement attached thereto.

(d) Clerical error or mistake. If an examination of a return by the Department discloses that due to a clerical error or mistake in preparing the return or in computing the tax, the tax has been understated, the Department will immediately issue a notice to the taxpayer requesting him to pay the tax due together with interest, penalties or additions within 30 days of receipt of the notice by a taxpayer. The provisions of § 119.6 (Reserved) may not apply to notices issued under this subparagraph.

(e) Payment. Taxes assessed under subsections (b) or (c) shall be paid within 90 days of the date of the notice unless the taxpayer shall, within the period file a petition for reassessment in the manner prescribed in § 119.6.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.3 Bankruptcy or receivership.

(a) Assessment. Upon the adjudication of bankruptcy of a taxpayer in a bankruptcy proceeding or the appointment of a receiver for a taxpayer in receivership proceeding before court, the Department will immediately assess and proceed to collect tax due or estimated to be due together with interest, penalties and additions. The Department may determine the amount of the tax due by means of information available to it. The Department will cause an investigation to be made of the taxpayer’s books and records to assist it in processing its claims.

(b) Proof of claim. Promptly after ascertaining the existence of a tax due or estimated to be due by a taxpayer in a proceeding under 11 U.S.C. § § 101—151326, known as the Federal Bankruptcy Act or in a receivership proceeding, the Department will file proof of claim covering the tax in accordance with law in the court in which the proceeding is pending. At the same time the proof of claim is filed with the bankruptcy or receivership court, the Department will send notice and demand for payment to the taxpayer together with a copy of the proof of claim.

(c) Preexisting appeals. A petition for reassessment or an appeal therefrom which has not been adjudicated prior to the date of initiation of bankruptcy or receivership proceeding may in no way affect the rights of the Department to proceed under this section.

(d) Application of funds. Amounts received from the distribution of assets by the court shall be applied in extinguishment of the tax together with interest, penalties and additions due. The amounts first received shall be applied to the oldest amounts unpaid in chronological order.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.4 Fiduciaries.

This chapter applies to fiduciaries in the same manner as against a taxpayer except that an assessment, jeopardy assessment or claim will be asserted against the fiduciary acting in his representative capacity instead of against him personally. Satisfaction of an assessment, jeopardy assessment or claim will be limited to the property held by the fiduciary in his representative capacity unless he has committed some act which creates a personal liability.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.5 Jeopardy assessments.

(a) Jeopardy assessments, filing and notice. If the Department believes that the assessment or collection of a deficiency of a tax under this article will be jeopardized by delay, in whole or in part, it is required to assess the deficiency immediately, together with the interest, additional amounts and additions to the tax provided by law by mailing or issuing notice of its finding to the taxpayer, together with a demand for immediate payment of the deficiency declared to be in jeopardy.

(b) Closing of taxable year. If a taxpayer designs by immediate departure from this Commonwealth or otherwise, to avoid the payment of a tax imposed by this article for the preceding or current taxable year, the Department may, upon evidence satisfactory to it, declare the taxable period for the taxpayer immediately terminated and serve upon him notice and demand for immediate payment of the tax for the short taxable period resulting from the termination, and of a tax for the preceding taxable year, or so much of the tax as is unpaid. This tax shall be due and payable immediately, even though the time otherwise allowed by law for filing a return and paying the tax has not expired.

(c) Payment and collection of jeopardy assessment. After a jeopardy assessment has been made, the Department will be required to send notice and demand to the taxpayer for the amount of the jeopardy assessment. The amount of the jeopardy assessment shall be immediately due and payable and proceedings for collection may be commenced by the Department at once. Collection of the jeopardy assessment may be stayed if the taxpayer, within 10 days after the date of the notice of the jeopardy assessment, files a petition for reassessment, accompanied by a bond or other security. The amount of the bond or security shall be the amount of the tax assessed, including interest, penalties and additions computed to the date of the notice plus 60 days together with an amount equaling 10% of the total figure. A bond given by a taxpayer under this subsection shall be executed by a surety company which is licensed with or under the supervision of the Insurance Commissioner of the Commonwealth. A security given by a taxpayer under this subsection may be any one of the following items or combination of items:

(1) The amount of the bond or security shall be in the amounts as the Department may deem necessary.

(2) A certified check on a State or national bank within the Commonwealth payable to the Department.

(3) Satisfactory municipal bonds negotiable by delivery, or obligations of the United States government negotiable by delivery.

(d) Additional security. The Department may require additional security whenever, in its opinion, the value of the security given is no longer sufficient to adequately secure the total amount of taxes and additions thereto.

(e) Finality of jeopardy assessment. A jeopardy assessment shall become final if a petition for reassessment, accompanied by bond or other security, is not filed within the 10 day period provided for in subsection (c).

(f) Hearing and action on petition for reassessment. The Department will grant a taxpayer or his authorized representative an oral hearing if the taxpayer so requests it in his petition for reassessment.

(g) Decision. The taxpayer will be notified by the Department of its decision after the oral hearing, if requested, and after considering the petition for reassessment. The decision of Department as to the validity of the jeopardy assessment will be final unless, within 90 days after notification of the Department’s decision, the taxpayer files a petition for review by the Board of Finance and Revenue as provided under § 119.7 (relating to review by Board of Finance and Revenue).

(h) Presumptive evidence of jeopardy. In the event of a jeopardy assessment, the belief of the Department, whether made after notice to the taxpayer or not, will be, for purposes, presumptive evidence that the assessment or collection of the tax or the deficiency was in jeopardy. A certificate of the Department of the mailing or issuing of the notices specified in this section will be presumptive evidence that the notices were so mailed or issued.

The provisions of this § 119.5 amended June 11, 1976, effective June 12, 1976, 6 Pa.B. 1331.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.7 Review by Board of Finance and Revenue.

(a) Petition for review of reassessment. The taxpayer has the right to file with the Board of Finance and Revenue a petition for review of a reassessment made by the Department within 90 days after the date of mailing the notice of the action taken upon a petition for reassessment. Failure of the Department to notify the petitioner of a decision within the 6-month period as provided for under § 119.6 (Reserved) shall act as a denial of the petition, and a petition for review may be filed with the Board of Finance and Revenue within 120 days after written notice is mailed to the petitioner that the Department has failed to dispose of his petition within the six-month period.

(b) Information from the Department. The Department may, if requested by the Board, furnish the Board with such information as it may have which may assist the Board in making a determination on the petition.

(c) Action by the Board. The Board of Finance and Revenue shall dispose of any petition within six months of its receipt thereof. Failure of the Board to dispose of any such petition within the 6-month period shall be deemed an affirmance of the action of the Department. The Board may sustain the action taken by the Department with respect to the petition for reassessment, or it may reassess the tax due upon such basis, as it shall deem, according to law.

(d) Notice of action by Board. The Board of Finance and Revenue shall give written notice by mail of any action taken by it to the Department and to the petitioner, his attorney, authorized agent or representative.

This section cited in 61 Pa. Code § 119.5 (relating to jeopardy assessments).

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.8 Appeal to a Commonwealth court.

From any decision or ruling made by the Board of Finance and Revenue, or upon the failure of the Board to act upon a petition for review, an aggrieved taxpayer shall have the right of an appeal to the Commonwealth Court. If the Commonwealth is aggrieved by a decision of the Board of Finance and Revenue, it also has the right of an appeal to the Commonwealth Court. Such appeals shall be filed within 30 days from the date of the mailing of the decision of the Board of Finance and Revenue or within 30 days from the end of the six-month period when the Board fails to act. From the action of the Commonwealth Court, further appeal to the Supreme Court of the Commonwealth may be had. For the rules and form of the petition to the Commonwealth Court, see the Commonwealth Court Procedural Rules.

The provisions of this § 119.8 amended January 31, 1975, 5 Pa.B. 195.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.9 Collection of tax.

The Department will collect the taxes imposed by this article in the manner provided by law for the collection of taxes imposed by the laws of this Commonwealth.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.10 Time of collection of tax.

(a) Collection. The Department will proceed to collect any tax due including interest, penalties, and additions as follows:

(1) Immediately in all cases of bankruptcies, receiverships, assignments, judicial sales, and clerical errors or mistakes in preparing a return or in computing the tax.

(2) Immediately in all cases if a jeopardy assessment notice has been issued unless a taxpayer has filed a petition for reassessment and posted the required bond within ten days after mailing of the notice by the Department.

(3) After 90 days from the date of mailing of a notice of assessment, unless a taxpayer has filed a petition for reassessment within 90 days after mailing of the notice by the Department.

(4) After 90 days from the date of mailing of notice of a decision by the Department on a petition for reassessment unless a taxpayer has filed a petition for review with the Board of Finance and Revenue within 90 days after mailing of the notice by the Department.

(5) After 120 days from the date of mailing of notice by the Department that it failed to dispose of the petition for reassessment unless a taxpayer has filed a petition for review with the Board of Finance and Revenue within 120 days after mailing of the notice by the Department.

(6) After 30 days from the date of mailing of notice of a decision by the Board of Finance and Revenue on a petition for review unless a taxpayer shall have perfected an appeal to the Commonwealth Court within 30 days after mailing of notice by the Board, and shall have filed with the prothonotary of the Commonwealth Court appropriate security in the amount of 120% of the amount of taxes found due by the Board and remaining unpaid.

(7) After 30 days from the last day the Board of Finance and Revenue should have disposed of the petition for review if no decision was made unless a taxpayer shall have perfected an appeal to the Commonwealth Court within 30 days of the date the Board should have disposed of the petition, and shall have filed with the prothonotary of the Commonwealth Court appropriate security in the amount of 120% of the amount of taxes found due by the Board and remaining unpaid.

(8) Immediately upon a final order of the Commonwealth court or upon a final order of the Supreme Court of this Commonwealth if an appeal was taken to that court.

(b) Defenses. In any proceeding for the collection of tax due including interest, penalties, and additions, the taxpayer against whom an assessment was made shall not be permitted to set up any ground of defense that might have been presented to the Department, the Board of Finance and Revenue, or the Commonwealth court if he had properly pursued his administrative remedies under this article.

The provisions of this § 119.10 amended September 17, 1976, 6 Pa.B. 2289.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.11 Liens for tax.

(a) If any person liable for any tax including interest, penalties, and addition neglects or for any reason refuses to pay the same on the date such becomes due, the amount of such tax, interest, penalties, and additions together with any other costs that accrue shall be a lien in favor of the Commonwealth against the real estate of such person. The following requirements shall apply:

(1) The Department may forward for filing a certified copy of such lien, interest, penalties, additions, and prothonotary’s costs and fees and upon

(2) The lien will be considered perfected when filed and docketed by the prothonotary.

(3) The lien shall continue for five years from the date of docketing and may be revived and continued by the Department in the manner now or hereafter provided by law.

(4) The Department may seek a writ of scire facias in the Court of Common Pleas of the county where the real estate is situated and prosecute to judgment and execution in the manner now or hereafter provided by law in order to satisfy taxes including interest, penalties, and additions due and owing.

(b) Upon receipt from the Department of a certified copy of a lien the prothonotary shall forthwith enter and docket the lien which shall be indexed as judgments are now indexed. No prothonotary shall require the payment of any costs or fees as a condition precedent to the filing and docketing of any such liens. Any wilful failure of any prothonotary to carry out any duty imposed upon him by this section shall be a misdemeanor and, upon conviction thereof, he shall be sentenced to pay a fine not exceeding $1,000 and cost of prosecution, or to undergo imprisonment not exceeding one year, or both.

(c) The lien of the Department will have priority to and be fully paid before any other obligation, judgment, claim, lien, or estate with which the real estate may become charged with or liable for after the filing and docketing of the lien of the Department.

(d) The lien of the Department will be subordinate to the following:

(1) Mortgages against the real estate which have been duly recorded prior to the tax lien.

(2) Cost of the writ and the judicial sale.

(3) Real estate taxes imposed or assessed upon the real estate.

(e) Prior to execution and upon payment of all taxes due including interest, penalties, additions, and prothonotary’s costs and fees and upon request of the taxpayer, the Department may release the property subject to the lien. A certificate by the Department to the effect that any property has been released from the lien shall be conclusive evidence that the property has been released.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.12 Refund or credit of overpayment.

(a) General rule. The Department, within the applicable period of limitations may credit any overpayment of tax, including interest thereon, against any outstanding liability for any tax, or for any interest, additional amount, addition to tax, or assessable penalty, owed by the person making the overpayment, and the balance, if any, will be refunded to such person by the Department.

(b) Overpayment of installment of estimated tax. If a taxpayer has paid an installment of estimated tax in excess of the correct amount of such installment, such overpayment will be credited against any unpaid installments. If the amount so paid, whether or not on the basis of installments, exceeds the amount determined to be the correct amount of the tax, such overpayment will be credited or refunded as provided in subsection (a).

This section cited in 61 Pa. Code § 119.13 (relating to restrictions on refunds).

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.13 Restrictions on refunds.

(a) General rule. Except as provided in subsection (b), the Department will make a credit or refund under § 119.12 (relating to refund or credit of overpayment) only pursuant to a petition for refund. See Chapter 7 (relating to Board of Appeals).

(b) Exceptions. The Department will make a credit or refund if the credit or refund arises as a result of:

(1) The overpayment of an installment of estimated tax.

(2) The filing of a final return showing less tax due after the application of the allowable credits than the amount of tax withheld from the compensation of the taxpayer or the amount of tax paid by him as estimated tax under this article.

(3) The filing of an amended return showing an overpayment of tax.

(4) A petition for reassessment. The credit or refund will only be for amounts paid by reason of the assessment.

(5) A Departmental audit.

The provisions of this § 119.13 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 119.13 amended January 25, 2013, effective January 26, 2013, 43 Pa.B. 535. Immediately preceding text appears at serial pages (205414) to (205415).

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.13a Refund claim filed by a legal representative or other fiduciary.

If a return is filed by an individual and, after his death, a refund claim is filed by a legal representative, certified copies of the letters testamentary, letters of administration or other similar evidence shall be annexed to the claim to show the authority of the legal representative to file the claim. If an executor, administrator, guardian, trustee, receiver or other fiduciary files a return and thereafter a refund claim is filed by the same fiduciary, documentary evidence to establish the legal authority of the fiduciary does not need to accompany this claim if a statement is made in the claim showing that the return was filed by the fiduciary and that the latter is still acting. In these cases, if a refund is to be paid, letters testamentary, letters of administration or other evidence may be required but should be submitted only upon the receipt of a specific request therefor. If a claim is filed by a fiduciary other than the one by whom the return was filed, the necessary documentary evidence should accompany the claim. A claim may be executed by an agent of the person assessed, but in this case a power of attorney must accompany the claim.

The provisions of this § 119.13a issued under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 119.13a adopted January 25, 2013, effective January 26, 2013, 43 Pa.B. 535.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.13b Checks in payment of claims.

Checks in payment of claims allowed will be drawn in the names of the persons entitled to the money and may be sent directly to the claimant or to a person in care of an attorney or agent who has filed a power of attorney specifically authorizing him to receive checks.

The provisions of this § 119.13b issued under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 119.13b adopted January 25, 2013, effective January 26, 2013, 43 Pa.B. 535.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.14 Limitations on assessment and collection.

(a) The amount of any tax imposed by this article will be assessed within three years after the return was filed.

(b) For purposes of § § 119.15 and 119.16 (relating to omission from return; exceptions to general period of limitations on assessment and collection) any return filed before the last day prescribed by law or regulations for the filing thereof (determined without regard to any extension of time for filing) will be considered as having been filed on the last day.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.15 Omission from return.

If the taxpayer omits from the income stated in the return of a tax imposed by this article an amount properly includable therein which is in excess of 25% of the income so stated, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within 6 years after the return was filed.

This section cited in 61 Pa. Code § 119.14 (relating to limitations on assessment and collection).

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.16 Exceptions to general period of limitations on assessment and collection.

(a) False return. In the case of a false or fraudulent return with the intent to evade any tax, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time after such false or fraudulent return is filed.

(b) Wilful attempt to evade tax. In the case of a wilful attempt in any manner to defeat or evade any tax imposed by this article, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

(c) No return. In the case of a failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time after the date prescribed for filing the return.

This section cited in 61 Pa. Code § 119.14 (relating to limitations on assessment and collection).

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.17 Extension of limitation.

The time prescribed by this chapter for the assessment of any tax may, prior to the expiration of such time, be extended for any period of time agreed upon in writing by the taxpayer and the Department. The extension shall become effective if the agreement has been executed by both parties. The period agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.18 Limitations on refund or credit.

Any petition for refund shall be filed in accordance with Chapter 7 (relating to Board of Appeals) and within applicable limitation periods.

The provisions of this § 119.18 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 119.18 amended January 25, 2013, effective January 26, 2013, 43 Pa.B. 535. Immediately preceding text appears at serial page (205416).

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.19 Interest.

Interest at the rate of 0.75% per month, for each month or fraction thereof for which any amount of tax imposed by this article is not paid on or before the last day prescribed for payment, shall be imposed for the period from such last date to the date paid. The last date prescribed for payment shall be determined without regard to any extension of time for filing the return, however, this section shall not apply to any failure to pay estimated tax.

The provisions of this § 119.19 amended December 29, 1978, 8, Pa.B. 3825. Immediately preceding text appears at serial page (36082).

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.20 Additions.

(a) Failure to file tax return. In the event of failure to file any return required under § 117.1 (relating to general requirement of a return) on the date prescribed therefor (determined with regard to any extension of time for filing), there shall be added to the tax required to be shown on the return the amount specified in subsection (b) unless the failure to file the return within the prescribed time is shown to the satisfaction of the Department to be due to reasonable cause and not to wilful neglect. The amount to be added to the tax is 5% thereof, if the failure is for not more than one month, with an additional 5% for each additional month or fraction thereof during which the failure continues, but which shall not exceed 25% in the aggregate.

(b) Penalty imposed on net amount due. The amount of tax required to be shown on the return for the purposes of this section shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed on the return.

(c) Month defined. If the date prescribed for filing the return is the last day of a calendar month, each succeeding calendar month or fraction thereof during which the failure to file continues shall constitute a month for purposes of this chapter. If the date prescribed for filing the return is a date other than the last day of a calendar month, the period which terminates with the date numerically corresponding thereto in the succeeding calendar month and each such successive period shall constitute a month for purposes of this chapter. If a return is not timely filed, the fact that the date prescribed for filing the return or the corresponding date in any succeeding calendar month, falls on a Saturday, Sunday or a legal holiday shall be immaterial in determining the number of months for which the addition to the tax under this chapter applies.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.21 Failure to pay tax due to negligence or intentional disregard of rules and regulations.

If any part of any underpayment is due to negligence or intentional disregard to rules and regulations, but without intent to defraud, there will be added to the tax an amount equal to 5% of the underpayment.

This section cited in 61 Pa. Code § 119.22 (relating to failure to pay due to fraud).

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.22 Failure to pay due to fraud.

If any part of any underpayment of tax required to be shown on a return is due to fraud, there will be added to the tax an amount equal to 50% of the underpayment. If a 50% addition to the tax for fraud is assessed with respect to an underpayment then the addition as provided in § 119.21 (relating to failure to pay tax due to negligence or intentional disregard of rules and regulations) will not be assessed with respect to the same underpayment.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.23 Additions imposed for failure to file or to pay estimated tax.

(a) Except as provided in subsection (c), any individual who is required to file a declaration of estimated tax shall be deemed to have made an underpayment of estimated tax if he fails to pay all or any part of an installment when due. The amount of the underpayment shall be the excess of the amount of the installment which would be required to be paid if the estimated tax were equal to 80% of the tax (2/3 in the case of an individual) shown on the return for the taxable year (or if no return was filed of the tax for such year) over the amount, if any, of the installments paid on or before the last day prescribed for such payment.

(b) Any individual making an underpayment shall pay, in addition to the tax, an amount at the rate of 9% per annum of the underpayment for the period of the underpayment. The period of the underpayment shall begin on the day after such payment was due and continue until such tax is actually paid but not beyond the 15th day of the fourth month following the close of the taxable year of the individual.

(c) No additions to the tax will be imposed if such installment is paid on or before the last date prescribed for payment, and the amount of such payment is one of the following:

(1) At least 80% (66 2/3% for an individual who expects to obtain at least 2/3 of his total estimated taxable income from farming for the year) of the amount due on the basis of the tax shown on the return for the taxable year.

(2) At least as much as would have been paid if based on the tax shown on the return of the prior year of the taxpayer.

(3) Based on a tax computed by using the income of the taxpayer for the prior year and the current tax rate.

(4) At least 90% of the tax due on the actual income earned in the months preceding the due date of the installment in question.

The provisions of this § 19.23 amended December 29, 1978, 8 Pa.B. 3826. Immediately preceding text appears at serial page (36084).

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.24 Failure to collect or truthfully account.

Any person required to collect, account for, and pay over any income tax who wilfully fails to collect, truthfully account for, and pay over such tax, or wilfully attempts in any manner to evade or defeat any such tax or the payment thereof shall be liable to a penalty equal to the total amount of tax evaded or not collected or not accounted for and paid over.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.25 Failing to furnish or furnishing a false withholding statement.

Any employer required, under the provisions of § 113.4 (relating to time and place for filing reconciliation and withholding statements), to furnish a withholding statement to an employe who wilfully furnishes a false or fraudulent statement, or who wilfully fails to furnish a statement in the manner or at the time, or not showing the information required by § 113.4 shall for each such failure be liable to a penalty of $50 for each employe.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.26 Employer bad check.

Any employer who issues a check in payment of any tax which shall be returned to the Department as uncollectible, shall be charged a fee of 10% of the face amount of such check, but such fee shall not exceed $200 nor be less than $10, plus all protest fees, to cover the cost of collections.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.27 Fiduciary request.

To facilitate the settlement and distribution of a decedent’s estate, the Department will, at the request of the fiduciary, executor, administrator, or other person who may have any liability for any income tax due from a decedent or his estate, determine the amount of income taxes due, if any, from the decedent or his estate and upon payment of the amount of tax plus appropriate penalty and interest so determined, the fiduciary or the person otherwise liable, shall be discharged from personal liability for any tax deficiency thereafter found to be due.

(1) After the filing of all returns due from the decedent and his estate, a request for such determination may be made, in duplicate, to the Department, on the form, ‘‘Request for Final Determination of Personal Income Tax Liability.’’

(2) The determination by the Department shall be final and conclusive, and if not appealed by the fiduciary and except upon proof of fraud, misrepresentation or nondisclosure of a material fact by the fiduciary:

(i) The determination shall not be reopened or modified by any officer, employe or agent of the Commonwealth.

(ii) In any suit, action or proceeding, such determination, or any collection, payment, abatement, refund or credit made in accordance therewith, shall not be annulled, modified, set aside or disregarded.

Decedent’s Final Return was filedby the Fiduciary on

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.28 Timely mailing treated as timely filing and payment.

Whenever payment of all or any portion of the tax imposed by this article is required to be received by the Department on or before a certain date, the taxpayer shall be deemed to have complied with this article if the letter transmitting payment of such tax is received by the Department and is postmarked by the United States Postal Service on or prior to the final day on which the payment is required to be received. Any private postage meter or similar device imprinting a postmark or date shall not be controlling upon the Department.

The provisions of this § 119.28 adopted June 12, 1975, 5 Pa.B. 1561.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.29 Procedure for claiming special tax provisions.

The following procedures shall be employed for claiming the special tax provisions:

(1) The claimant may claim the special tax provisions upon the expiration of his taxable year by completing a Special Tax Provisions Schedule (Schedule SP) and filing it in conjunction with the annual return required under the provisions of this article.

(2) If the claimant is required to file an estimated tax return under the provisions of this article, he may utilize the special tax provisions in computing the tax due with such returns.

The provisions of this § 119.29 adopted June 12, 1975, effective 5 Pa.B. 1561.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

61 Pa. Code § 119.30 Innocent spouse relief.

(a) Definitions.

The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Collection activity—The application of any overpayment to the liability provided for under section 346 of the TRC (72 P. S. § 7346), the mailing of a notice that the Department plans to intercept taxpayer’s Federal Income Tax under section 6402 of the IRC (26 U.S.C.A. § 6402) or the issuance of a writ of execution, whichever first occurs. Disqualified asset—Any property or right to property that was transferred from the nonelecting spouse to the electing spouse if the principal purpose of the transfer was the avoidance of tax or payment of tax, including additions to tax, penalties and interest. Electing spouse—A taxpayer who follows the procedure described in subsection (f). Nonelecting spouse—An electing taxpayer’s spouse in the tax year for which the electing taxpayer is seeking tax relief under this section. Rebate—The amount refunded or credited to a taxpayer because the Department determined that the Pennsylvania tax liability reported on the Personal Income Tax return exceeds the Pennsylvania tax liability due or any other amount refunded or credited to taxpayer that reduces the Pennsylvania tax liability reported on the return. Taxpayers’ Rights Advocate—As defined in section 207 of the Taxpayers’ Bill of Rights (72 P. S. § 3310-207). Understatement—The excess of the tax required to be shown on the Personal Income Tax return for the taxable year, less the tax shown on the Personal Income Tax return reduced by any rebate.

(b) In general.

(1) Relief from joint and several liability for understated tax. A spouse who filed a joint Pennsylvania Personal Income Tax return with a spouse may elect relief from joint and several liability for Pennsylvania Personal Income Tax which was understated on the joint return, provided the following conditions are met:

(i) The understatement of tax is attributable to erroneous items of the spouse.

(ii) The eligible spouse did not know or have reason to know of the understatement.

(2) Relief from joint and several liability for unpaid tax. The Taxpayers’ Rights Advocate may grant relief for a tax liability due to the underpayment of tax as reported on the taxpayers’ joint return. The relief granted must be a separate liability of the taxpayer’s spouse, and the Taxpayers’ Rights Advocate must find that it is inequitable to hold the taxpayer liable for the separate liability of the taxpayer’s spouse.

(c) Joint liability relief for an understatement of tax available to all joint filers.

(1) In general. A joint filer shall be relieved of liability for tax (including interest, penalties and other charges) for a taxable year to the extent the liability is an understatement attributable to the other joint filer if the following conditions are met:

(i) A joint return has been made for a taxable year.

(ii) There is an understatement of tax on the return attributable to erroneous items of the other individual filing the joint return.

(iii) The individual establishes that in signing the return the individual did not know and had no reason to know of the understatement made on the return.

(iv) Taking into account all the facts and circumstances, it is inequitable to hold the individual liable for the tax deficiency attributable to the understatement.

(v) The individual elects the benefits of this subsection no later than 2 years from the date of the first collection activity for the understatement.

(2) Knowledge or reason to know. A spouse has knowledge or reason to know of an understatement if the spouse actually knew of the understatement or if a reasonable person in similar circumstances would have known of the understatement. All facts and circumstances are considered in determining whether an electing spouse had reason to know of an understatement. Some of the facts and circumstances considered include the following:

(i) The nature of the erroneous item and the amount of the erroneous item relative to other items.

(ii) The couple’s financial situation.

(iii) The electing spouse’s educational background and business experience.

(iv) The extent of the electing spouse’s participation in the activity that resulted in the erroneous item.

(v) Whether the electing spouse failed to inquire, at or before the time the return was signed, about items on the return or omitted items from the return that a reasonable person would question.

(vi) Whether the erroneous item represented a departure from a recurring pattern reflected in prior years’ returns; such as, omitted income from an investment regularly reported on prior years’ returns.

(3) Apportionment of relief. Relief shall be apportioned when a spouse establishes that in signing the return the spouse did not know, and had no reason to know, the extent of the understatement; and but for spouse’s knowledge of the understatement, the spouse would have been relieved of liability under paragraph (1). The spouse shall be relieved of liability for tax (including interest, penalties and other charges) for the taxable year to the extent that the liability is attributable to the portion of the understatement of which the spouse did not know and had no reason to know.

Example: H and W are married and file their 2005 joint Pennsylvania Personal Income Tax return on March 1, 2006. In 2005, casinos report income of $300,000 to H, and H and W do not include this income on their return. H kept his gambling income in an individual bank account; and each month, H transferred a sum of at least $6,000 into H and W’s joint bank account. The total deposits from H’s separate account to the joint account for the 2005 tax year totaled $90,000. All of H and W’s reported income was deposited into this joint account.

W paid the household expenses using the joint account and regularly received the bank statements for it. W did have knowledge and reason to know of at least $90,000 of the $300,000 income reported by the casinos. W may not be relieved of the liability for the tax deficiency arising from $90,000 of the unreported gambling income of which she knew. W may be relieved of the deficiency arising from the additional $210,000 of gambling income reported by the casinos if given the facts and circumstances of H and W’s activities, income, and the like, W had no reason to know of the additional $210,000 of income.

(d) Joint liability relief by separation of liability available to taxpayers no longer married or taxpayers legally separated or not living together.

(1) In general. Except as provided in this subsection, if an individual who has made a joint return for any taxable year elects the relief available in this subsection, the individual’s liability for tax which is assessed due to an understatement of tax on the return may not exceed the portion of the deficiency allocable to the individual as provided in paragraph (3).

(2) Election.

(i) Individuals eligible to make election.

(A) In general. An individual shall only be eligible to elect the application of this subsection if one of the following conditions is met:

(I) At the time the election is filed, the individual is no longer married to, or is legally separated from the individual with whom the individual filed the joint return to which the election relates.

(II) The electing individual was not a member of the same household as the individual with whom the joint return was filed at any time during the 12-month period ending on the date the election is filed.

(B) Certain taxpayers ineligible to elect. If the Department determines that assets were transferred between individuals filing a joint return or by individuals filing a joint return as part of a fraudulent scheme by the individuals, an election under this subsection by either individual shall be invalid and the liability with respect to the tax shall be joint and several. Transfers made as part of a fraudulent scheme include transfers made to frustrate the collection of tax. For purposes of this subsection, a fraudulent scheme includes a scheme to defraud the Department or another third party, including, but not limited to, creditors, ex-spouses and business partners.

(C) Member of the same household.

(I) Separate dwellings. A husband and wife who reside in the same dwelling are considered members of the same household. In addition, a husband and wife who reside in two separate dwellings are considered members of the same household if the spouses are not estranged or one spouse is temporarily absent from the other’s household within the meaning of subclause (II).

(II) Temporary absences. An electing spouse and a nonelecting spouse are considered members of the same household during either spouse’s temporary absences from the household if it is reasonable to assume that the absent spouse will return to the household; and the household or a substantially equivalent household is maintained in anticipation of the return. Examples of temporary absences may include absence due to incarceration, illness, business, vacation, military service or education.

(ii) Election not valid with respect to certain deficiencies. If the individual making an election under this subsection had actual knowledge, at the time the individual signed the return, of any item giving rise to a deficiency (or portion thereof) which is not allocable to the individual under paragraph (3), an election does not apply to the deficiency or any portion.

(A) Actual knowledge—omitted income. In the case of omitted income, knowledge of the item includes knowledge of the receipt of the income. This rule applies equally in situations where the other spouse has unreported income although the spouse does not have an actual receipt of cash (such as, dividend reinvestment or a distributive share from a flow-through entity).

Example. W received $5,000 of dividend income from her investment in X Company but did not report it on the joint return. H knew that W received $5,000 of dividend income from X Company that year. H had actual knowledge of the erroneous item (that is, $5,000 of unreported dividend income from X Company); and no relief is available under this section for the deficiency attributable to the dividend income from X Company.

(B) Actual knowledge—deduction or credit. In the case of an erroneous deduction or credit, knowledge of the item means knowledge of the facts that made the item not allowable as a deduction or credit. If a deduction is fictitious or inflated, the Department must establish that the electing spouse actually knew that the expenditure was not incurred or not incurred to that extent.

(C) Partial knowledge. If an electing spouse had actual knowledge of only a portion of an erroneous item, then relief is not available for that portion of the erroneous item. An electing spouse’s actual knowledge of the proper tax treatment of an item is not relevant for purposes of demonstrating that the electing spouse had actual knowledge of an erroneous item. In addition, an electing spouse’s knowledge of how an erroneous item was treated on the tax return is not relevant to a determination of whether the electing spouse had actual knowledge of the item.

Example 1. If H knew that W received $5,000 of gambling winnings but did not know that W’s actual winnings were $25,000, relief would not be available for the portion of the deficiency attributable to the $5,000 of income of which H had actual knowledge.

Example 2. Relief is not available under this subsection when H knew that W received winnings of $5,000 but did not know they were taxable.

Example 3. H knew of W’s winnings, but H failed to review the completed return and did not know that W omitted the income from the return. Relief is not available under this subsection.

(D) Knowledge of the source not sufficient. Knowledge of the source of an erroneous item is not sufficient to establish actual knowledge. In addition, an electing spouse’s actual knowledge may not be inferred when the electing spouse merely had reason to know of the erroneous item. Similarly, the Department need not establish that an electing spouse knew the source of an erroneous item to establish that the electing spouse had actual knowledge of the item itself.

Example 1. H knew that W owned X Company stock, but H did not know that X Company paid dividends that year. H’s knowledge of W’s ownership in X Company is not sufficient to establish that H had actual knowledge of the dividend income from X Company. Even if H’s knowledge of W’s ownership interest in X Company indicates a reason to know of the dividend income, actual knowledge of the dividend income cannot be inferred from H’s reason to know.

Example 2. H knew that W received $5,000, but he did not know the source of the $5,000. W and H omit the $5,000 from their joint return. H had actual knowledge of the erroneous item (that is, the omitted $5,000). No relief is available under this subsection.

(E) Factors supporting actual knowledge. To demonstrate that an electing spouse had actual knowledge of an erroneous item at the time the return was signed, the Taxpayers’ Rights Advocate may rely upon all the facts and circumstances. One factor that may be relied upon in demonstrating that an electing spouse had actual knowledge of an erroneous item is whether the electing spouse made a deliberate effort to avoid learning about the item to be shielded from liability. This factor, together with all other facts and circumstances, may demonstrate that the electing spouse had actual knowledge of the item, and the electing spouse’s election would be invalid with respect to that entire item. Another factor that may be relied upon in demonstrating that an electing spouse had actual knowledge of an erroneous item is whether the electing spouse and the nonelecting spouse jointly owned the property that resulted in the erroneous item. Joint ownership is a factor supporting a finding that the electing spouse had actual knowledge of an erroneous item.

(iii) Disqualified asset transfers.

(A) In general. The portion of the deficiency for which an electing spouse is liable is increased (up to the entire amount of the deficiency) by the value of any disqualified asset that was transferred to the electing spouse. For purposes of this subparagraph, the value of a disqualified asset is the fair market value of the asset on the date of the transfer.

(B) Presumption. Any asset transferred from the nonelecting spouse to the electing spouse during the 12-month period before the mailing date of the Department’s first billing notice of the tax liability for which innocent spouse relief is requested is presumed to be a disqualified asset. The presumption also applies to any asset that is transferred from the nonelecting spouse to the electing spouse after the mailing date of the first billing notice. The presumption does not apply, however, if the electing spouse establishes that the asset was transferred pursuant to a divorce decree or a separate maintenance order or a written instrument incident to the decree or court order. If the presumption does not apply, but the Department can establish that the purpose of the transfer was the avoidance of tax or payment of tax, the asset will be disqualified, and its value (up to the entire amount of the deficiency) will be added to the amount of the deficiency for which the electing spouse remains liable. If the presumption applies, an electing spouse may still rebut the presumption by establishing that the principal purpose of the transfer was not the avoidance of tax or payment of tax.

Example 1. Disqualified asset presumption. H and W are divorced. In May 2005, W transfers $20,000 to H, and in April 2006, H and W receive a billing notice proposing a $40,000 deficiency on their 2004 joint Pennsylvania Personal Income Tax return. The liability remains unpaid, and in October 2006, H elects to allocate the deficiency under this section. Seventy-five percent of the net amount of erroneous items is allocable to W, and 25% of the net amount of erroneous items is allocable to H.

In accordance with the proportionate allocation method (see paragraph (3)), H proposes that $30,000 of the deficiency be allocated to W and $10,000 be allocated to himself. H submits a signed statement providing that the principal purpose of the $20,000 transfer was not the avoidance of tax or payment of tax, but he does not submit any documentation indicating the reason for the transfer. H has not overcome the presumption that the $20,000 was a disqualified asset. Therefore, the portion of the deficiency for which H is liable ($10,000) is increased by the value of the disqualified asset ($20,000). H is relieved of liability for $10,000 of the $30,000 deficiency allocated to W, and remains jointly and severally liable for the remaining $30,000 of the deficiency (assuming that H does not qualify for relief under any other provision).

Example 2. Disqualified asset presumption inapplicable. On May 1, 2001, H and W receive a billing notice regarding a proposed deficiency on their 1999 joint Pennsylvania Personal Income Tax return relating to an unreported capital gain from H’s sale of his investment in Z stock. W had no actual knowledge of the stock sale. The deficiency is assessed in November 2001, and in December 2001, H and W divorce. According to a decree of divorce, H must transfer 1/2 of his interest in mutual fund A to W. The transfer takes place in February 2002. In August 2002, W elects to allocate the deficiency to H. Although the transfer of 1/2 of H’s interest in mutual fund A took place after the billing notice was mailed, the mutual fund interest is not presumed to be a disqualified asset because the transfer of H’s interest in the fund was made pursuant to a decree of divorce.

Example 3. Overcoming the disqualified asset presumption. H and W are married for 25 years. Every September, on W’s birthday, H gives W a gift of $500. On February 28, 2007, H and W received a billing notice from the Department relating to their 2003 joint Pennsylvania Personal Income Tax return. The deficiency relates to H’s business, and W had no knowledge of the items giving rise to the deficiency. H and W are legally separated in June 2004, and, despite the separation, H continues to give W $500 each year for her birthday. H is not required to give the amounts pursuant to a decree of divorce or separate maintenance. On January 27, 2009, W files an election to allocate the deficiency to H. The $1,500 transferred from H to W from February 28, 2006, (a year before the billing notice was mailed) to the present is presumed disqualified. However, W may overcome the presumption that the amounts were disqualified by establishing that the amounts were birthday gifts from H and that she has received the gifts during their entire marriage. Those facts would show that the amounts were not transferred for the purpose of avoidance of tax or payment of tax.

(3) Allocation of relief.

(i) Allocation of erroneous items. For purposes of allocating a deficiency under this section, erroneous items are generally allocated to the spouses as if separate returns were filed, subject to the following exceptions:

(A) Benefit on the return. An erroneous item that would otherwise be allocated to the nonelecting spouse is allocated to the electing spouse to the extent that the electing spouse received a tax benefit on the joint return.

(B) Fraud. The Taxpayers’ Rights Advocate may allocate any item between the spouses if the Department establishes that the allocation is appropriate due to fraud by one or both spouses.

(C) Erroneous items of income. Erroneous items of income are allocated to the spouse who was the source of the income. Compensation is allocated to the spouse who performed the services producing the compensation. Items of business or investment income are allocated to the spouse who owned the business or investment. If both spouses owned an interest in the business or investment, the erroneous item of income is generally allocated between the spouses in proportion to each spouse’s ownership interest in the business or investment, subject to the limitations of this paragraph. In the absence of clear and convincing evidence supporting a different allocation, an erroneous income item relating to an asset that the spouses owned jointly is generally allocated 50% to each spouse, subject to the limitations in this paragraph and the exceptions in this subparagraph.

(D) Erroneous deduction items. Erroneous deductions related to a business or investment are allocated to the spouse who owned the business or investment. If both spouses owned an interest in the business or investment, an erroneous deduction item is generally allocated between the spouses in proportion to each spouse’s ownership interest in the business or investment. In the absence of clear and convincing evidence supporting a different allocation, an erroneous deduction item relating to an asset that the spouses owned jointly is generally allocated 50% to each spouse, subject to the limitations in this paragraph and the exceptions in this subparagraph. Deduction items unrelated to a business or investment are also allocated 50% to each spouse, unless the evidence shows that a different allocation is appropriate.

(ii) Allocation method.

(A) Proportionate allocation. The portion of a deficiency allocable to the electing spouse is the amount that bears the same ratio to the deficiency as the net amount of erroneous items allocable to the electing spouse bears to the net amount of all erroneous items. This calculation may be expressed as follows:

net amount of erroneous items

X = (deficiency) * allocable to the electing spouse net amounts of all erroneous items( )

X = Electing spouse’s share of deficiency

(B) Items proportionately allocated. The proportionate allocation in clause (A) applies to any portion of the deficiency, except for the following:

(I) Any portion of the deficiency attributable to erroneous items allocable to the nonelecting spouse of which the electing spouse had actual knowledge.

(II) Any portion of the deficiency attributable to penalties.

(C) Penalties. Any additions, penalties and fees under section 352 of the TRC of 1971 (72 P. S. § 7352) are allocated to the spouse whose item generated the cost.

(D) Examples. In each example, the electing spouse or spouses qualify to elect to allocate the deficiency, that any election is timely made, and that the deficiency remains unpaid. In addition, unless otherwise stated, assume that neither spouse has actual knowledge of the erroneous items allocable to the other spouse.

Example 1. Allocation of erroneous items. W and H timely file their 2005 joint Pennsylvania Personal Income Tax return on April 15, 2006. On October 17, 2006, the Department issued an assessment with respect to their 2005 joint return. The following erroneous items give rise to the deficiency:

A disallowed business expense for H’s business.

A disallowed deduction for educational expenses reported by W.

Unreported interest income from a joint account. H and W divorce on January 4, 2007, and W timely elects to allocate the deficiency. The erroneous items are allocated as follows:

The disallowed business expense is allocable to H.

The disallowed educational expense is allocable to W.

The unreported interest income from the joint account normally would be allocated 1/2 to H and 1/2 to W, but because both H and W had knowledge of the income, an election to allocate this portion of the deficiency is invalid.

Example 2. Proportionate allocation. W and H timely file their 2005 joint Pennsylvania Personal Income Tax return on April 15, 2006. On October 17, 2006, the Department issued an assessment for $12,280 with respect to their 2005 joint return. H and W divorce on December 4, 2006, and W timely elects to allocate the deficiency. The following erroneous items give rise to the deficiency:

$300,000 business loss allocable to H.

Deduction under section 179 of the IRC (26 U.S.C.A. § 179) of $60,000 allocable to H.

$15,000 deduction for unreimbursed employee business expenses allocable to W.

$25,000 of unreported interest allocable to W.

In total, there are $400,000 of erroneous items, of which $40,000 is attributable to W and $360,000 is attributable to H. The ratio of erroneous items allocable to W to the total erroneous items is 1/10 ($40,000/$400,000).

$1,228 = ($12,280) * $40,000 $400,000

W’s liability is limited to $1,228 of the deficiency (1/10 of $12,280). The Department may collect up to $1,228 from W and up to $12,280 from H. The total amount collected, however, may not exceed $12,280. If H also made an election, there would be no remaining joint and several liability, and the Department would be permitted to collect $1,228 from W and $11,052 from H.

Example 3. Proportionate allocation with joint erroneous item. On September 4, 2006, W elects to allocate to H a $921 deficiency for the 2005 tax year. The following erroneous items give rise to the deficiency:

Unreported interest in the amount of $20,000 from a joint bank account.

Disallowed unreimbursed employee business expenses of $2,000 attributable to W.

Disallowed business expenses in the amount of $8,000 attributable to H’s business.

The erroneous items total $30,000. Generally, income, deductions, or credits from jointly held property that are erroneous items are allocable 50% to each spouse. However, in this case, both spouses had actual knowledge of the unreported interest income. Therefore, W’s election to allocate the deficiency attributable to the interest is invalid. W and H remain jointly and severally liable for the tax due on the interest. The tax due on the interest is $614. W may allocate the remaining $10,000. The tax due on the amount to be allocated is $307.

$61.40 = ($307) * $2,000 $10,000

W’s remaining tax liability = $724; [$61 (Allocable to W) + $614 (Nonallocable portion of deficiency)]

H’s liability = $921. The Department would be permitted to collect $724 from W and $921 from H. The total amount collected, however, may not exceed $921.

If H were also to make an election, the Department would be permitted to collect $860 from H. [(.8) ($307) = $246 Portion allocable to H]; [$860 = $246 + 614 (Nonallocable portion of deficiency)]

(4) Burden of proof. Except for establishing actual knowledge under paragraph (2)(ii), the electing spouse must prove that all of the qualifications for making an election under this section are satisfied and that none of the limitations (including the limitation relating to transfers of disqualified assets) apply. The electing spouse must also establish the proper allocation of the erroneous items.

(5) Limitations. The relief available under this subsection is limited to relief for understated tax. Refunds are not authorized under this subsection.

(e) Relief by income allocation for unpaid tax or an understatement of tax if relief was unavailable under subsections (c) and (d).

(1) In general. Using the factors provided in paragraph (3), if the electing spouse is divorced, widowed, or legally separated and the factors favoring relief outweigh the factors weighing against relief and none of the limitations in paragraph (2) apply, the Taxpayers’ Rights Advocate may allocate the electing spouse’s tax liability as provided in paragraph (3).

(2) Relief limitations.

(i) The income tax liability which the electing spouse seeks relief must be attributable to an item of the other spouse (or former spouse) with whom the electing spouse filed the joint return, unless one of the following exceptions applies:

(A) An electing spouse has only nominal ownership of an item. If an item is titled in the name of the electing spouse, the item is presumptively attributable to the electing spouse. This presumption is rebuttable.

Example: H opens an individual retirement account (IRA) in W’s name and forges W’s signature on the IRA in 1980. Thereafter, H makes contributions to the IRA. In 2007, when H is age 50, H takes a distribution from the IRA. H and W file a joint return for the 2007 taxable year but do not report the taxable portion of the distribution on their joint return. The Department issues an assessment relating to the IRA distribution and assesses the deficiency against H and W. W requests relief from joint and several liability under this section. W establishes that W had no knowledge of the IRA account, did not contribute to the IRA, sign paperwork relating to the IRA, or otherwise act as if she were the owner of the IRA. W thereby rebutted the presumption the IRA is attributable to W.

(B) If the electing spouse did not know and had no reason to know that funds intended for the payment of tax were misappropriated by the nonelecting spouse for the nonelecting spouse’s benefit, the Taxpayers’ Rights Advocate will consider granting equitable relief in this case only to the extent that the funds intended for the payment of tax were taken by the nonelecting spouse.

(C) If the electing spouse establishes he was the victim of abuse prior to the time the return was signed, and that, as a result of the prior abuse, the electing spouse did not challenge the treatment of any items on the return for fear of the nonelecting spouse’s retaliation, the Taxpayers’ Rights Advocate will consider granting equitable relief although the understatement may be attributable in part or in full to an item of the electing spouse.

(ii) Refunds are not available under this subsection. Relief is limited to reducing or eliminating an electing spouse’s tax deficiency.

(iii) Relief is not available for unpaid tax that is a separate liability of the taxpayer’s spouse and is for a tax year more than 12 months prior to the legal separation or divorce of the taxpayer from the spouse or for a tax year more than 12 months prior to the date the taxpayer and the spouse were no longer members of the same household as described in subsection (d)(2)(i)(C).

(iv) Relief is not available if an electing spouse has taxable income and has not filed the return required by section 330 of the TRC (72 P. S. § 7331) or if an electing spouse has an outstanding personal income tax liability for a tax year or tax years other than the year or years for which the electing spouse is seeking relief under this section.

(v) Relief is not available for an electing spouse unless one of the following conditions is met:

(A) At the time the election is filed, the individual is no longer married to, or is legally separated from, the individual with whom the individual filed the joint return to which the election relates.

(B) The electing individual was not a member of the same household as the individual with whom the joint return was filed at any time during the 12-month period ending on the date the election is filed.

(3) Factors for determining whether to grant relief as described in this subsection. The Taxpayers’ Rights Advocate will consider the following factors in determining whether, taking into account all the facts and circumstances, it is inequitable to hold the electing spouse liable for all or part of the tax deficiency or unpaid tax:

(i) Knowledge or reason to know. The electing spouse’s knowledge or reason to know of a deficiency or the failure to pay the reported tax liability is a factor weighing against relief. The lack of the knowledge, however, is not a factor weighing in favor of granting relief.

(A) Unpaid tax. In the case of an income tax liability that was properly reported but not paid, the electing spouse’s actual knowledge or reason to know that the nonelecting spouse would not pay the income tax liability is a factor weighing against relief.

(B) Deficiency cases. Actual knowledge of the item giving rise to the deficiency is a strong factor weighing against relief. This strong factor only may be overcome if the factors in favor of relief are compelling. Reason to know of the item giving rise to the deficiency rather than actual knowledge will not be weighed more heavily than other factors.

(C) Reason to know. For purposes of clauses (A) and (B), in determining whether the electing spouse had reason to know, the Taxpayers’ Rights Advocate will consider the electing spouse’s level of education, any deceit or evasiveness of the nonelecting spouse, the electing spouse’s degree of involvement in the activity generating the income tax liability, the electing spouse’s involvement in business and household financial matters, the electing spouse’s business or financial expertise, and any lavish or unusual expenditures compared with past spending levels.

(ii) Abuse. The presence of abuse by the nonelecting spouse is a factor favoring relief. The lack of abuse by the nonelecting spouse will not be weighed against relief. A history of abuse by the nonelecting spouse may mitigate an electing spouse’s knowledge or reason to know.

(iii) Nonelecting spouse’s legal obligation. The nonelecting spouse’s legal obligation to pay the outstanding income tax liability pursuant to a divorce decree or agreement will not weigh in favor of relief if the electing spouse knew or had reason to know, when entering into the divorce decree or agreement, that the nonelecting spouse would not pay the income tax liability.

(iv) Significant benefit. The electing spouse has significantly benefited beyond normal support from the unpaid liability. Evidence of direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understatement. The receipt of a significant benefit is a strong factor weighing against relief. The failure of the electing spouse to receive a significant benefit will not weigh in favor of relief.

Example. If an electing spouse receives property (including life insurance proceeds) from the nonelecting spouse that is beyond normal support and traceable to items omitted from gross income that are attributable to the nonelecting spouse, the electing spouse will be considered to have received significant benefit from those items.

(v) Compliance with income tax laws. The failure of an electing spouse to comply with Article III of the TRC (72 P. S. § § 7301—7361) in the taxable years following the taxable year or years to which the request for relief relates is a strong factor weighing against relief without clear evidence that the electing spouse made a good faith effort to comply.

(vi) Economic hardship. Whether the electing spouse would suffer economic hardship if the Taxpayers’ Rights Advocate does not grant relief from the income tax liability. Economic hardship is present when the electing spouse is unable to pay reasonable basic living expenses. The determination of a reasonable amount of basic living expenses will vary according to the circumstances of the individual taxpayer. These circumstances, however, do not include the maintenance of an affluent or luxurious standard of living. In determining a reasonable amount for basic living expenses, the Taxpayers’ Rights Advocate will consider information provided by the taxpayer including the following:

(A) The taxpayer’s age, employment status and history, ability to work, number of dependents, and status as a dependent of someone else.

(B) The amount reasonably necessary for food, clothing, housing (including utilities, homeowner insurance, homeowner dues, and the like), medical expenses (including health insurance), transportation, current tax payments (including Federal, State and local), alimony, child support, or other court-ordered payments, and expenses necessary to the taxpayer’s production of income (such as dues for a trade union or professional organization, or child care payments which allow the taxpayer to be gainfully employed).

(C) The cost of living in the geographic area in which the taxpayer resides.

(D) The amount of property exempt from levy which is available to pay the taxpayer’s expenses.

(E) Extraordinary circumstances such as special education expenses, a medical catastrophe or natural disaster.

(F) Eligibility for tax forgiveness in current and tax years subsequent to the tax year for which relief is requested.

(vii) Mental or physical health. In determining whether the electing spouse was in poor mental or physical health on the date the electing spouse signed the return or at the time the electing spouse requested relief, the Taxpayers’ Rights Advocate will consider the nature, extent, and duration of illness when weighing this factor, but the lack of evidence of poor mental or physical health of an electing spouse will not weigh against relief.

(4) Allocation method for unpaid tax. The electing spouse’s liability for unpaid tax (including interest, penalties and other charges) is determined using the items reported on the joint return and calculating the separate return amount due from the electing spouse in accordance with the following:

(i) Income, deductions and credits earned by, paid to, paid by, or attributable to solely one spouse will be assigned to that spouse.

(ii) Except for estimated tax payments made jointly and a payment made with the joint return from joint funds of both spouses, income, deductions and credits earned by, paid to, paid by, or attributable to both spouses jointly, or paid from joint funds of both spouses will be divided equally between the spouses.

(iii) The portion of the estimated tax payments made jointly and the payment made with the joint return that is from joint funds of the spouses that is allocable to each spouse is the amount that bears the same ratio to the sum of the spouse’s joint estimated payments and joint payment with the return as the separate return amount of each spouse’s total income less compensation bears to the total income less compensation reported on the joint return.

Example 1: H and W filed a joint 2006 Pennsylvania Personal Income Tax return on February 1, 2007, and reported a tax due amount of $307. H and W did not include any payment with the return. H and W had separate checking accounts. W did not participate in H’s business. The Department issued an assessment for the $307 on October 1, 2007. H and W did not file a petition for reassessment. On November 1, 2008, H and W’s divorce was finalized. On July 15, 2009, W filed the forms required to request innocent spouse relief for the tax assessment issued on October 1, 2007. W timely filed her 2007 and 2008 Pennsylvania Personal Income Tax returns and paid the tax due with the return. W states that she assumed H wrote a check for the 2006 tax due and enclosed the check with the return because in previous years he paid the tax due with the return because her earnings were subject to withholding tax and H had no withholding tax. In addition, the interest they earned each year generally was less than the unreimbursed business expenses W incurred.

H and W’s joint return reported the following:

If H and W were to have filed separate returns, the returns would appear as follows:

Factors weighing in favor of granting W relief are W’s divorce from H within the year following the tax year for which she is seeking tax relief. H and W did not have a joint checking account, and in past years, H paid the tax due with each return with a check from his account. W’s withholding exceeded the tax liability attributable to the income allocable to her. W has no outstanding tax liabilities, and she properly filed her 2007 and 2008 Pennsylvania Personal Income Tax returns. Both years her withholding tax exceeded the tax due with the return. No evidence exists for factors weighing against granting relief from the tax liability attributable to H’s income.

The Taxpayers’ Rights Advocate may grant W relief on the assessment because the factors weighing in favor of granting relief exceed the factors weighing against granting relief. W does not receive a refund. H is liable for the $307 tax due with H and W’s 2007 joint return.

Example 2: H and W have lived apart since December 2008. H and W filed a joint income tax return for tax year 2006. The return included the following:

H and W did not pay the tax due. H and W only had a joint checking account, and the interest they received related to jointly held investment. The rental property was owned by H and W. W regularly picked up and opened the household mail.

W received a notice that her Federal income tax refund would be intercepted to pay the 2006 Pennsylvania Personal Income Tax liability. W filed an election to obtain innocent spouse relief. W did not present any evidence that she would suffer economic hardship if relief was not granted. W’s tax returns for subsequent tax years were filed and any tax due was paid.

Since H and W’s employers withheld the applicable income tax on the compensation they earned, the unpaid tax due related to the interest and rental income. Since this income is attributable to jointly held property, if H and W had filed separate returns, they each would have reported half of the interest income and rental income. Accordingly, if the Taxpayers’ Rights Advocate grants W any relief, the relief which may be granted is limited to 50% of the outstanding liability.

The factors weighing against granting even 50% relief outweigh the factors favoring relief because no factor weighs in favor of relief. W had reason to know that the tax due was not paid with the return and is outstanding. The income on which the tax was not paid was attributable to jointly held property. The Taxpayers’ Rights Advocate should not grant W relief.

Example 3: H and W divorced in November 2008. H and W filed a joint income tax return for tax year 2003. The return included the following:

H and W did not pay the tax due. H and W only had a joint checking account, and the interest they received related to jointly held investment. The rental property was owned by H and W. W regularly picked up and opened the household mail.

W received a notice that her Federal income tax refund would be intercepted to pay the 2003 Pennsylvania Personal Income Tax liability. W filed an election to obtain innocent spouse relief. W did not present any evidence that she would suffer economic hardship if relief was not granted. W’s tax returns for subsequent tax years were filed and any tax due was paid.

The unpaid tax due is attributable to income obtained from jointly held property. If H and W had filed separate returns, they each would have reported half of the interest income and rental income.

No relief may be granted because W is seeking relief for a tax year more than 12 months before she was divorced or maintained a separate household from her spouse.

(5) Burden of proof. The electing spouse must prove that the allocation of the income, deductions, credits, and other items from the joint return to separate returns is correct.

(f) Procedure for requesting relief.

(1) Election.

(i) To make an election for the relief available in subsections (c) and (d), an electing spouse shall complete and file with the Taxpayers’ Rights Advocate the forms and documentation prescribed by the Department.

(ii) A valid election under this section is the first timely claim for relief from joint and several liability for the tax year for which relief is sought. A valid election also includes an electing spouse’s second election to seek relief from joint and several liability for the same tax year under subsection (d) when the following apply:

(A) The electing spouse did not qualify for relief under subsection (d) when the Taxpayers’ Rights Advocate considered the first election solely because the qualifications of subsection (d)(2)(i)(A) were not satisfied.

(B) At the time of the second election, the qualifications for relief under subsection (d) are satisfied.

(iii) An electing spouse is entitled to only one final administrative determination of relief under this section for a given liability, unless the electing spouse properly submits a second request for relief as described in subparagraph (ii). A taxpayer’s failure to make a valid election as provided in subsection (g)(1) is not an election for relief, and the Taxpayers’ Rights Advocate notice to the Taxpayer of the invalid election is not an administrative determination of relief.

(2) Timing of election.

(i) The forms prescribed by the Department shall be filed no later than 2 years from the date of the first collection activity against the electing spouse with respect to the joint tax liability.

(ii) The Taxpayers’ Rights Advocate may not consider a claim for innocent spouse relief that is filed for a tax year prior to the date the tax becomes collectible by the Department.

(g) Taxpayers’ Rights Advocate’s procedure.

(1) Invalid election. If the taxpayer fails to complete and provide the prescribed forms and documentation required for a valid election, the taxpayer will be notified that the forms as submitted do not qualify as an election and will advise the electing spouse what information or documentation must be provided to make the election. If the taxpayer fails to cure the inadequacy of the election, the Taxpayers’ Rights Advocate will notify the electing spouse that a decision cannot be rendered.

(2) Spousal notification. The Taxpayers’ Rights Advocate will notify the nonelecting spouse of the valid election filed by the spouse for relief under this section and give the nonelecting spouse the opportunity to become a party to any proceeding or object to the Taxpayers’ Rights Advocate’s proposed allocation.

(3) Relief determination. The Taxpayers’ Rights Advocate will determine the portion of the tax that will be apportioned or allocated solely to the nonelecting spouse as permitted under subsections (c), (d) and (e) and grant the electing spouse relief from joint and several liability for the amounts.

(4) Notification of relief. Within 6 months of the Taxpayers’ Rights Advocate’s notice of its receipt of a valid election, the Taxpayers’ Rights Advocate will notify the electing spouse of the relief granted.

(5) Appeal rights.

(i) The electing spouse may appeal any of the following actions by filing a petition as prescribed in section 2704 of the TRC of 1971 (72 P. S. § 9704):

(A) A denial of the election for relief available in subsections (c) and (d).

(B) The Taxpayers’ Rights Advocate’s failure to notify the electing spouse of a decision within 6 months of the date of the electing spouse’s valid election.

(ii) Since a taxpayer elects the relief available under subsections (c) and (d) and the right of appeal is limited to a denial of the taxpayer’s election or the failure to notify the taxpayer of a decision within 6 months of the valid election, the Taxpayers’ Rights Advocate’s decision to deny relief described in subsection (e) is not subject to review.

(h) Relief for penalties, interest and other charges. Relief for penalties, interest and other charges follows relief granted on the underlying tax. Thus, if an electing spouse is eligible for relief from tax, the electing spouse is also eligible for relief from the corresponding penalties, interest and other charges. Relief is not available under this section if there was no underpayment of tax on the tax return or the tax reported as due with the return was paid with the return.

Example: Taxpayers filed a joint return late, paid the tax but still owed penalties and interest for filing late. Relief is not available under this section.

The provisions of this § 119.30 issued under section 212 of the Taxpayers Bill of Rights (72 P. S. § 3310-212).

The provisions of this § 119.30 adopted December 10, 2010, effective December 11, 2010, 40 Pa.B. 7093.

History

• Authority: The provisions of this § 119.
• Source: The provisions of this § 119.

Chapter 121 Final Returns

61 Pa. Code § 121.1 Filing tax return.

(a) Every resident individual, estate or trust having taxable income for the taxable year shall file a tax return.

(b) Every nonresident individual, estate or trust having taxable income for the taxable year derived from sources within this Commonwealth shall file a tax return.

(c) The return for any deceased person shall be filed by his executor, administrator or other person charged with his property.

(d) The return for an individual who is unable to make a return by reason of minority or other disability shall be filed by his guardian, committee, fiduciary or other person charged with the care of his person or property or by his duly authorized agent.

(e) The return for an estate or trust shall be filed by the fiduciary. If two or more fiduciaries are acting jointly, the return may be filed by any one of them.

(f) A return need not be filed by an individual whose tax liability is less than $1.

(g) A return filed before the due date or extended due date will be considered to be filed on the due date or extended due date.

The provisions of this § 121.1 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 121.1 amended January 25, 2013, effective January 26, 2013, 43 Pa.B. 535. Immediately preceding text appears at serial page (302163).

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.2 Filing Form PA-40.

Residents, part-year residents and nonresidents shall file the same Form PA-40.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.3 Residence.

(a) A person is a resident of this Commonwealth for income tax purposes if he is domiciled in Pennsylvania and does not qualify as a nonresident. Domicile is that place which a person considers home and to which he intends to return if away therefrom.

(b) Even though a person is not domiciled in this Commonwealth he shall, nevertheless, be considered a Commonwealth resident for tax purposes if he spends, in the aggregate more than 183 days of the taxable year in this Commonwealth.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.4 Method of taxing residents.

If a person is a Commonwealth resident, income from sources both within and without this Commonwealth shall be subject to the Com monwealth personal income tax. A taxpayer shall be allowed a credit against the personal income tax if subject to and paying any tax imposed by other states or countries which is based upon income and such income is subject to the Commonwealth personal income tax. This credit shall be limited to the proportion of the tax otherwise due that the amount of the income of the taxpayer subject to tax by the other jurisdiction bears to his entire taxable income. If a taxpayer claims a credit for taxes paid to other states, references should be made to the detailed instructions of Schedule G.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.5 Nonresidents.

A person is a nonresident of this Commonwealth for income tax purposes if domiciled in this Commonwealth and has no permanent place of abode in this Commonwealth; does maintain a permanent place of abode elsewhere; and does not spend more than 30 days of the taxable year in this Commonwealth. If a person is not domiciled in this Commonwealth, then he is a nonresident of this Commonwealth if he spends less than 183 days of the taxable year in this Commonwealth.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.6 Method of taxing nonresidents.

(a) If a person is a nonresident of this Commonwealth, the income received, earned or otherwise acquired from sources within this Commonwealth shall be subject to the Commonwealth personal income tax. Generally, if he is an employe, the exact amount of compensation for services performed in this Commonwealth is known because the employer shall allocate the exact amount of compensation, withhold the tax on this amount and report the employe’s Commonwealth earnings on the employes Commonwealth withholding forms. If, however, earnings are not subject to withholding reference should be made to the instructions to Part I of Schedule H to determine how to apportion compensation from services performed both within and without this Commonwealth.

(b) If a person has business or farm income derived from sources both within and without this Commonwealth, and does not maintain accounts and records which clearly reflect income from within this Commonwealth, reference should be made to the instructions to Part II of Schedule H to determine how to apportion business or farm income derived from sources both within and without this Commonwealth.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.7 Part-year residents.

A person is a part-year resident for Commonwealth income tax purposes if he has changed his residence during the taxable year from a place outside this Commonwealth to this Commonwealth with the intent of residing permanently in this Commonwealth, or from Commonwealth to a place outside this Commonwealth with the intent of residing permanently outside this Commonwealth.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.8 Method of taxing part-year residents.

(a) If a person is a part-year resident he shall be subject to the Commonwealth personal income tax as a resident for only that part of the year in which he was a resident. A taxpayer should indicate on Form PA-40 the length of time he was a resident.

(b) In addition, if a person derived income from sources within this Commonwealth during that part of the taxable year in which he was a nonresident, he shall be subject to the Commonwealth personal income tax as a nonresident for that part of the taxable year on income derived within this Commonwealth. In such case, both his taxable income as a resident and his taxable income as a nonresident should be entered on the same Form PA-40 in order to compute your total tax liability. If as a nonresident his compensation was not subject to withholding or if he derived income from a business and did not maintain records which clearly reflected his income within this Commonwealth, reference should be made to the instructions to Schedule H on how to apportion your income.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.9 Taxable income.

(a) The tax imposed under the act of August 31, 1971 (P. L. 362, No. 93) (72 P. S. § § 7201—8101) applies to income received or accrued to a taxpayer on or after June 1, 1971. Taxpayers who file on a fiscal year basis shall be subject to the tax for the first taxable period on that portion of the fiscal year which postdates May 31, 1971.

(b) The tax is levied at the flat rate of 2.3% on eight classes of income defined as follows:

(1) Compensation. All salaries, wages, commissions, bonuses and incentive payments whether based on profits or otherwise, fees, tips, and similar remuneration received for services rendered whether directly or through an agent and whether in cash or in property.

(2) Net profits. The net income from the operation of a business, profession, or other activity after provision for all costs and expenses incurred in the conduct thereof, determined either on a cash or accrual basis in accordance with accepted accounting principles and practices but without deduction of taxes based on income.

(3) Net gains or income from disposition of property. Net gains or net income, less net losses, derived from the sale, exchange or other disposition of property, including real or personal, whether tangible or intangible. The term net gains or income shall not include gains or income derived from obligations which are statutorily free from State or local taxation under any other act of the General Assembly of this Commonwealth or under the laws of the United States.

(4) Other. Net gains or income derived from or in the form of rents, royalties, patents and copyrights.

(5) Dividends. Any distribution in cash or property made by a corporation, association, or business trust paid out of the following:

(i) Accumulated earnings and profits.

(ii) Earnings and profits of the year in which such dividend is paid.

(6) Interest. Interest derived from obligations which are not statutorily free from state or local taxation under any other act of the General Assembly of this Commonwealth or under the laws of the United States.

(7) Gambling and lottery winnings. All gambling and lottery winnings.

(8) Estates or trusts. Net gains or income derived through estates or trusts.

(c) The act does not provide for any adjustment to the tax base for personal exemptions or deductions.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.10 Reporting income.

(a) Under the law, only certain classes of income are subject to tax. Therefore, that income not included in any of the eight categories is exempt from the tax.

(b) Examples of income subject to the tax which shall be reported are the following:

(1) Wages, salaries, commissions, bonuses, incentive payments and tips.

(2) Net profits from business or profession.

(3) Profits from a partnership or association.

(4) Net gains from sales or exchanges of real estate, autos, securities and other property.

(5) Rents and royalties from property, patents and copyrights.

(6) Gambling and lottery winnings.

(7) Interest on bank deposits, bonds and notes.

(8) Interest on net gain on bonds or obligations of other states or countries.

(9) The taxpayer’s share of income from estates or trusts.

(10) Dividends except dividends paid in the form of stock distributed by a corporation to its stockholders if the distribution is not treated as personal income for Federal Income Tax purposes.

(c) Examples of income not subject to the tax which should not be reported are the following:

(1) Pensions and annuities.

(2) Government payments made to veterans and their families.

(3) Benefits paid by public retirement systems.

(4) Interest on obligations of this Commonwealth or its political subdivisions and authorities and interest on certain obligations of the United States government, its agencies or instrumentalities are not taxable if they are statutorily free from taxation. Interest on obligations of other states and countries, however, shall be subject to the Commonwealth Income Tax.

(5) Payments to reimburse actual expenses.

(6) The value of meals and lodging furnished for the convenience of the employer or casual employer.

(7) Social Security benefits.

(8) Military pay received by a United States serviceman on active duty outside of this Commonwealth.

(9) Life insurance proceeds.

(10) Workers’ Compensation benefits.

(11) Payments for occupational diseases under section 108 of the Workers’ Compensation Act (77 P. S. § 27.1) and section 108 of the Pennsylvania Occupational Disease Act (77 P. S. § 1208).

(12) Public assistance payments.

(13) Unemployment compensation payments.

(14) Income received for child support.

(15) Educational stipends for which no services are rendered, such as scholarships.

(16) Dividends paid in the form of stock by the distributing corporation if not treated as personal income for Federal Income Tax purposes.

The provisions of this § 121.10 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 121.10 amended March 19, 1982, effective March 20, 1982, 12 Pa.B. 994; amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249. Immediately preceding text appears at serial pages (205426) to (205427).

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.11 Partnership or similar enterprise.

(a) If a person is a member of a partnership, joint venture or similar enterprise, the person shall report his share of taxable income whether he received it or not.

(b) A taxpayer should enter his share of net profits on line two.

The provisions of this § 121.11 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 121.11 amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249. Immediately preceding text appears at serial page (205427).

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.12 Members of the armed forces subject to the tax.

(a) If a person is a member of the armed forces and is a resident of this Commonwealth, he shall be subject to the Commonwealth personal income tax. If a person was domiciled in this Commonwealth at the time he entered the military service, he does not cease to be a resident of this Commonwealth as a result of his presence in another state or foreign country under military orders. That means a person shall file a Form PA-40 and pay the tax due in the same manner as any other resident individual unless he satisfies all three of the following conditions:

(1) Had no permanent place of abode in this Commonwealth during the taxable year.

(2) Maintained a permanent place of abode outside this Commonwealth during the entire taxable year.

(3) Did not spend more than 30 days in this Commonwealth during the taxable year.

(b) A serviceman who lives on a military installation or in assigned or rented government quarters will not be considered as maintaining a permanent place of abode. However, it will generally be recognized that a serviceman does maintain a permanent place of abode if he leases, rents, or buys a dwelling place near his station of duty and occupies it with his family if his duty assignment is of an indefinite nature.

(c) All military pay, whether combat or noncombat is subject to the Commonwealth personal income tax.

(d) Because of the Soldiers and Sailors Civil Relief Act of 1940 (50 U.S.C. § 101 et seq.), nonresident military personnel who are serving at a military installation in this Commonwealth shall not be subject to the Commonwealth personal income tax on their military pay but are subject to tax on any other income they earn in this Commonwealth. Similarly, any income earned by their spouse or any other member of their household shall be subject to the Commonwealth personal income tax.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.13 Net losses.

(a) Under the provisions of Article III of the Tax Reform Code of 1971 (72 P. S. § § 7301—7361) a person shall not be allowed to offset a gain in one class of income with a loss in another class of income. However, a gain may be offset with a loss in the same class of income but limited to the amount of the gain if the income class is one in which net income rather than gross income is reported. For example, if a person experiences a net loss from the sale or exchange of property he shall not enter this loss on Form PA-40 and use this loss to offset income from compensation. However, both gains and losses from the sale or exchange of property may be entered on Schedule D and thus offset part or all of the income in this class.

(b) If a person experiences a net loss in an income class he should enter a zero on the appropriate line of Form PA-40.

Class of Income

Rental losses and losses from the disposition of real estate cannot be used to offset income from compensation or the net profits from the operation of a business or profession, because losses in one class of income, as defined by section 303 of the Tax Reform Code of 1971 (72 P. S. § 7303), cannot be used to offset a gain in another class of income. Therefore, any paper or real loss suffered by or through the ownership of the apartment building could not have been used by the individual taxpayers to offset or reduce income or profit from any other source or endeavor. Orsato-Guenon, Inc. v. Commonwealth, 665 A.2d 520 (Pa. Cmwlth. 1995).

Selective Application Unacceptable

Selective application of the tax code and these regulations was simply unacceptable. The taxpayer, an S corporation, merely failed to complete a simple form yet in every other way properly complied with the law with the individual stockholders paying Pennsylvania personal income tax on their individual returns. The bottom line was that taxpayer, the corporation, did not own the real estate in question; thus, it had no income and could not be liable for any income tax. Orsato-Guenon, Inc. v. Commonwealth, 665 A.2d 520 (Pa. Cmwlth. 1995).

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.15 Types of returns.

(a) If a husband and wife elect to file separate returns each shall report his or her separate income on a separate form.

(b) If a husband and wife elect to file a joint return they shall include all income of both husband and wife. A husband and wife may file a joint return even though one of them had no income.

(c) Husband and wife filing jointly receive no tax benefits under the Commonwealth income tax law as is the case when filing a joint return for Federal income tax purposes. The filing of a joint return would be for the convenience of the taxpayer.

(d) If filing a joint return, a spouse shall not offset a gain in one class of income with a loss of the other spouse in another class of income, and in addition a spouse shall not offset a gain in the same class of income with a loss of the other spouse in the same class of income.

(e) If a joint return is filed the couple assumes full legal responsibility for the entire year and if one fails to pay the tax, the other shall pay it. In the return heading, both names and both social security numbers shall be listed. Both shall sign the return.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.17 When to file.

(a) Returns for calendar or fiscal years ending in 1971 after June 1 shall be filed by April 15, 1972.

(b) Returns for the fiscal year beginning in 1971 shall be filed on or before the 15th day of the fourth month following the close of the fiscal year.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.18 Extension of time for filing a return.

(a) If a person is granted an extension of time for filing his Federal income tax return, he will automatically be granted an extension of time for filing his Commonwealth income tax return. The extension period granted by the Commonwealth will be equivalent to the extension period granted by the Internal Revenue Service. A copy of the letter or form granting the Federal extension shall accompany your return Form PA-40.

(b) If a person has not been granted an extension for filing his Federal income tax return, he may request an extension of time for filing his Commonwealth tax return. This extension shall not exceed a period of six months except for a taxpayer who is outside the United States. A taxpayer shall file an application for extension of time to file. Applications should be submitted in sufficient time for the Department to consider and act upon them prior to the regular due date of the return. An Application for extension of time to file may be obtained by writing to the Department of Revenue, The Personal Income Tax Bureau, Harrisburg, Pennsylvania, 17129.

(c) An extension of time to file an income tax return shall not extend the time for payment of the tax. For either type of extension a taxpayer shall pay in full on or before the original due date the amount reasonable estimated as his Commonwealth tax due.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.19 Where to file.

Returns shall be filed with the Department of Revenue, The Personal Income Tax Bureau, P. O. Box 8111, Harrisburg, Pennsylvania 17129.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.20 How to pay.

The balance of tax due on line 17 of Form PA-40 shall be paid in full with the return, unless the amount due is less than $1.00, in which case no payment will be required. Make check or money order payable to Pennsylvania Department of Revenue.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.21 Rounding money items off to whole dollars.

On the return and any schedules required to be completed, money items may be shown in whole-dollar amounts. This is accomplished by eliminating any amount less than $.50 and increasing any amount that is $.50 or more to the next highest dollar.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.22 Name and social security number on forms and schedules.

The name and social security number of a taxpayer shall be entered on all schedules accompanying the return and shall be the same as that shown on Form PA-40.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.23 Signature and verification.

(a) A return shall not be valid unless it is signed. Husband and wife both shall sign a joint return.

(b) Any person, firm, or corporation who prepares the return of a taxpayer shall sign. If the return is prepared by a firm or corporation, the return should be signed in the name of the firm or corporation.

(c) The signature on the return verifies by written declaration under penalties of perjury that the individual has personally examined the return and to the best of his knowledge, the return is true, correct, and complete.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.24 Maintenance of records.

Books and records which substantiate information reported on a Pennsylvania Income Tax return or accompanying schedules shall be retained so long as the contents thereof may be material in the collection of the income tax. The books and records shall be made available for the inspection of an authorized employe of the Department.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.25 Amended return.

(a) A person filing a return should carefully follow the instructions which he received with the return. A person filing a return should check the return to make sure he has reported all of his income and claimed all of the credits to which he is entitled before filing his return. If, after filing a return, a person discovers that he has failed to report some of his income, erroneously claimed credits or is entitled to credits which were not claimed, the person can correct the error by filing an amended return. The person should file a new return clearly marked, ‘‘Amended Return,’’ in which the correct tax or refund is shown.

(b) The Department will review an amended return if the following apply:

(1) The amended return is filed within 3 years of the due date or extended due date of the original return.

(2) The amendments shown on the amended return involve issues other than those under appeal.

(3) The taxpayer is not challenging the Department’s policy, its interpretation or the constitutionality of the Commonwealth’s statutes. A challenge of the Department’s policy, its interpretation of the statutes or the constitutionality of the Commonwealth’s statutes must be made by filing a petition for reassessment or a petition for refund.

(c) If a tax payment was made with the original return, the amount of this payment shall be included on the amended return in the manner prescribed by instructions of the Department.

(d) If a refund was received or is expected to be received from the original return, the amount of this refund shall be shown on the amended return in the manner prescribed by instructions of the Department.

(e) Effect of an amended return on petition rights.

(1) An amended return does not replace the filing of a petition for reassessment or a petition for refund.

(2) The filing of an amended return does not extend the time limits for a taxpayer to file a petition for reassessment or a petition for refund.

(f) Review of amended return.

(1) The Department is not obligated to revise the tax due the Commonwealth upon review of an amended return. The Department’s failure to revise the tax due the Commonwealth is not appealable and does not change existing appeal rights of the taxpayer.

(2) If the Department determines an adjustment of the taxpayer’s account is appropriate, it will adjust the Department’s records to conform to the revised tax as determined and will credit the taxpayer’s account to the extent of an overpayment resulting from the adjustment or assess the taxpayer’s unpaid tax and unreported liability for tax, interest or penalty due the Commonwealth, whichever is applicable.

(g) An amended return filed with the Department must contain the following:

(1) The calculation of the amended tax liability.

(2) Revised Pennsylvania supporting schedules, if applicable.

(3) A complete explanation of the changes being made and the reason for those changes.

The provisions of this § 121.25 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).

The provisions of this § 121.25 amended through February 20, 1981, effective June 23, 1979, 11 Pa.B. 726; amended January 25, 2013, effective January 26, 2013, 43 Pa.B. 535. Immediately preceding text appears at serial pages (205431) to (205432).

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.26 Penalties for failure to file or for filing a late return.

(a) If there is a failure to file a return on or before the due date prescribed on or before the date to which an extension has been granted, there shall be added to the amount required to be shown as tax on the return 5% of the amount of the tax, as the penalty, unless it is shown that the failure to file a return is due to reasonable cause and not due to willful neglect. If the failure is for more than 1 month, an additional 5% for each additional month or fraction thereof shall be added during which the failure continues, not to exceed 25% in the aggregate. In no case may the amount added be less than $5.

(b) A person who willfully fails to file a return, files a fraudulent return or attempts to evade or defeat the tax, shall be guilty of a misdemeanor and upon conviction be subject to fines or be imprisoned as provided for in the law, or both.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

61 Pa. Code § 121.28 Use of Federal income tax information.

(a) Amounts reported on Form PA-40 are subject to verification and audit by the Department.

(b) The Department and the United States Internal Revenue Service are exchanging income tax information for the purpose of verifying the accuracy of information reported on Pennsylvania Personal Income Tax returns.

History

• Authority: The provisions of this § 121.
• Source: The provisions of this § 121.

Chapter 123 Poverty Income

61 Pa. Code § 123.1 Special tax provisions for poverty.

For the taxable year 1974 and each year thereafter, a claimant who meets the standards of eligibility set forth in this chapter is subject to a separate class of taxation and entitled to the benefit of the special tax provisions as provided in this chapter. Application for benefits shall be made on Schedule SP. A claimant filing for benefits hereunder may not file a joint Form PA-40 return with their spouse. A claimant shall file separately.

The provisions of this § 123.1 adopted June 13, 1975, effective June 14, 1975, 5 Pa.B. 1561.

History

• Source: The provisions of this § 123.

61 Pa. Code § 123.3 Taxability under special provisions.

(a) If the poverty income of the claimant as determined in accordance with the definition of ‘‘poverty income’’ provided in § 101.1 (relating to definitions) is less than or equal to the appropriate poverty income limitation as determined in accordance with § 123.2 (relating to poverty income limitations) the claimant has no tax liability under this article and may be entitled to a refund of amounts paid over to the Commonwealth under the provisions of this article.

(b) If the poverty income of the claimant as determined in accordance with the definition of ‘‘poverty income’’ provided in § 101.1 does not exceed the appropriate poverty income limitation determined in accordance with § 123.2 by more than the dollar category contained in paragraphs (1)—(9), the claimant is entitled to a reduction in the tax liability which would otherwise be imposed by this article and a refund, if applicable, of amounts paid over to the Commonwealth under the provisions of this article to the extent set forth as follows:

(1) Ninety percent if not in excess of $100.

(2) Eighty percent if not in excess of $200.

(3) Seventy percent if not in excess of $300.

(4) Sixty percent if not in excess of $400.

(5) Fifty percent if not in excess of $500.

(6) Forty percent if not in excess of $600.

(7) Thirty percent if not in excess of $700.

(8) Twenty percent if not in excess of $800.

(9) Ten percent if not in excess of $900.

The provisions of this § 123.3 adopted June 13, 1975, effective June 14, 1975, 5 Pa.B. 1561.

History

• Source: The provisions of this § 123.

61 Pa. Code § 123.4 Deceased claimant.

(a) The personal representative of a deceased claimant may file Schedule SP for the deceased claimant for 1980 and subsequent years whether the claimant died during or after the applicable tax year.

(b) The tax year for a decedent is the short period beginning with the first day of his last taxable year and ending with the date of his death.

The provisions of this § 123.4 adopted April 17, 1981, effective April 18, 1981, 11 Pa.B. 1327.

History

• Source: The provisions of this § 123.

Chapter 125 Personal Income Tax Pronouncements—Statements of Policy

61 Pa. Code § 125.41 Awards received in reparation for the seizure, theft, requisition or involuntary conversion of the income of victims of Nazi persecution.

Awards or settlements received in reparation for the seizure, theft, requisition or involuntary conversion of the income of victims of Nazi persecution are taxable only as to the following:

(1) Amounts paid as a substitute for taxable income accruing after one of the following:

(i) May 30, 1971.

(ii) If the right to receive the income was acquired from a decedent by bequest, devise or inheritance or by the decedent’s estate, the later of May 30, 1971, or the decedent’s date of death.

(2) Amounts awarded as legal interest for periods after one of the following:

(i) May 30, 1971.

(ii) If the right to receive the income was acquired from a decedent by bequest, devise or inheritance or by the decedent’s estate, the later of May 30, 1971, or the decedent’s date of death.

The provisions of this § 125.41 adopted April 16, 1999, effective April 17, 1999, 29 Pa.B. 2037.

History

• Source: The provisions of this § 125.

61 Pa. Code § 125.42 Awards received in reparation for the seizure, theft, requisition or involuntary conversion of the property of victims of Nazi persecution.

Awards or settlements received in reparation for the seizure, theft, requisition or involuntary conversion of the property of victims of Nazi persecution constitute proceeds from the disposition of property. Gain or loss shall be recognized on the same basis as gain or loss from the sale or exchange of property acquired before June 1, 1971, (see § 103.13(f) (relating to net gains or income from disposition of property)), or property of a decedent acquired by bequest, devise or inheritance or by the decedent’s estate.

The provisions of this § 125.42 adopted April 16, 1999, effective April 17, 1999, 29 Pa.B. 2037.

History

• Source: The provisions of this § 125.

61 Pa. Code § 125.43 Recoveries of converted property.

No gain is realized on the recovery of involuntarily converted property unless the taxpayer has previously claimed a business or nonbusiness loss on its conversion.

The provisions of this § 125.43 adopted April 16, 1999, effective April 17, 1999, 29 Pa.B. 2037.

History

• Source: The provisions of this § 125.

61 Pa. Code § 125.51 Allowance of deduction for cost depletion.

(a) General rule. In the case of mines, oil and gas wells, other natural deposits, and timber, there shall be allowed as a deduction in computing income a reasonable allowance for depletion. In any case in which it is ascertained as a result of operations or development work that the recoverable units are greater or less than the prior estimate thereof, the prior estimate (but not the basis for depletion) shall be revised and the allowance under this section for subsequent taxable years shall be based on the revised estimate.

(b) Recoverable units. Recoverable units are the number of units (for example—tons, pounds, ounces or barrels) of minerals, oil or gas in the ground and economically worth extracting, estimated according to the best available information and industry standards.

(c) Special rules.

(1) Leases. In the case of a lease, the deduction under this section shall be apportioned between the lessor and lessee in accordance with Federal Income Tax requirements.

(2) Life tenant and remainderman. In the case of property held by one person for life with remainder to another person, the deduction under this section shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant.

(3) Property held in trust. In the case of property held in trust, the deduction under this section shall be apportioned between the income beneficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of those provisions, on the basis of the trust income allocable to each.

(4) Property held by estate. In the case of a decedent’s estate, the deduction under this section shall be apportioned between the estate and the heirs, legatees and devisees on the basis of the income of the estate allocable to each.

(5) Basis for depletion. The basis on which depletion is to be allowed in respect of any property shall be the adjusted basis for the purpose of determining the gain upon the sale or other disposition of the property.

The provisions of this § 125.51 adopted February 24, 2006, applies for taxable years beginning on or after January 1, 2005, 36 Pa.B. 959; corrected March 11, 2006, 36 Pa.B. 1130.

History

• Source: The provisions of this § 125.

61 Pa. Code § 125.52 Percentage depletion.

(a) Deduction. A deduction for percentage depletion shall be allowed only in the following set of circumstances:

(1) The deduction is allowable in computing Federal taxable income.

(2) Insufficient information is available to estimate the amount of recoverable units in accordance with industry standards.

(3) The cost of the recoverable units is fixed and certain.

(4) The cost of the recoverable units has not been fully recovered.

(b) Effective date. This section will apply for taxable years beginning on or after January 1, 2005.

The provisions of this § 125.52 adopted February 24, 2006, applies for taxable years beginning on or after January 1, 2005, 36 Pa.B. 959; corrected March 11, 2006, 36 Pa.B. 1130.

History

• Source: The provisions of this § 125.

Chapter 141 General Provisions

61 Pa. Code § 141.1 Scope

The Department promulgates this article for the purpose of providing uniform rules for the levy, implementation, administration, assessment and collection of the school district personal income tax authorized by the act. This article applies to any school district imposing a school district personal income tax and other persons subject to the act.

61 Pa. Code § 141.2 Definitions.

The following words and terms, when used in this article, have the following meanings, unless the context clearly indicates otherwise. Act—The Taxpayer Relief Act (53 P. S. § § 6926.101—6926.5006). Adjusted Pennsylvania taxable personal income—The sum of a taxpayer’s Pennsylvania personal income, taking into account allowable statutory reductions, required to be reported to the Department on the taxpayer’s Pennsylvania Personal Income Tax return for a taxable year. Allowable statutory reduction—Any item of loss used to compute a net class of Pennsylvania personal income or a deduction authorized under section 303 of the TRC (72 P. S. § 7303) or other law that reduces Pennsylvania personal income. Board—A ‘‘board of school directors’’ as defined in section 302 of the act (53 P. S. § 6926.302). Compensation—Compensation as defined in section 303 of the TRC and this title. Department regulations or regulations—Regulations promulgated by the Department and published under this title. Individual—

(i) A natural person.

(ii) The term does not include a trust or decedent’s estate. Local Tax Enabling Act—53 P. S. § § 6901—6923. Payroll period—A period of service for which a payment of compensation is ordinarily made. The period may be daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannually or annually. Pennsylvania Personal Income Tax—The tax imposed under Article III of the TRC (72 P. S. § § 7301—7359). Pennsylvania Personal Income Tax return—The return that is required to be made and filed with the Department under section 330 of the TRC (72 P. S. § 7330). Pennsylvania personal income—The classes of income enumerated in section 303 of the TRC and defined in Article III of the TRC and applicable Department regulations from whatever source derived, including any income of members or shareholders of partnerships, associations or Pennsylvania S corporations as provided under sections 306 and 307.8 of the TRC (72 P. S. § § 7306 and 7307.8) and applicable Department regulations, but not including income taxable to a trust or estate as provided for under Chapter 105 (relating to estates and trusts). Resident individual—

(i) An individual domiciled in a school district during the individual’s taxable year.

(ii) The term excludes a statutory resident and includes a statutory nonresident. School district—A ‘‘school district’’ as defined in section 302 of the act. School district personal income tax—A tax that a board of a school district levies under section 321(c) of the act (53 P. S. § 6926.321), regarding general tax authorization. Statutory resident—An individual who is not domiciled in this Commonwealth but is considered a resident of this Commonwealth for Pennsylvania Personal Income Tax purposes because the individual maintains a permanent place of abode in this Commonwealth and spends in the aggregate more than 183 days of the taxable year in this Commonwealth. Statutory nonresident—An individual who is domiciled in this Commonwealth but for Pennsylvania Personal Income Tax purposes is considered a nonresident of this Commonwealth because the individual maintains no permanent place of abode in this Commonwealth but maintains a permanent place of abode elsewhere and spends in the aggregate not more than 30 days of the taxable year in this Commonwealth. Tax collector—A person that the board of a school district designates as the collector of any school district personal income tax imposed by the school district. Taxable year—A taxable year as defined in the TRC. Taxpayer—A person that is subject to a school district personal income tax.

Chapter 142 Tax, Imposition and Rate

61 Pa. Code § 142.1 Tax and imposition.

(a) The school district personal income tax is a tax at the rate prescribed in § 142.2 (relating to tax rate) levied on the income as described in subsection (b) that a resident individual receives during the resident individual’s taxable year. A taxpayer who is a resident individual of more than one school district that imposes a school district personal income tax during the taxpayer’s taxable year is subject to the school district personal income tax of each school district.

(b) A taxpayer’s income subject to tax under subsection (a) is the taxpayer’s adjusted Pennsylvania taxable personal income, subject to the provisions of subsection (c).

(c) The income subject to tax of a taxpayer who is a resident individual of a school district for only a portion of the taxpayer’s taxable year shall be an amount equal to the taxpayer’s adjusted Pennsylvania taxable personal income multiplied by a fraction the numerator of which is the number of calendar months during the taxable year that the individual is a resident individual of the school district and the denominator of which shall be 12. A taxpayer shall include in the numerator any calendar month during which the taxpayer is a resident individual for more than half the calendar month. A day that a taxpayer’s domicile changes shall be included as a day the individual is in the new domicile and not the old domicile. If the number of days that a taxpayer is a resident of the new domicile and a resident of the old domicile in a calendar month are equal, the calendar month shall be included in calculating the number of months in the new domicile.

Example 1. A calendar year taxpayer changes domicile from one Commonwealth school district to another on September 20th. September is a month during the calendar year containing 30 days. Because the taxpayer changed domicile on the 20th day of the calendar month, the day is included as a day in the new domicile instead of the old domicile. Therefore, taxpayer was domiciled in the old domicile for 19 days and the new domicile for 11 days. Because the taxpayer was in the old domicile for more than half the month of September, the taxpayer is considered a resident individual of the old domicile during September. For purposes of calculating the fraction numerator, taxpayer is a resident individual of the old domicile from January to September (9 months) and the new domicile from October to December (3 months).

Example 2. The facts in this example are the same as Example 1, except the taxpayer changes his domicile on September 16. Because September 16 is included as a day in the new domicile, the taxpayer was a resident individual for 15 days in both the old and new domicile during September. Therefore, September is included as a calendar month in the new domicile. For purposes of calculating the fraction numerator, taxpayer is a resident individual of the old domicile from January to August (8 months) and the new domicile from September to December (4 months).

This section cited in 61 Pa. Code § 142.2 (relating to tax rate); and 61 Pa. Code § 145.3 (relating to form).

61 Pa. Code § 142.2 Tax rate.

(a) The board shall establish for its fiscal year the school district personal income tax rate under the provisions of and subject to the limitations contained in the act.

(b) If the tax rate changes during a taxpayer’s taxable year, the taxpayer’s income subject to tax as determined under § 142.1 (relating to tax and imposition) shall be apportioned by multiplying the income by a fraction, the numerator of which must be the number of months in taxpayer’s taxable year prior to the effective date of the tax rate change and the denominator of which must be the number of month’s in the taxpayer’s taxable year. The product must be the taxpayer’s income subject to the tax rate before the rate change. The difference between the product and the taxpayer’s income subject to tax as determined under § 142.1 must be the income subject to the tax rate after the rate change.

This section cited in 61 Pa. Code § 142.1 (relating to tax and imposition); and § 145.3 (relating to form).

Chapter 143 Tax Payments

61 Pa. Code § 143.1 Liability for payment.

Each taxpayer subject to a school district personal income tax is liable for and responsible to pay the tax.

61 Pa. Code § 143.2 Payment.

(a) Location. The payment of any school district personal income tax shall be made to the tax collector for the school district imposing the tax.

(b) Types of payments. The board of a school district may prescribe the means by which a school district personal income tax payment may be made, including cash, check, draft, money order, certified or cashier’s check, credit or debit card or electronic funds transfer.

(c) Conditional payments. Acceptance of a check, draft, money order, certified check or cashier’s check is a conditional payment until honored by the drawee.

(d) Returned or rejected payments. If a taxpayer or other person makes what purports to be a payment of school district personal income tax with a check, money order, cashier’s check (or other guaranteed draft), credit card or debit card or by other means and the amount of the liability is not paid, or is paid and subsequently charged back to the payee, the taxpayer shall remain liable for the obligation due the school district to the same extent as if the payment had not been tendered.

61 Pa. Code § 143.3 Receipt of payments.

For purposes of determining when a school district personal income tax payment is made and credited to a taxpayer’s account, a tax payment is deemed to be made on the date the tax collector responsible for collecting the tax receives the payment or the due date for the payment, whichever is later.

This section cited in 61 Pa. Code § 143.6 (relating to estimated tax declarations and installment payments).

61 Pa. Code § 143.4 Tax due date.

The school district personal income tax of each taxpayer for the taxable year shall be due on the date that taxpayer is required to file the return for the personal income subject to tax, without regard to any extensions.

61 Pa. Code § 143.5 Employer withholding.

(a) An employer who maintains an office or transacts business within a school district shall deduct and withhold school district personal income tax from the compensation of each employee of the employer under the following conditions:

(1) The employee is a resident individual of the school district.

(2) The employee provides services to the employer within the school district.

(3) The employer is required under section 316 of the TRC (72 P. S. § 7316) to deduct and withhold Pennsylvania Personal Income Tax from the compensation of the employee.

(b) The school district personal income tax required to be deducted and withheld under subsection (a) shall be deducted and withheld for each payroll period in an amount equal to the product of the following:

(1) The school district personal income tax rate for the school district where the employer maintains an office or transacts business that is in effect during the payroll period, which rate can be found on the Department of Community and Economic Development’s Local Tax Withholding Register as established under section 351(c)—(e) of the TRC (72 P. S. § 7351(c)—(e)), regarding tax registers and local tax withholding registers.

(2) The compensation paid for the payroll period.

(c) Every employer required to deduct and withhold from compensation under subsection (a) who has not previously registered, shall within 15 days after becoming an employer, register with the tax collector for the school district where the employer maintains an office or transacts business, the name and address and other information the tax collector may require.

(d) Every employer required to deduct and withhold from the compensation of a person under subsection (a) shall on or before April 30, July 31, October 31 and January 31, file a return for and remit to the tax collector for the school district where the employer maintains an office or transacts business the amount of school district personal income tax deducted and withheld during the preceding 3-month periods ending March 31, June 30, September 30, and December 31, respectively. The information to be provided on the return must include:

(1) The name and Social Security number of each person from whose compensation withholding was made.

(2) The compensation subject to withholding during the preceding 3-month period.

(3) The amount of withholding.

(4) The school districts imposing the school district personal income tax on the compensation.

(5) The total compensation of all persons from whom the employer is required to withhold during the preceding 3-month period.

(6) The total school district personal income tax withheld and remitted with the return.

(e) The tax collector may require any employer who for two of the preceding four quarterly periods has failed to deduct and withhold the proper school district personal income tax, or any part thereof, or has failed to remit the proper amount of the school district personal income tax, to file a return and remit the withheld school district personal income tax monthly. In that case, the school district personal income tax to be withheld shall be made to the tax collector on or before the last day of the month succeeding the month for which the tax was withheld.

(f) On or before February 28, of the succeeding year, every employer required to withhold school district personal income tax under subsection (a) shall file the following with the tax collector:

(1) An annual return showing:

(i) The total amount of compensation paid and subject to withholding.

(ii) The total amount of school district personal income tax deducted and withheld from the compensation.

(iii) The total amount of school district personal income tax remitted to the tax collector for the period beginning January 1, of the current year, and ending December 31, of the current year.

(2) A return withholding statement for each person whose compensation was subject to withholding during all or any part of the period beginning January 1, of the current year, and ending December 31, of the current year, setting forth the name, address and Social Security number, the amount of compensation paid to the person during the period, the amount of school district personal income tax deducted and withheld, the political subdivisions imposing the tax upon the person and the amount of tax remitted to the tax collector. Every employer shall furnish two copies of the individual return to the person for whom it is filed.

(g) Every employer who discontinues business prior to December 31, of the current year, shall within 30 days after the discontinuance of business, file the returns and withholding statements required under this section and remit the tax due.

(h) An employer who willfully or negligently fails to deduct, withhold and remit the school district personal income tax as required under this section shall be liable for payment of the school district personal income tax that the employer was required to withhold to the extent that the taxes have not been recovered from the person from whom the withholding was to be made.

(i) Notwithstanding the provisions of this section, an employer may deduct and withhold school district personal income tax at the most recently available school district personal income tax rate on the Department of Community and Economic Development’s Tax Register as established under section 351(b) of the act (53 P. S. § 6926.351(b)). Further, an employer is not required to deduct and withhold school district personal income tax from the compensation of a resident individual or make reports of compensation deducted and withheld in connection with a school district personal income tax that is not officially released on the Department of Community and Economic Development’s Local Withholding Tax Register as prescribed in section 351 of the act.

(j) The failure or omission of an employer to deduct, withhold and remit the school district personal income tax required under this section does not relieve any person from the payment of the school district personal income tax or from complying with the filing requirements of this article.

(k) Nothing in this section shall be construed to prohibit an employer from voluntarily deducting and withholding school district personal income tax from the compensation of a person who is subject to school district personal income tax but is not a resident individual of the school district in which the employer maintains an office or transacts business and to which the person reports to work. If an employer voluntarily deducts and withholds school district personal income tax from a person, the employer shall remit the tax and file the returns and reports required under subsections (d) and (f) with the tax collector for the school district where the person is a resident individual.

This section cited in 61 Pa. Code § 144.3 (relating to employer withholding credit); and 61 Pa. Code § 145.3 (relating to form).

61 Pa. Code § 143.6 Estimated tax declarations and installment payments.

(a) Every taxpayer shall make a declaration and installment payments of estimated school district personal income tax if the taxpayer’s estimated school district personal income tax exceeds the dollar limitation contained in section 325 of the TRC (72 P. S. § 7325) for making a declaration of Pennsylvania Personal Income Tax.

(b) Estimated school district personal income tax means a taxpayer’s school district personal income tax liability as prescribed under Chapter 142 (relating to tax, imposition and rate), less any credit to which the taxpayer may be entitled under § 144.3 (relating to employer withholding credit), that the taxpayer reasonably estimates to be due for the taxable year.

(c) The declaration and installment payments of estimated school district personal income tax shall be made to the tax collector for the school district at the time prescribed for the declaration and payment of earned income tax not subject to withholding under section 13-III of The Local Tax Enabling Act (53 P. S. § 6913-III).

(d) The board of a school district that imposes a school district personal income tax shall prescribe the information to be reported on the declaration required under this section and the means by which installment payments are to be made, provided that if an amended declaration is filed, any remaining unpaid installments shall be ratably increased or decreased to reflect the increase or decrease on the amended declaration. The board or its designee shall determine the format for the declaration and make necessary arrangements for the production of the declaration and dissemination to taxpayers.

(e) Notwithstanding the provisions of subsection (c), estimated school district personal income tax installment payments are payments of school district personal income tax to which § 143.3 (relating to receipt of payments) applies.

This section cited in 61 Pa. Code § 143.7 (relating to overpayment carryover); and 61 Pa. Code § 145.3 (relating to form).

61 Pa. Code § 143.7 Overpayment carryover.

(a) A taxpayer who has overpaid the school district personal income tax for a taxable year may have the overpayment carried forward and credited against the school district personal income tax liability for the following taxable year.

(b) The overpayment that is credited under this section is considered a payment of tax under this chapter as opposed to a tax credit and may be refunded as provided under § 146.3 (relating to refunds).

(c) An overpayment that is credited under this section may be used to satisfy a taxpayer’s estimated school district personal income tax liability under § 143.6 (relating to estimated tax declarations and installment payments).

Chapter 144 Tax Credits

61 Pa. Code § 144.1 Payment of tax to other political subdivisions or states.

(a) A taxpayer is entitled to a credit against the school district personal income tax as prescribed under section 14 of The Local Tax Enabling Act (53 P. S. § 6914), regarding payment of tax to other political subdivisions or states as credit or deduction and withholding tax.

(b) Notwithstanding subsection (a), a taxpayer will not be allowed a credit against the school district personal income tax for any tax imposed by any state or political subdivision located outside this Commonwealth.

61 Pa. Code § 144.2 Poverty credit.

A taxpayer may claim the same percentage of tax forgiveness that a taxpayer is entitled to claim as a credit against the Pennsylvania Personal Income Tax liability as provided for under section 304 of the TRC (72 P. S. § 7304) against the school district personal income tax.

Example. If a taxpayer is eligible to claim 90% tax forgiveness of his Pennsylvania Personal Income Tax, the taxpayer is eligible to claim 90% tax forgiveness against his school district personal income tax.

61 Pa. Code § 144.3 Employer withholding credit

Any amount actually withheld under § 143.5 (relating to employer withholding) shall be allowed to the recipient of the compensation subject to withholding as a credit against the school district personal income tax liability for the taxable year in which the withholding is made.

Chapter 145 Tax Returns

61 Pa. Code § 145.1 Date and place of filing.

(a) A taxpayer who during any part of a taxable year is a resident individual of a school district imposing a school district personal income tax shall file a school district personal income tax return with the tax collector for the school district on or before the date when the taxpayer is required to file the taxpayer’s Pennsylvania Personal Income Tax return.

(b) A taxpayer who during the taxpayer’s taxable year is a resident individual of more than one school district that imposes a school district personal income tax shall comply with subsection (a) for each school district.

61 Pa. Code § 145.2 Extensions.

(a) A taxpayer who has an extension for filing the Pennsylvania Personal Income Tax return shall have a commensurate extension for filing a school district personal income tax return. To be entitled to the extension under this section, a taxpayer is required to provide proof of the Pennsylvania extension to the tax collector. Adequate proof includes a copy of the completed Pennsylvania application for extension of time to file, or in the event a taxpayer has an extension to file a Pennsylvania Personal Income Tax return based upon an approved extension for filing a Federal Income Tax return, a copy of the completed Federal extension request form.

(b) If a taxpayer has been denied or does not have an extension to file the taxpayer’s Pennsylvania Personal Income Tax return, a tax collector may grant an extension for the filing of a school district personal income tax return upon written request from the taxpayer. The tax collector shall establish the form, if any, required for the submission of a request for an extension. The tax collector shall give a taxpayer written notice of the approval or denial of the extension request. An extension may not be longer than 6 months.

61 Pa. Code § 145.3 Form.

(a) The board or a designee shall determine the format for the return and make necessary arrangements for the production of the return and dissemination to taxpayers.

(b) The board of the school district imposing a school district personal income tax shall prescribe the information to be included on the school district personal income tax return and the manner and place for filing. At a minimum, the return must contain the following information:

(1) The taxpayer’s personal information including:

(i) Name.

(ii) Address.

(iii) Social Security number.

(2) The taxpayer’s income as described in § 142.1(b) (relating to tax and imposition).

(3) A calculation of the school district personal income tax.

(4) The tax credits as provided in Chapter 144 (relating to tax credits).

(5) The tax payments made before or with the filing of the return, including estimated installment payments as described in § 143.6 (relating to estimated tax declarations and installment payments).

(6) A calculation of the balance of tax due after credits and payments, including a tax underpayment or overpayment.

(7) An overpayment to be refunded or credited.

(8) The signature of the taxpayer filing the return, or the person filing a return in the case of returns filed by persons other than the taxpayer under § 145.5 (relating to returns by persons other than taxpayer).

(9) The name, address and telephone number of any person preparing the return on behalf of the taxpayer.

(c) A return must allow for the filing of a joint return so that each taxpayer filing the joint return can return the information required in subsection (a) separately. See § 145.4 (relating to joint returns) for joint return requirements.

(d) A return must allow a taxpayer to apportion personal income during different parts of the taxable year so that the different tax rates may be applied as provided in § 142.2(b) (relating to tax rate).

61 Pa. Code § 145.4 Joint returns.

The board of the school district imposing a school district personal income tax may authorize spouses to file joint returns under rules the board prescribes, subject to the following requirements:

(1) If spouses file a joint return, their tax liability shall be joint and several.

(2) Spouses filing a joint return may not offset one spouse’s losses in a taxable class of income with the gain of the other spouse from any taxable class of income.

(3) Spouses with different taxable years or who reside in different school districts may not file a joint return.

This section cited in 61 Pa. Code § 145.3 (relating to form).

61 Pa. Code § 145.5 Returns by persons other than taxpayer.

Department regulations relating to Pennsylvania Personal Income Tax returns filed on behalf of deceased individuals, minors and taxpayers with disabilities and returns made by agents apply for purposes of the return for school district personal income tax. See § § 117.3, 117.4 and 117.6 (relating to deceased individuals; minority or other disability; and returns made by agents).

This section cited in 61 Pa. Code § 145.3 (relating to form).

61 Pa. Code § 145.6 Amended returns.

(a) Subject to the provisions of subsection (b), a taxpayer may file an amended school district personal income tax return to correct errors contained in an original return or amended return. A board shall prescribe rules relating to filing amended returns.

(b) A taxpayer’s adjusted Pennsylvania taxable personal income as reported to, determined, adjusted or assessed by the Department is within the jurisdiction of the Department and cannot be affected by the filing of an amended school district personal income tax return. Amendments to adjusted Pennsylvania taxable personal income shall be made to the Department on an amended Pennsylvania Personal Income Tax return as prescribed for the returns by Department regulation.

Chapter 146 Administration and Collection

61 Pa. Code § 146.1 Tax collector powers and duties.

(a) The tax collector is responsible to administer, receive, assess and collect the school district personal income tax levied by a board under the act.

(b) Subject to subsection (c), a tax collector shall have all the same powers, rights, responsibilities and duties for the collection of the school district personal income tax that are available for the collection of municipal taxes that may be imposed by law, including taxes imposed under the following:

(1) The Local Tax Enabling Act.

(2) Title 53 of Pennsylvania Consolidated Statutes § § 8421—8438 (relating to the Local Taxpayer Bill of Rights Act).

(3) As otherwise provided by law.

(c) A tax collector is required to accept a taxpayer’s adjusted Pennsylvania taxable personal income subject to timely Department determination and adjustment or assessment for which all appeals have been exhausted.

(d) A tax collector may disclose to or allow the Department to examine school district personal income tax returns, records, documents or information of a taxpayer within the tax collector’s possession, whether obtained through audit or otherwise, for purposes of carrying out the tax collector’s powers and duties under this section. Any disclosures under this subsection qualify as a disclosure for official purposes under 53 Pa.C.S. § 8347 (relating to confidentiality of tax information).

61 Pa. Code § 146.2 Access to Department returns and records.

(a) The Department will use the Department of Community and Economic Development’s Local Withholding Tax Register as prescribed under section 351 of the act (53 P. S. § 6926.351), regarding tax register and local tax withholding register, to determine the official tax collectors for a school district.

(b) Upon request, the Department may provide a tax collector by electronic transmittal an abstract of a current or former resident individual taxpayer’s Pennsylvania Personal Income Tax return for purposes of the tax collector administering and collecting the school district’s school district personal income tax. The Department may provide or make available for inspection and duplication, in a format determined by the Department, other taxpayer returns, records and information that the Department deems necessary for a tax collector to administer a school district personal income tax.

(c) A tax collector shall execute a confidentiality agreement as prescribed by the Department before the Department will disclose tax information under subsection (b).

(d) A tax collector shall reimburse the Department for the costs associated with the disclosure of tax information under subsection (b). The Department will prescribe a fee schedule outlining the costs. The Department will deny any request without payment of the fee.

(e) Federal Income Tax returns, records or information in the Department’s possession are strictly confidential and will not be disclosed to a tax collector. Federal tax returns, records and information within the possession of the Internal Revenue Service shall be obtained directly from the Internal Revenue Service, subject to Federal law applicable to disclosure of Federal tax returns, records and information.

61 Pa. Code § 146.3 Refunds.

Title 53 of the Pennsylvania Consolidated Statutes § 8425 (relating to refunds of overpayments) applies to refunds for overpayments of any personal income tax.

This section cited in 61 Pa. Code § 143.7 (relating to overpayment carryover).

Chapter 147 Interest, Penalties and Costs of Collection

61 Pa. Code § 147.1 Interest.

A board may determine the rate for and the tax collector may assess and collect interest on a delinquent school district personal income tax liability in the manner provided for the determination and collection of interest on tax claims under the act of May 16, 1923 (P. L. 207, No. 153) known as the Municipal Claim and Tax Lien Law. See 53 P. S. § 7143.

61 Pa. Code § 147.2 Penalties.

Under the authority of section 22 of The Local Tax Enabling Act (53 P. S. § 6922), the board may prescribe reasonable penalties for a taxpayer’s nonpayment of school district personal income tax when due and for a person’s failure to comply with this article.

61 Pa. Code § 147.3 Costs of collection.

Under the authority of section 22.1 of The Local Tax Enabling Act (53 P. S. § 6922.1), the board may prescribe the reasonable costs of collection incurred to provide notices of delinquency or to implement similar procedures utilized to collect delinquent taxes from a taxpayer. The costs may be retained by the tax collector with the approval of the board of the school district.

Chapter 148 Tax Appeals

61 Pa. Code § 148.1 Appeal process.

(a) Subject to subsection (b), each board levying a school district personal income tax shall establish an administrative process for taxpayers to appeal assessments, determinations, adjustments or refunds of the school district personal income tax as prescribed for eligible taxes under 53 Pa.C.S. § § 8421—8438 (relating to the Local Taxpayer Bill of Rights Act). The provisions related to tax appeals under the Local Taxpayer Bill of Rights Act apply to appeals related to the school district personal income tax.

(b) Issues related to a taxpayer’s Pennsylvania personal income, adjusted Pennsylvania taxable personal income or the Pennsylvania Personal Income Tax that affects the calculation of a taxpayer’s school district personal income tax shall be raised as part of an appeal of his Pennsylvania Personal Income Tax and may not be raised as part of an appeal under this section.

Chapter 151 General Provisions

61 Pa. Code § 151.1 Definitions.

The following words and terms, when used in this article, have the following meanings, unless the context clearly indicates otherwise: FC—The Fiscal Code (72 P. S. § § 1—1804). IRC—The Internal Revenue Code of 1986, including amendments under the Tax Reform Act of 1986 (26 U.S.C.A. § § 1—7872). Report—Generally, any one of the annual corporate tax report forms. For example: the Corporate Net Income Tax Report or the Foreign Franchise Tax Report or the Bank Shares Tax Report. Return—Generally, any of the Federal Internal Revenue Service tax forms. For example: U.S. Corporation Income Tax Return (Form 1120). Settlement—The determination by the Commonwealth of tax liability of a taxpayer according to law. A settlement of a corporate tax report is made by a Taxing Officer of the Bureau of Corporation Taxes, Department of Revenue, evidenced by affixing his signature and the date of signing to the report. Settlements are subject to the approval of a Taxing Officer in the Department of the Auditor General, evidenced by affixing his signature and the date of signing to the same report. TRC—The Tax Reform Code of 1971 (72 P. S. § § 7101—10004).

By voting for a settlement as defined by this section the Attorney General acquiesced in the entry of an order of the Board of Finance and Revenue and thereby waived the right to appeal therefrom, inasmuch as his representation of the Commonwealth does not change from one level of action to another. Commonwealth v. Carborundum Co., 458 A.2d 314, 315 (1983).

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.2 Scope.

This chapter concerns administrative procedures and statutory provisions which pertain to corporate taxes in general, rather than specific taxes as set forth in subsequent chapters of this article.

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.3 Letters of authority.

Effective March 27, 1974, the Department will require the filing of a letter of authority on the taxpayer’s letterhead stationery executed by an official of the taxpayer authorizing the tax practitioner, for example an attorney or accountant named to represent the taxpayer:

(1) When the name of the tax practitioner does not appear on the report as its corporate tax representative.

(2) When the tax practitioner presents for filing in the Department a Petition for Resettlement and the name of the tax practitioner does not appear either on the report named in the petition or within the body of the petition signed by an official of the taxpayer. See section 1102 of the FC (72 P. S. § 1102).

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.4 Obtaining a Corporate Clearance Certificate.

(a) Corporate Clearance Certificate is a certificate issued by the Department evidencing the payment of taxes and charges as required by law.

(b) The information and documentation which is required to be furnished to obtain a Corporate Clearance Certificate depends upon the purpose for which the certificate is sought. The following is a list of purposes for which a Corporate Clearance Certificate is commonly obtained and the information and documentation which shall be required to be furnished.

(1) A dissolution under the Business Corporation Law (15 P. S. § § 1001—2204).

(i) An application for a Corporate Clearance Certificate executed in duplicate (Form RCT-442).

(ii) Reports for the current tax year to the date of complete divestiture.

(iii) A Schedule of Distribution of Assets in Dissolution (Form RCT-422). If distribution of assets is made in kind to stockholders, attach a copy of Federal Form 1099L.

(iv) A detailed schedule of capital gains exempted under section 337 of the IRC (26 U.S.C.A. § 337).

(2) A dissolution by court of common pleas.

(i) An application for a Corporate Clearance Certificate executed in duplicate (Form RCT-442).

(ii) A copy of the Petition for Dissolution which was submitted to a court of common pleas.

(iii) Reports for the current tax year to the date of filing the Petition for Dissolution.

(iv) A Schedule of Distribution of Assets in Dissolution (Form RCT-422).

(v) A detailed schedule of capital gains exempted under section 337 of the IRC (26 U.S.C.A. § 337).

(3) The withdrawal by a foreign corporation under the Business Corporation Law (15 P. S. § § 1001—2204).

(i) An application for a Corporate Clearance Certificate executed in duplicate (Form RCT-442).

(ii) A Withdrawal Affidavit (Form RCT-407) for a foreign corporation.

(iii) Reports for the current tax year to the date business activities ceased and the corporation no longer employed property in this Commonwealth. An explanation of the disposition of assets located in this Commonwealth is required to accompany the reports.

(iv) A detailed schedule of capital gains exempted under section 337 of the IRC.

(4) A merger under the Business Corporation Law (15 P. S. § § 1001—2204)

(i) An application for a Corporate Clearance Certificate executed in duplicate (Form RCT-442.)

(ii) A copy of the plan of merger.

(iii) Reports for the current tax year to the proposed date of merger.

(5) A bulk sale under section 1403 of the FC (72 P. S. § 1403).

(i) An application for a Corporate Clearance Certificate executed in duplicate (Form RCT-442).

(ii) Reports for the current tax year to the proposed date of sale.

(iii) A schedule of the assets to be sold and the resulting gains or losses.

(6) A foreign corporation seeking the release of a public contract bond under the act of June 10, 1947 (P. L. 493 No. 223) (8 P. S. § 23).

(i) An application for a Corporate Clearance Certificate executed in duplicate (Form RCT-442).

(ii) Reports for the current tax year to the date on which the contract was completed.

(c) The Department of Labor and Industry, Bureau of Employment Security, will receive a copy of applications for Corporate Clearance Certificates. A clearance certificate evidencing the payment of liabilities owed to the Department of Labor and Industry will be issued directly to the applicant by the Department of Labor and Industry, except when the application was submitted under section 1403 of the FC (72 P. S. § 1403) as required by subsection (b)(5). A Corporate Clearance Certificate issued by the Department under section 1403 of the FC (72 P. S. § 1403) will include a clearance certificate issued by the Department of Labor and Industry.

The provisions of this § 151.4 adopted July 22, 1977, effective July 23, 1977, 7 Pa.B. 2069.

This section cited in 61 Pa. Code § 13.13 (relating to tax clearance certificates).

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.5 Release of corporation tax liens.

(a) When the corporate tax debtor or another interested party requests a release from the lien of corporate taxes on all or part of the tax debtor’s real property, the following mathematical formula shall be used in establishing the release consideration:

(1) The assessed market valuation of the real property to be released will constitute the numerator of the fraction.

(2) The assessed market valuation of the tax debtor’s real property within this Commonwealth, including the real property to be released, will constitute the denominator of the fraction.

(3) The fraction will then be multiplied by the amount of the tax debit and the resulting figure will be the release consideration.

(b) Assessed market valuation is the value of the real property as assigned by the county assessment bureau prior to the application of the formula to arrive at the assessed tax valuation. In clarification, it is noted that the assessment bureau in one county may establish that a particular piece of real property lying therein has a value of $10,000 and will assess taxes on 25% of that value whereas another county may establish that a particular piece of real property lying therein has the same value but will assess taxes on 50% of that value; the use of the assessed market valuation will therefore result in a more uniform fraction in those instances where the tax debtor has real property in more than one county.

Example: John Doe desires to purchase a piece of the tax debtor’s real property in Schuylkill County; the assessed market valuation which is taxed at 25%, is $10,000. The balance of the tax debtor’s real property in this Commonwealth lies in Dauphin County and has an assessed market valuation of $10,000, the same to be taxed at 50%. The tax debit as of the date of the proposed sale is $750. The formula therefore will be expressed as follows: $10,000/$20,000 X $750 = $375 (the release consideration).

(c) The party seeking the release shall provide the county assessment bureau with the assessed market valuation from the county wherein the real property is located. In the event county records are unavailable to establish the fraction, the party seeking the release may use the privately appraised market value of the real property to be released as the numerator over the privately appraised market value of the tax debtor’s real property within this Commonwealth as the denominator; when using this alternate method of establishing the fraction, the party seeking the release shall support the appraised market valuations with the written opinions of licensed realtors in the county wherein the real property is located. A third alternative and one which will be used only where the above described methods of establishing the real consideration are impossible or unduly burdensome, is to use corporate acquisition costs or corporate records, or both.

(d) For purposes of this section, the tax debit as of the date of the transfer or proposed transfer will be the controlling multiplicand figure. Before the county assessment bureau will submit a proposed release for approval by the Secretary, the Auditor General and the Attorney General, the party seeking the release shall provide the county assessment bureau with a check in the amount of the release consideration payable to the Department along with a legal description of the real property to be released.

(e) In those rare instances where the value of the real property to be released is less than the proportionate share of the taxes due, the Department with the approval of the Auditor General and the Attorney General, may reduce the release consideration as the equities of the situation dictate.

(f) Upon approval of the release by the Secretary, the Auditor General and the Attorney General, the party requesting the release will be provided by the county assessment bureau with a certificate showing the real property released. This certificate may then, at the discretion of the party released, be filed in the office of the recorder of deeds in the county wherein the real property is located.

The provisions of this § 151.5 adopted February 13, 1976, effective February 14, 1976, 6 Pa.B. 327; amended July 22, 1977, effective July 23, 1977, 7 Pa.B. 2069.

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.11 Termination.

(a) General. A corporation which desires to terminate its responsibility to file annual reports, but does not desire to dissolve formally or withdraw under the Business Corporation Law (15 P. S. § § 1001—2204) or dissolve under a petition to a court of common pleas, may terminate the filing responsibility by submitting the required information and documentation. The information and documentation which is required depends upon the nature of the corporation.

(1) A domestic corporation that has not transacted business shall file an Out of Existence Affidavit (Form RCT-404).

(2) A domestic corporation that has transacted business shall file the following:

(i) An Out of Existence Affidavit (Form RCT-403).

(ii) Corporate Tax Reports for the current tax year to the date of complete divestiture.

(iii) A detailed capital gains schedule under Federal Internal Revenue Service Form 4797 or Federal Internal Revenue Service Form 1120 Schedule D or both or a pro forma capital gains schedule if gains are not recognized under section 337 of the IRC.

(3) A foreign corporation shall file the following:

(i) A Withdrawal Affidavit (Form RCT-407).

(ii) Corporate Tax Reports for the current year to the date business activities ceased and the corporation no longer employed property in this Commonwealth, including an explanation of the disposition of assets located in this Commonwealth.

(iii) A detailed capital gains schedule under Federal Internal Revenue Service Form 4797 or Federal Internal Revenue Service Form 1120 Schedule D or both or a pro forma capital gains schedule if gains are not recognized under section 337 of the IRC.

(b) Effect of termination. Upon acceptance of the required documentation by the Department, the name of the corporation shall be removed from the active tax rolls of the Department, and the corporation will no longer be required to file annual reports. A corporation which files a Withdrawal Affidavit or an Out of Existence Affidavit may subsequently lose the right to the use of its name. Refer to section 202 of the Business Corporation Law (15 P. S. § 1202).

The provisions of this § 151.11 adopted November 11, 1977, effective November 12, 1977, 7 Pa.B. 3317.

This section cited in 19 Pa. Code § 17.2 (relating to appropriation of the name of a senior corporation); 61 Pa. Code § 151.12 (relating to minimum reporting); 61 Pa. Code § 151.13 (relating to resumption of reporting); and 61 Pa. Code § 155.29 (relating to minimum tax).

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.12 Minimum reporting.

(a) A corporation which is qualified to terminate tax reporting under § 151.11 (relating to termination), but desires to preserve the right to use its name, may submit a Skeleton Report in lieu of an Out of Existence Affidavit or Withdrawal Affidavit. A Skeleton Report shall be filed annually on the corporation’s due date for reporting.

(b) Skeleton Report is the report form filed with only the identification, Statement in Support of Inactive Report, and affirmation sections completed.

(c) Skeleton Reports are settled at a minimum tax which will be established by the Bureau. Commencing with reports for calendar year 1983 and for each year thereafter, a minimum Capital Stock or Foreign Franchise Tax of $75 is imposed on corporations filing Skeleton Reports. See § 155.29 (relating to minimum tax).

(d) Without a Statement in Support of Inactive Report, reports shall be executed in full.

(e) The right of the corporation to the use of the corporate name is not jeopardized when Skeleton Reports are filed.

The provisions of this § 151.12 adopted November 11, 1977, effective November 12, 1977, 7 Pa.B. 3317; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial pages (40491) to (40492).

This section cited in 19 Pa. Code § 17.2 (relating to appropriation of the name of a senior corporation); and 61 Pa. Code § 155.29 (relating to minimum tax).

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.13 Resumption of reporting.

(a) A corporation which has terminated its reporting requirement under § 151.11 (relating to termination) and then commences sufficient activities in this Commonwealth to subject the corporation to reporting shall submit a composite report and a Skeleton Affidavit (Form RCT-227 or RCT-228) for the period of inactivity. The report and affidavit shall be submitted with the report for the first tax period in which the taxable activities are resumed.

Example: A corporation which reports on a calendar year basis terminates its reporting requirement on August 15, 1972. On November 10, 1978, the taxpayer resumes activities in this Commonwealth which subject the corporation to Corporate Net Income and Capital Stock Tax reporting. The corporation shall submit a composite report and Skeleton Affidavit for the period from August 15, 1972 to December 31, 1977. This composite report and Skeleton Affidavit may be submitted together with the corporation’s reports for the 1978 tax year due on or before April 15, 1979.

(b) A composite report is one report which is filed for a period of more than 1 tax year.

The provisions of this § 151.13 adopted November 11, 1977, effective November 12, 1977, 7 Pa.B. 3317.

This section cited in 19 Pa. Code § 17.2 (relating to appropriation of the name of a senior corporation).

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.14 Amended report.

(a) Applicability. This section applies to taxes imposed under Articles IV, VI, VII, VIII, IX, XI and XV of the Tax Reform Code of 1971 and not settled prior to January 1, 2008, along with the following:

(1) Corporate Loans Tax imposed under sections 19—24 of the State Personal Property Tax Act (72 P. S. § § 3250-10—3250-15).

(2) Co-operative Agricultural Corporate Net Income Tax Act imposed under the Co-operative Agricultural Association Corporate Net Income Tax (72 P. S. § § 3420-21—3420-30).

(3) The electric co-op corporation membership fee imposed under 15 Pa.C.S. § 7333 (relating to license fee; exemption from excise taxes).

(4) Gross Receipts Tax on private bankers imposed under section 1 of the act of May 16, 1861 (P. L. 708, No. 660) (72 P. S. § 2221).

(b) General.

(1) An amended report may be filed by a taxpayer, on a form prescribed by the Department under oath or affirmation of an authorized officer, within 3 years after filing of the original report. An amended report may be filed for the purpose of bringing to the attention of the Department a correction to the original report or to provide additional information which the taxpayer requests the Department to consider.

(2) The Department will only consider additional information if it is submitted with an amended report. The taxpayer may submit any information it believes is relevant to the determination of its tax. The filing of an amended report is not a new report.

(3) The Department will not accept an amended report that challenges the Department’s policy, its interpretation of the statutes or the constitutionality of the Commonwealth’s statutes. Any challenges of the Department’s policy, its interpretation of the statutes or the constitutionality of the Commonwealth’s statutes shall be made by filing a petition for reassessment or a petition for refund.

(c) Prerequisite. An amended report will not be considered by the Department unless the taxpayer consents in writing, on a form prescribed by the Department, to the extension of the assessment period for the tax year to 1 year from the date of the filing of the amended report or 3 years from the filing of the original report, whichever period last expires. See section 407.4 of the TRC (72 P. S. § 7407.4). In addition, the taxpayer is required to maintain records until the end of the extended assessment period.

(d) Petition rights.

(1) An amended report does not replace the filing of a Petition for Reassessment or a Petition for Refund.

(2) The filing of an amended report does not extend the time limits for a taxpayer to file a Petition for Reassessment or a Petition for Refund.

(e) Review of amended report.

(1) The Department is not obligated to revise the tax due the Commonwealth upon review of an amended report. Its failure to revise the tax due the Commonwealth is not an appealable action and will not change any existing appeal rights of the taxpayer.

(2) If the Department determines an adjustment of the taxpayer’s account is appropriate, it will adjust the corporation’s tax on the Department’s records to conform to the revised tax as determined and will credit the taxpayer’s account to the extent of any overpayment resulting from the adjustment or assess the taxpayer’s unpaid tax and unreported liability for tax, interest or penalty due the Commonwealth, whichever is applicable.

(f) Amended report filed when tax liability is under appeal.

(1) An amended report involving issues under appeal will be forwarded to the appropriate administrative appeal board or to the Office of the Attorney General, to be included in the appeal.

(2) If the amended report involves issues other than those under appeal, the Department may review the amended report. The review of a report does not obligate the Department to change the tax due the Commonwealth and will not change any existing appeal rights of the taxpayer. If the Department determines that a change to the tax liability is appropriate, it will adjust the corporation’s tax on the Department’s records to conform to the revised tax as reported. The Department will credit the taxpayer’s account to the extent of any overpayment resulting from the adjustment or assess the taxpayer’s unpaid tax and unreported liability for tax, interest or penalty due the Commonwealth, whichever is applicable.

(g) Additional information required to be provided with an amended report. An amended report filed with the Department must contain the following:

(1) An agreement to the extension of the assessment period as described in subsection (c).

(2) The calculation of the amended tax liability.

(3) Revised Pennsylvania supporting schedules, if applicable.

(4) A complete explanation of the changes being made and the reason for those changes.

(5) Other information required by the Department to support the calculation of the amended tax liability.

The provisions of this § 151.14 adopted June 18, 2010, effective June 19, 2010, 40 Pa.B. 3356.

This section cited in 61 Pa. Code § 153.54 (relating to changes made by Federal government).

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.21 Definitions.

The following words and terms, when used in § § 151.21—151.24, have the following meanings, unless the context clearly indicates otherwise: Application—Use by the Department of a credit to pay a tax debit. Assignment—The sale or exchange of a settled credit by a taxpayer (the assignor) to another taxpayer (the assignee) for application by the assignee to a tax debit in the assignee’s account. Conditional statutory credit—Those statutory credits which are subject to special conditions set forth by the statute establishing those credits. The credits may be utilized in the manner set forth in this chapter, subject to the special conditions or limitations set forth by the statute which creates them. An example is section 5 of the Neighborhood Assistance Tax Credit (62 P. S. § 2085). Settled credit—A surplus which has been determined to be an overpayment upon settlement by the Department of the annual tax report to which it relates. Tax debit—The term includes tax prinicipal, penalty and interest. Transfer—The movement by the Department of a credit within the account of a taxpayer against a tax debit of the same taxpayer. Unsettled credit—A surplus resulting from an apparent overpayment of a tax with respect to which a payment is made, either as a result of a tentative tax payment or of a regular payment, prior to settlement of the annual tax report to which it relates.

The provisions of this § 151.21 adopted March 23, 1979, effective March 24, 1979, 9 Pa.B. 1071.

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.22 Transfer, assignment and refund of credits.

(a) Use of unsettled credits. Unsettled credits are available for transfer to corporation tax debits within the account of the taxpayer upon receipt by the Department of the Annual Report on account of which the payment is submitted. If obligations due the Commonwealth have been paid, unsettled credits may be used by the taxpayer to pay a tax or other claim due by it to the Commonwealth, may be refunded or may be assigned to another person upon receipt by the Department of the Annual Report on account of which the payment is submitted. See section 3003(f) of the TRC (72 P. S. § 10003) and section 1108(b) of the FC (72 P. S. § 1108(b)). A transfer of an unsettled credit is not prohibited by the possibility of a subsequent resettlement under section 407(b) of the TRC (72 P. S. § 7407(b)), or an account adjustment made to correct a clerical or mathematical error on the part of the taxpayer or of the Department.

(b) Use of settled credits. Settled credits shall be used in accordance with the following:

(1) Taxes to which settled credits may be transferred. Except as otherwise provided by law or by regulation, a settled Corporation Tax credits may be transferred in payment of any other tax or taxes paid or payable into the General Fund. Credits of other tax paid into the General Fund may be so transferred in payment of corporation taxes. Taxes paid or payable into the General Fund include Personal Income Taxes, Cigarette and Beverage Taxes, sales and use taxes, Inheritance Taxes and Corporation Taxes (except that portion of the Gross Receipts Tax on Motor Vehicle carriers credited to the Motor License Fund and Insurance Premiums Tax on foreign fire and foreign casualty insurance companies). Refer to section 902(b) of the TRC (72 P. S. § 7902(a)). Settled corporation tax credits may also be interchanged with tax credits from certain special funds such as the Unemployment Compensation Funds or the Motor Vehicle Fund.

(2) Availability for assignment. A settled credit may be the subject of assignment to another corporation. A settled credit is not deemed to be available for assignment, however, unless outstanding tax debits reflected in the account of the assignor are offset by sufficient credits to satisfy the debits, and unless other obligations due the Commonwealth by the taxpayer have been fully paid.

(3) Availability for refund. A settled credit may be refunded if outstanding tax debits reflected in the account are offset by sufficient credits to satisfy the debits and if other obligations due the Commonwealth by the taxpayer have been paid.

(4) Petition for cash refund. A settled credit which is the subject of a Petition for Cash Refund may not be transferred to taxes other than corporation taxes and may not be assigned to another corporation during the pendency of the proceedings.

(c) Procedures for transfer, assignment and refund. Procedures for transfer, assignment and refund shall conform with the following:

(1) Transfer by corporation. A corporation may direct the Department to transfer unsettled or settled credits of the corporation to present or anticipated tax debits of the corporation by submitting a letter, signed by an authorized representative of the corporation, setting forth the type, year and amount of the credit to be so transferred and the tax debit or debits to which it is to be applied.

(2) Transfer by Department. The Department may transfer unsettled or settled credits of the taxpayer within the account of the taxpayer. The Department may first make the transfer, and will send the taxpayer a statement of the specific manner in which the credits have been applied. The taxpayer may object to the proposed transfer within 30 days of receipt of the statement, and, if the Department determines that the objection is proper, the transfer will be reversed.

(3) Assignment. To assign an unsettled or settled tax credit to another taxpayer, whether or not a subsidiary corporation, the assignor shall complete and submit to the Department an Assignment of Tax Credit form signed by an authorized representative of the assignor corporation. The application will be deemed to authorize the Department to review the assignor’s account, transfer credits that may be necessary to offset or pay outstanding tax debits, and make other determinations that may be necessary to compute the assignor’s current available unsettled or settled credit balance. The Department will then apply the unsettled or settled credit assigned (not exceeding the current available balance) in accordance with the assignee’s instructions or, in the absence of instructions, in the manner provided by § 151.24 (relating to order of application of tax credits). The Department will then confirm the assignment in writing to both parties.

(4) Refund. To obtain a refund of an unsettled or settled tax credit, the taxpayer shall submit to the Department a letter signed by an authorized representative of the taxpayer. The letter shall specify which credits the taxpayer is requesting be refunded, shall include a statement that the taxpayer has no obligations due the Commonwealth and shall be deemed to authorize the Department to review the taxpayer’s account, transfer credits that may be necessary to offset or pay outstanding tax debits and make other determinations that may be necessary to compute the taxpayer’s current available unsettled and settled credit balance. The Department will then refund the unsettled or settled credit in accordance with the taxpayer’s instructions.

The provisions of this § 151.22 adopted March 23, 1979, effective March 24, 1979, 9 Pa.B. 1071; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial pages (40493) to (40494) and (94409).

This section cited in 61 Pa. Code § 151.21 (relating to definitions).

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.23 Effective date of payment resulting from application of credit.

Tax credits which are applied in payment of a tax debit are credited as of the post-mark date of the payment from which the credit originated.

The provisions of this § 151.23 adopted March 23, 1979, effective March 24, 1979, 9 Pa.B. 1071.

This section cited in 61 Pa. Code § 151.21 (relating to definitions).

History

• Source: The provisions of this § 151.

61 Pa. Code § 151.24 Order of application of tax credits.

In the absence of instructions by the taxpayer to the contrary, and unless otherwise provided by law or by regulation, tax credits shall be applied to the penalties, legal costs, interest and tax principal, in that order, of each tax debit in the taxpayer’s account, in the chronological order in which the tax debits arose.

The provisions of this § 151.24 adopted March 23, 1979, effective March 24, 1979, 9 Pa.B. 1071.

This section cited in 61 Pa. Code § 151.21 (relating to definitions); and 61 Pa. Code § 151.22 (relating to transfer, assignment and refund of credits).

History

• Source: The provisions of this § 151.

Chapter 153 Corporate Net Income Tax

61 Pa. Code § 153.1 Taxpayers.

(a) Inclusions. The following entities organized and incorporated under the statutes of this Commonwealth, the United States or another state, territory, foreign country or dependency, and doing business in this Commonwealth, or carrying on activities in this Commonwealth, or owning property in this Commonwealth, or having capital or property employed or used in this Commonwealth by or in the name of itself, or a person, partnership, association, limited partnership, joint-stock association or corporation are taxpayers for purposes of this article. See section 401(1) of the TRC (72 P. S. § 7401(1)).

(1) Corporations having capital stock.

(2) Joint-stock associations.

(3) Limited partnerships, including:

(i) Registered partnerships formed and existing under the act of May 9, 1899 (P. L. 261, No. 153) (59 P. S. § § 241—311) prior to January 1, 1971, the effective date of its repeal by section 1203(e)(2) of the Business Corporation Law (15 P. S. § 2203(e)(2)).

(ii) Partnership associations formed and existing under the act of June 2, 1874 (P. L. 271, No. 153) (15 P. S. § § 12701—12710) prior to its repeal, effective August 9, 1970, by section 14(a)(1) of the Professional Corporation Law (15 P. S. § 2914(a)(1)).

(4) Professional corporations formed under the Professional Corporation Law (15 P. S. § § 2901—2914) and professional associations formed under the Professional Association Act (15 P. S. § § 12601—12619) which elect, under section 4 of the Professional Corporation Law (15 P. S. § 2904), to accept the provisions thereof.

(5) Corporations having authority to issue capital stock and organized or created by or under the nonprofit corporation law of a state.

(6) S corporations, as provided for under section 1361 of the IRC (26 U.S.C.A. § 1361).

(7) Domestic International Sales Corporations, commonly known as DISCs, as provided for under section 991 of the IRC (26 U.S.C.A. § 991).

(8) Foreign Sales Corporations, commonly known as FSCs, as provided for under section 921 of the IRC (26 U.S.C.A. § 921).

(9) General or limited partnerships formed under the statutes of the Commonwealth which elect to be governed by 15 Pa.C.S. Ch. 87 (relating to electing partnerships).

(b) Exclusions. The following entities are not taxpayers for purposes of this article. See section 401 of the TRC (72 P. S. § 7401).

(1) Massachusetts Trust or business trust, or common law trusts or Real Estate Investment Trusts (commonly referred to as REITs, as provided for under section 856 of the IRC (26 U.S.C.A. § 856)) which are not organized or created by or under the statutory law of a state.

(2) Nonprofit corporations without authority to issue capital stock.

(3) Limited partnerships formed under or governed by 15 Pa.C.S. Ch. 85 (relating to Pennsylvania Revised Uniform Limited Partnership Act) or the Uniform Limited Partnership Act of another state.

(4) Corporations having a valid Pennsylvania S Corporation election in effect for the taxable year.

The provisions of this § 153.1 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408); amended under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.1 amended October 5, 1984, effective October 6, 1984, 14 Pa.B. 3624; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial pages (94411) to (94412).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.11 Definition of ‘‘taxable income.’’

As used in this chapter, the term ‘‘taxable income’’ means ‘‘Federal taxable income before net operating loss deduction and special deductions’’ (presently Line 28 of Page 1 of Federal IRS Form 1120 or Line 24 of Page 1 of Federal IRS Form 1120-A) as returned to and ascertained by the Federal government and as modified or adjusted under section 401(3)1. of the TRC (72 P. S. § 7401(3)1.) and under this chapter, unless the context clearly indicates otherwise.

The provisions of this § 153.11 amended under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.11 amended November 3, 1978, effective November 4, 1978, 8 Pa.B. 3035; amended January 1, 1987, effective January 17, 1987, 17 Pa.B. 273; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (115309) to (115310).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.12 Altering Federal taxable income.

Foreign taxes paid. Foreign taxes taken by the taxpayer as a credit against Federal taxes are not allowed to reduce taxable income. Reference should be made to § 153.13 (relating to Federal tax credits). Foreign taxes taken by the taxpayer as a deduction in arriving at Federal taxable income are a proper deduction (reflected presently on Line 17 of Page 1 of Federal IRS Forms 1120 and 1120-A). See § 153.13.

The provisions of this § 153.12 issued under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270); amended under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.12 amended October 5, 1984, effective October 6, 1984, 14 Pa.B. 3624; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial pages (94413) and (36116).

This section cited in 61 Pa. Code § 153.13 (relating to Federal tax credits); and 61 Pa. Code § 153.25 (relating to payroll factor).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.13 Federal tax credits.

In the determination of taxable income, Federal tax credits, for example the Federal tax credit for taxes paid to a foreign country, is not allowed to reduce the ‘‘Federal taxable income before net operating loss deduction and special deductions’’ (presently Line 28 of Page 1 of Federal IRS Form 1120 or Line 24 of Page 1 of Federal IRS Form 1120-A). Reference should also be made to § 153.12 (relating to altering Federal taxable income).

The provisions of this § 153.13 amended under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.13 amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial page (36116).

This section cited in 61 Pa. Code § 153.12 (relating to altering Federal taxable income).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.14 Other adjustments.

The following items will be allowed as special deductions in determining Commonwealth taxable income if supported by a detailed schedule:

(1) Special deduction for western hemisphere trade corporations. A deduction will be allowed in the amount of the deduction permitted under sections 921 and 922 of the IRC (26 U.S.C.A. § § 921 and 922).

(2) Contribution adjustments to State taxable income. A taxpayer filing with the Federal government as a member of a consolidated group may be entitled, on a separate company reporting basis, to a larger contribution deduction in arriving at Commonwealth taxable income. Because consolidated reporting is not permitted for Commonwealth purposes, the taxpayer may reflect on a separate company reporting basis the contribution deduction to which it would have been entitled had it filed a separate return with the Federal government.

(3) Special deduction for section 1250 of the IRC (26 U.S.C.A. § 1250) property depreciated on an accelerated depreciation basis when the accelerated depreciation falls below straight line depreciation. This adjustment may be taken in accordance with the following:

(i) A taxpayer depreciating section 1250 of the IRC (26 U.S.C.A. § 1250) property on an accelerated depreciation basis is permitted a special deduction to taxable income to be apportioned when the accelerated depreciation falls below straight line depreciation. The amount of the deduction for a tax year is limited to the amount of depreciation below straight line. The aggregate adjustment to taxable income to be apportioned for amounts below straight line may not exceed the aggregate of the amount added to taxable income to be apportioned in previous tax years.

Example: Taxpayer, a calendar year company, purchases a plant, which is a section 1250 of the IRC property, on January 1, 1976, having a depreciable value of $900,000 and a 20-year useful life. Taxpayer depreciates the property on a double-declining (accelerated) basis. Straight-line depreciation would be $45,000 per year. Taxpayer’s depreciation on its Federal return for 1984 would be $43,047. Taxpayer’s 1984 taxable income to be apportioned on its Commonwealth report would be adjusted by permitting a deduction for the amount of depreciation below straight-line or $1,953 ($45,000 minus $43,047).

(ii) A taxpayer depreciating section 1250 of the IRC property on an accelerated depreciation basis is permitted a special deduction to taxable income to be apportioned when a section 1250 of the IRC property is sold. The Department will permit the taxpayer a special deduction for accelerated depreciation previously included in income to be apportioned in prior years.

Example: Taxpayer purchases a building in 1971 and elects to depreciate the building on an accelerated depreciation basis. The following amounts were included as tax preference items for the years listed:

The building was sold on January 1, 1975. Each of the years listed in this example produced taxable income and the tax preference amounts listed in this example were included in income to be apportioned. The Department will permit the taxpayer a special deduction of $25,000.

(iii) The special deductions described in subparagraphs (i) and (ii) will not be permitted for a tax year when the taxpayer did not have income to be apportioned.

(4) Special deduction for certified pollution control facilities amortized under section 169 of the IRC (26 U.S.C.A. § 169). This adjustment may be taken in accordance with the following:

(i) A taxpayer depreciating a certified pollution control facility under section 169 of the IRC (26 U.S.C.A. § 169) is permitted a special deduction to taxable income to be apportioned when the rapid amortization period expires. The amount of the deduction for a given tax year is limited to the amount of depreciation which the taxpayer would have been allowed under the depreciation method elected under section 167 of the IRC (26 U.S.C.A. § 167) minus a depreciation which the taxpayer has taken for a given tax year. The total special deductions may not exceed the total amount added to taxable income to be apportioned in prior years.

Example: Taxpayer’s, a calendar year company, rapid amortization period of a certified pollution control facility constructed in late December 1971, begins January 1972 and expires December 1976. No other depreciation has been taken and the depreciable value is $1 million and the useful life is 20 years. Straight-line depreciation would be $50,000 per year. Since the useful life is greater than 15 years, taxpayer’s Federal rapid amortization deduction is available only for the portion of the property’s depreciable value attributable to the first 15 years of its useful life or 75% (15/20) of its depreciable value (75% of $1 million or $750,000) over the 60 months rapid amortization period. The remaining 25% of its depreciable value (25% of $1 million or $250,000) is depreciated by the straight-line method over the 20-year useful life period. Taxpayer’s depreciation on its Federal return for 1977 would be $12,500. Taxpayer’s 1977 taxable income to be apportioned on its Commonwealth report would be adjusted by permitting a deduction for the amount of depreciation below straight-line or $37,500 ($50,000 minus $12,500).

(ii) The special deduction described in subparagraph (i) will not be permitted for a tax year when the taxpayer did not have income to be apportioned.

The provisions of this § 153.14 amended December 2, 1977, effective December 3, 1977, 7 Pa.B. 3451; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (115311) to (115312) and (174431).

Depreciation

The taxpayer was not denied the right to use straight line depreciation on its State return since it chose to use accelerated depreciation on its Federal tax return. Roosevelt Arms, Inc. v. Commonwealth, 608 A.2d 648 (Pa. Cmwlth. 1992).

Special Deduction

The taxpayer did not prove that it or its predecessor added back any depreciation in prior years; therefore, having failed to meet its burden, the taxpayer was not entitled to special deductions for its ‘‘Section 1250 property.’’ Eat ’n Park Restaurants Business Trust v. Commonwealth, 803 A.2d 845 (Pa. Cmwlth. 2002); exceptions sustained in part, overruled in part 821 A.2d 160 (Pa. Cmwlth. 2003).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.15 Net loss deduction.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

(1) Net loss—For a corporation ineligible to allocate or apportion its income, the negative amount for a taxable year arrived at under section 401(3)1. of the TRC (72 P. S. § 7401(3)1.). For a corporation eligible to allocate or apportion its income, the negative amount for a taxable year arrived at under section 401(3)2. of the TRC. Negative amounts shall be allocated and apportioned in the same manner as positive amounts.

(2) Net loss deduction—The net loss deduction for a taxable year is the lesser of the amount of the net loss which may be carried over to the taxable year or taxable income for the taxable year.

(3) Taxable year—The taxable year of a corporation is the taxable year which the corporation, or a consolidated group with which the corporation participates in the filing of consolidated returns, actually used in reporting taxable income to the Federal government.

(b) General rule. For taxable years beginning in 1982 and thereafter, a net loss deduction will be allowed from taxable income as arrived at under section 401(3)1. of the TRC for corporations which do not qualify to allocate or apportion their income for the taxable year or from taxable income as arrived at under section 401(3)2. of the TRC for corporations which qualify to allocate or apportion their income for the taxable year.

Example 1. Corporation ‘‘A’’ has a loss of $100,000 before allocation and apportionment. Corporation ‘‘A’’ is entitled to allocate and apportion its income. Corporation ‘‘A’’ has a three factor apportionment formula percentage of 25%. Corporation ‘‘A’’ has a nonbusiness loss of $30,000 allocable to state ‘‘X’’ and nonbusiness income of $10,000 allocable to Pennsylvania. Corporation ‘‘A’’ has a net loss of $10,000, determined as follows:

Example 2. For the 12-month taxable year ended December 31, 1986, Corporation ‘‘A’’ has taxable income, after allocation and apportionment, of $100,000. For the taxable year ended December 31, 1985, Corporation ‘‘A’’ had a net loss of $90,000. Corporation ‘‘A’’ has no other net losses.

Corporation ‘‘A’’ has a net loss deduction of $90,000 for its taxable year ended December 31, 1986.

(c) Carryover. A net loss for a taxable year may only be carried forward under the following schedule:

The earliest net loss shall be carried over to the earliest taxable year to which it may be carried under this schedule.

Example. For its taxable year ended December 31, 1986, Corporation A has taxable income, after allocation and apportionment of $50,000. Corporation A has the following net losses available:

For its taxable year ended December 31, 1986, Corporation A has a net loss deduction of $50,000. The deduction consists of the $15,000 net loss from taxable year 1983, the $30,000 net loss from taxable year 1984 and $5,000 of the net loss from taxable year 1985.

The remaining $15,000 of net loss from taxable year 1985 is available for carryover to Corporation A’s next 2 taxable years.

(d) Pennsylvania S Corporations.

(1) While a corporation is in Pennsylvania S status, no loss may be carried over from a taxable year when the corporation was subject to the Corporate Net Income Tax to a taxable year when the corporation is treated as a Pennsylvania S corporation. If a corporation’s Pennsylvania S election is either terminated or revoked, no loss may be carried over from a taxable year when the corporation is treated as a Pennsylvania S corporation to a taxable year during which the corporation is subject to the Corporate Net Income Tax.

(2) A taxable year during which a corporation is a Pennsylvania S corporation is considered a taxable year for determining the number of years to which a net loss may be carried. The short taxable year of a corporation after revocation or termination of Pennsylvania S status is treated as a taxable year.

(e) Change in ownership. Under section 401(3)4.(g) of the TRC, in the case of a change in the ownership of a corporation effected in a manner described in sections 381 or 382 of the IRC (26 U.S.C.A. § § 381 or 382), certain limitations provided the IRC with respect to the use of net operating losses after a change in ownership shall apply for the purpose of computing the portion of the net loss available for carry-over as a deduction against income subject to the Corporate Net Income Tax, whether the change is effected by purchase, liquidation, acquisition of stock or reorganization. The applicable limitations include limitations imposed by the IRC solely on account of a change in ownership, including but not limited to, sections 269, 318 (insofar as it defines the scope of section 382 of the IRC (26 U.S.C.A. § 382)), 381 and 382 of the IRC (26 U.S.C.A. § § 269, 318, 381 and 382). The carryover of net losses is not limited by the Federal consolidated return regulations.

The provisions of this § 153.15 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.15 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273.

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.21 Transacting business outside.

(a) A taxpayer may allocate and apportion if in addition to transacting business outside this Commonwealth as established in subsection (b) it is either ‘‘subject to’’ a tax in another state as provided in § 153.22 (relating to subject to) or another state has ‘‘jurisdiction to subject’’ as provided in § 153.23 (relating to jurisdiction to subject) the taxpayer to a Corporate Net Income Tax.

(b) What constitutes transacting business outside cannot be precisely defined. It may be generally stated that a taxpayer is ‘‘transacting business outside’’ when its presence outside this Commonwealth is related to its actual business activity. The presence may be through, but not limited to, administrative functioning, property ownership, or sales activity.

Example 1. Taxpayer actively engaged in manufacturing farm equipment in this Commonwealth. In State W taxpayer owned a manufacturing plant. Taxpayer leased the plant to another company to be used for the manufacturing farm equipment. Taxpayer acquired the lessee’s products and subsidized its operations by advancing money to it. Upon the expiration of the lease, the manufacturing operations in State W ceased completely. Up to the expiration of the lease, taxpayer was transacting business outside this Commonwealth. After the expiration of the lease, taxpayer’s ownership of the property in State W was not related to its actual business activity, and, therefore, taxpayer was not transacting business outside this Commonwealth. Example 2. Taxpayer manufactures sparkplugs in this Commonwealth and all activities are carried on in this Commonwealth except that administrative function and executive policies are performed and established by taxpayer’s officers located in the State O. The activities in State O are related to the manufacturing activity in this Commonwealth and are part of the taxpayer’s business. Thus, taxpayer is transacting business outside of this Commonwealth.

The provisions of this § 153.21 adopted January 27, 1978, effective January 28, 1978, 8 Pa.B. 257.

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.22 Subject to.

(a) A taxpayer is ‘‘subject to’’ one of the four taxes specified in section 401(3)2.(a)(3) of the TRC (72 P. S. § 7401(3)2.(a)(3)) in a particular state if it carries on business activity in the state and the state in fact requires it to file, and, in fact, does file one of the four enumerated tax reports based on the business activity. A taxpayer claiming it is ‘‘subject to’’ one of the four specified taxes may be required by the Bureau to furnish proof that the taxpayer has filed the required tax report in the other state and the other necessary information.

Example: State A has a corporation franchise tax measured by net income for the privilege of doing business in that state. Taxpayer files a return based upon its business activity in the state but the amount of computed liability is less than the minimum tax. Taxpayer pays the minimum tax. Taxpayer is subject to State A’s corporation franchise tax.

(b) A taxpayer is not ‘‘subject to’’ one of the specified taxes within the meaning of section 401(3)2.(a)(3) (72 P. S. § 7401(3)2.(a)(3)) if the taxpayer voluntarily files one or more of the tax reports when not required to do so by the laws of that state or pays a minimum fee for qualification, organization or the privilege of doing business in that state, but:

(1) Does not engage in business activity in that state.

(2) Does actually engage in some business activity, but not sufficient for nexus.

Example: State A has a corporation franchise tax measured by net income, for the privilege of doing business in that state. Taxpayer files a return and pays the $50 minimum tax, although it carries on no business activity in State A. Taxpayer is not ‘‘taxable’’ in State A.

(c) Only those taxes enumerated in section 401(3)2.(a)(3) of the TRC (72 P. S. § 7401(3)2.(a)(3)) which may be considered as basically revenue raising rather than regulatory measures shall be considered in determining whether the taxpayer is ‘‘subject to’’ one of the taxes specified in section 401(3)2.(a)(3) of the TRC (72 P. S. § 7401(3)2.(a)(3)).

Example: State A requires nonresident corporations which qualify or register in State A to pay to the Secretary of State an annual license fee or tax for the privilege of doing business in the state regardless of whether the privilege is in fact exercised. The amount paid is determined according to the total authorized capital stock of the corporation; the rates are progressively higher by bracketed amounts. The statute sets a minimum fee of $50 and a maximum fee of $500. Failure to pay the tax bars a corporation from utilizing the State courts for enforcement of its rights. State A also imposes a corporation income tax. Nonresident Taxpayer is qualified in State A and pays the required fee to the Secretary of State but does not carry on any activities in State A other than utilizing its courts. Taxpayer is not ‘‘taxable’’ in State A.

The provisions of this § 153.22 adopted February 13, 1976, effective February 14, 1976, 6 Pa.B. 327.

This section cited in 61 Pa. Code § 153.21 (relating to transacting business outside).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.23 Jurisdiction to subject.

(a) A particular state has ‘‘jurisdiction to subject’’ the taxpayer to a net income tax, if the taxpayer’s business activity in the state is sufficient to give the State jurisdiction to impose at least a net income tax under the constitution and statutes of the United States. See section 401(3)2.(a)(1)(F) of the TRC (72 P. S. § 7401(3)2.(a)(1)(F)). Whether the state does in fact impose a tax is not relevant. Jurisdiction to tax is not present where the state is prohibited from imposing the tax by reason of the provisions of 15 U.S.C.A. § § 381—385.

(b) The determination of whether the state has ‘‘jurisdiction to subject’’ the taxpayer to a net income tax shall be made upon the same rules that are applied in determining whether a taxpayer has sufficient activity in this Commonwealth to subject the taxpayer at least to the Pennsylvania Corporate Net Income Tax. See section 401 of the TRC (72 P. S. § 7401).

Example 1. Taxpayer manufactures pin ball machines in this Commonwealth. Taxpayer has salesmen in State N who have the right to, and do in fact, accept orders there. State N has no corporate tax statutes. State N has ‘‘jurisdiction to subject’’ taxpayer to a net income tax because 15 U.S.C.A. § § 381—385 does not apply. Example 2. Taxpayer manufactures farm equipment in this Commonwealth and in foreign country B. Both the Commonwealth and foreign country B impose a net income tax, but foreign country B exempts corporations engaged in manufacturing farm equipment. Foreign country B has jurisdiction to subject taxpayer to a net income tax.

The provisions of this § 153.23 amended under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.23 adopted January 27, 1978, effective January 28, 1978, 8 Pa.B. 257; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial page (36121).

This section cited in 61 Pa. Code § 153.21 (relating to transacting business outside).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.25 Payroll factor.

(a) General. The payroll factor is a fraction, the numerator of which is the total amount of compensation paid in this Commonwealth during the tax period by the taxpayer to its employes and the denominator of which is the total amount of compensation paid everywhere during the tax period by the taxpayer to its employes.

(b) Effect of method of accounting. If the taxpayer uses either the cash or accrual method of accounting in reporting its taxable income to the IRS, the total amount paid to individuals for a tax period is determined upon the basis of the accounting method of the taxpayer.

(c) Effect of denial of deduction for wages and salaries. The payroll factor shall include compensation whether or not included as part of the deduction for wages and salaries of the taxpayer. Reference should also be made to § 153.12 (relating to altering Federal taxable income).

The provisions of this § 153.25 adopted June 9, 1978, 8 Pa.B. 1579, amended February 20, 1981, effective June 23, 1979, 11 Pa.B. 726. Immediately preceding text appears at serial page (36125).

This section cited in 61 Pa. Code § 153.29 (relating to corporation tax: interest in partnership/joint venture).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.26 Sales factor.

(a) Interest on United States securities and dividends received. Gross receipts in the form of interest on United States securities and dividends received shall be excluded from sales. Reference should be made to section 401(3)2.(a)(1)(E), (15) and (17) of the TRC (72 P. S. § 7401(3)2.(a)(1)(E), (15) and (17)).

(b) Sales of tangible personal property. The following sales factors shall apply to the sale of tangible personal property.

(1) When sales of tangible personal property are in this Commonwealth. Sales of tangible personal property are in this Commonwealth if the property is delivered or shipped to a purchaser within this Commonwealth regardless of the f.o.b. point or other conditions of the sale. Reference should be made to section 401(3)2.(a)(16) of the TRC (72 P. S. § 7401(3)2.(a)(16)).

(2) General rule. Sales of tangible personal property are in the state in which delivery to the purchaser occurs.

Example: A taxpayer produces beer in New York. Taxpayer sells the beer to a distributor located in this Commonwealth. Distributor sends its truck into New York to taxpayer’s plant to pick up the beer and brings the beer back to its Commonwealth business location. Delivery has occurred in New York and these taxpayer’s sales are in New York.

(3) Definitions. The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:

(i) Delivered—The physical transfer of possession of tangible personal property to the purchaser.

(ii) Purchaser—The term includes the following:

(A) The ultimate recipient of the property if the taxpayer, at the designation of the purchaser, delivers property in this Commonwealth to the ultimate recipient.

Example: A taxpayer in this Commonwealth sold merchandise to a purchaser in New York. Taxpayer directed the manufacturer of the merchandise in Ohio to ship the merchandise to the purchaser’s customer in this Commonwealth under purchaser’s instructions. The sale by the taxpayer is in this Commonwealth.

(B) A consignee if the taxpayer (consignor) delivers or ships property in this Commonwealth to a consignee which the consignee subsequently sells.

Example: The taxpayer (consignor) located in Ohio ships property to this Commonwealth to a consignee. Consignee, also a taxpayer, sells and ships such property to New York to its purchaser. The consignor’s sale is in this Commonwealth and the consignee’s sale is in New York.

(iii) Shipped—The transportation of tangible personal property, including delivery, to the purchaser.

(4) Application of general rule. The general rule shall be applied as follows:

(i) Property shall be deemed to be delivered to a purchaser within this Commonwealth if the shipment terminates in this Commonwealth, even though the property is subsequently transferred by the purchaser to another state.

Example: A taxpayer makes a sale of desks to a purchaser who maintains a central warehouse in this Commonwealth at which merchandise purchases are received. The purchaser reships sale. The taxpayer’s desks shipped to the purchaser’s warehouse in this Commonwealth are sales in this Commonwealth.

(ii) When property is being shipped by a taxpayer (consignor) from the state of origin to a consignee in another state and is diverted while enroute and shipped in this Commonwealth to a purchaser, the sale is in this Commonwealth.

Example: The taxpayer begins shipment of property from Ohio to the purchaser’s place of business in New York. While enroute the property is diverted to and shipped to the purchaser’s place of business in this Commonwealth. The sale by the taxpayer is in this Commonwealth.

The provisions of this § 153.26 amended through November 16, 1984, effective November 17, 1984, 14 Pa.B. 4163. Immediately preceding text appears at serial pages (81525) to (81526) and (89263).

Construction

This section is contrary to the clear wording of § 401(3)2(a)(16) of The Tax Reform Code. Commonwealth v. Gilmour Manufacturing Co., 822 A.2d 676 (Pa. 2003).

Interest on United States Securities and Dividends Received

In determining that the regulation excluding gross receipts in the form of interest on U.S. securities and dividends received from ‘‘sales’’ for sales factor purposes applies to computation of the Capital Stock Tax as well as the Corporate Net Income Tax, the court held that the Revenue Department’s interpretation of the tax code as expressed in the regulation is reasonable and not clearly inconsistent with the statute. SmithKline Beckman Corp. v. Commonwealth, 482 A.2d 1344 (Pa. Cmwlth. 1984); order affirmed 498 A.2d 374 (Pa. 1985).

This section cited in 61 Pa. Code § 153.29 (relating to corporation tax: interest in partnership/joint venture); and 61 Pa. Code § 170.11 (relating to documentation requirements to establish out-of-State sales after Gilmour Manufacturing decision).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.27 Railroad, truck, bus and airline companies.

(a) The taxpayer shall be transacting business outside this Commonwealth in order to be entitled to the use of the appropriate special statutory apportionment fraction. See section 401(3)2. of the TRC (72 P. S. § 7401(3)2.).

(b) The taxpayer is not required to have income from business activity which is taxable both within and without this Commonwealth as a further condition precedent to its use of the revenue miles apportionment fraction but is entitled to the use of the revenue miles apportionment fraction without regard to whether or not the taxpayer has income from business activity which is taxable outside this Commonwealth. See section 401(3)2.(a)(2) and (3) of the TRC (72 P. S. § 7401(3)2.(a)(2) and (3)).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.28 Property factor.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

(1) Net annual rental rate—The annual rental rate paid by the taxpayer for an item of real or tangible personal property less annual rental income received by the taxpayer from subrentals, but not less than zero.

(2) Original cost—The basis of the real or tangible personal property for Federal income tax purposes at the time of acquisition by the taxpayer and adjusted by subsequent capital additions or improvements thereto and partial disposition thereof, by reason of sale, exchange, abandonment and the like.

(3) Owned—Property to which the taxpayer has both legal and equitable title, property to which the taxpayer has legal title subject to the security interest of another and property which the taxpayer is purchasing under an installment sales agreement or similar agreement under the terms of which legal title remains in the seller for security purposes until the purchase price is paid.

(4) Owned or rented and used—Property owned by the taxpayer and used by the taxpayer. Property rented to the taxpayer and used by the taxpayer.

(5) Real and tangible personal property—Land, buildings, machinery, equipment, furniture, fixtures, automobiles, trucks, inventory and other similar property. The term does not include coin, currency, shares of stock or evidence of indebtedness.

(6) Used—Actually used or available for or capable of being used during the taxable year by the taxpayer.

(b) General. The property factor is a fraction, the numerator of which is the average value of the taxpayer’s real and tangible personal property owned or rented and used in this Commonwealth during the taxable year and the denominator of which is the average value of all of the taxpayer’s real and tangible personal property owned or rented and used during the taxable year.

(c) Inclusions.

(1) Mineral interests. A leasehold interest in minerals in place, however the interest may be designated, described or characterized by the law of the situs state, is included in the property factor as owned property.

(2) Minerals. Minerals which have been severed or extracted are included in the property factor.

(3) Partially used construction in progress. The average value of the real and tangible personal property owned by the taxpayer and partially used by the taxpayer while construction is being completed shall, to the extent used, be included in the property factor. A schedule detailing the basis of the value of partially used construction in progress shall be submitted to the Department.

(4) Mobile and movable property. The value of mobile and movable property, such as construction equipment, trucks, automobiles or leased electronic equipment, which are located and used within and without this Commonwealth during the taxable year is determined for the purposes of the numerator of the factor on an equitable and reasonable basis, such as on a time used or mileage basis. Property in transit between locations of the taxpayer to which it belongs shall be considered to be at the destination for purposes of the property factor. Property in transit between a seller and buyer which is included by a taxpayer in the denominator of its property factor in accordance with its regular accounting practices shall be included in the numerator according to the state of destination.

(d) Exclusions.

(1) Construction in progress. Real and tangible personal property owned but not used by the taxpayer because the property is in the process of construction is excluded from the property factor.

(2) Security interests. The security interest of a taxpayer as seller or lessor in personal property sold or leased under a conditional sale, bailment lease, chattel mortgage or other contract providing for the retention of a lien or title as security for the sale price of the property is excluded from the property factor.

(3) Idle property. Property which is not actually used or available for or capable of being used during the taxable year by the taxpayer is excluded from the property factor.

Example 1. The taxpayer closes one of its facilities with the intention that the closing will be permanent. The facility remains closed for several years, until it can be disposed of. The property would be included in the property factor the year the facility is closed, but would thereafter be excluded. Example 2. The taxpayer closes its manufacturing facility for a 3-month period during which the facility is refurbished. The property would remain in the property factor. Example 3. The taxpayer owns certain mineral interests which have been depleted of reasonably recoverable minerals. The mineral interests should be excluded from the property factor thereafter.

(e) Valuation of owned property.

(1) General rule. Real and tangible personal property owned by the taxpayer, other than inventories, shall be valued at original costs.

(2) Mineral interests. Mineral interests shall be included in the property factor at original cost. Delay rentals, to the extent not treated as a part of original cost, shall be included in the property factor as rents. Payments, however designated, which are based on the level or rate of production are not considered rent for property factor purposes.

(3) Inventories. Inventories shall be included in the property factor in accordance with the valuation method used for Federal Income Tax purposes.

(f) Valuation of rented property. Real and tangible personal property rented to the taxpayer shall be valued at eight times the net annual rental rate.

(g) Averaging property values.

(1) Owned property.

(i) Annual averaging. The average value of real and tangible personal property owned by the taxpayer is determined by averaging the values at the beginning and ending of the taxable year.

(ii) Monthly averaging. The Department may require the averaging of monthly values during the taxable year of real and tangible personal property owned by the taxpayer if the method is reasonably required to reflect properly the average value of the taxpayer’s property. Monthly averaging will be necessary if substantial fluctuations in the value of the real and tangible personal property exist during the taxable year or if property is acquired after the beginning of the taxable year or disposed of before the end of the taxable year or if property is acquired after the beginning of the taxable year and disposed of before the end of the taxable year or for a similar circumstance.

(2) Rented property. The value of property rented for only a portion of the taxable year shall be eight times the net rent paid.

The provisions of this § 153.28 issued and amended under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.28 adopted March 9, 1984, effective March 10, 1984, 14 Pa.B. 853; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial pages (96403) to (96404).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.29 Corporation tax: interest in partnership/joint venture.

(a) General.

(1) When a taxpayer has an interest in a partnership, joint venture, association or other unincorporated enterprise (hereinafter referred to in this section as partnership), the amount of its distributive share of partnership income shall be determined in accordance with the IRC. The taxpayer’s interest in the partnership shall, for purposes of Commonwealth corporate taxation, be considered a direct interest in the assets of the partnership rather than an intangible interest. Accordingly, the taxpayer’s share of the partnership’s payroll, property and sales—as hereafter determined—shall be included in the apportionment factors of the taxpayer unless otherwise excluded by this section.

(2) A taxpayer’s partnership interest for the purpose of computing the portion of the partnership’s property, payroll and sales to be included in the taxpayer’s property, payroll and sales factors shall be determined under the partnership agreement and in accordance with the IRC

(b) Nexus.

(1) If the separate activities of the taxpayer or the activities of the partnership are sufficient to meet the conditions of section 401(1) of the TRC (72 P. S. § 7401(1)) relating to doing business, carrying on activities, having capital or property employed or used or owning property within this Commonwealth, then the taxpayer will be subject to corporate taxation by the Commonwealth.

(2) If the separate activities of the taxpayer or the activities of the partnership are sufficient to constitute transacting business outside this Commonwealth and render the taxpayer taxable to another state under section 401(3)2.(a)(2) and (3) of the TRC (72 P. S. § 7401(3)2.(a)(2) and (3)), then the taxpayer will be allowed to apportion and allocate its income.

(c) Business income.

(1) Income arising from transactions and activity in the regular course of the taxpayer’s trade or business constitutes business income. The determination of whether a corporate partner’s distributive share of partnership income is business income depends upon whether the income arose in the regular course of the taxpayer’s trade or business, determined in accordance with § 153.24 (reserved). The taxpayer’s trade or business shall include activities performed in partnership.

Example 1: Corporation A’s distributive share of Partnership P’s income is 20%. Corporation A manufactures toys which are sold in seven other states by Partnership P. Corporation A’s business income for the year, disregarding its distributive share of Partnership P’s income, was $1,000,000. Partnership P’s business income for the same year was $800,000. The business income of Corporation A is $1,160,000 ($1,000,000 plus 20% of $800,000).

(2) The classification of income by the labels customarily given such as interest, rents, royalties and capital gains, is of no aid in determining whether distributive partnership income is business or nonbusiness income. The income is determined to be either business or nonbusiness income depending upon the relationship to the trade or business of the corporate partner, not of the partnership, as determined by paragraph (1).

(d) Apportionment of business income. A corporate partner entitled to apportionment under subsection (b)(2) shall determine the business income attributable to this Commonwealth by use of a three-factor formula consisting of property, payroll and sales of the taxpayer including its share of the partnership’s property, payroll and sales for a partnership year ending within or with the taxpayer’s tax year as follows:

(1) Property factor.

(i) General rule. The numerator and denominator of the property factor shall be determined as set forth in section 401(3)2.a(10)—(12) of the TRC (72 P. S. § 7401(3)2.(a)(10)—(12)) and this chapter; however, the special rules in subparagraph (ii) will apply.

(ii) Special rules. A portion of the partnership’s real and personal property, both owned and used and rented and used during the tax year to the extent of the taxpayer’s interest in the partnership shall be included in the numerator and denominator of the taxpayer’s property factor. However, the value of the property which is rented or leased by the taxpayer to the partnership or vice versa shall, with respect to the taxpayer, be adjusted in the numerator and denominator of the taxpayer’s property fraction in order to avoid duplication in the following manner:

(A) If the property is owned by the taxpayer and rented to the partnership, no portion of the rental value of the rented or leased property will be in the taxpayer’s property factor.

(B) If the property is owned by the partnership and rented to the corporate partner, the property factor of the taxpayer will include the sum of:

(I) The value of the property multiplied by the percentage of taxpayer’s interest in the partnership.

(II) The rental value of the property multiplied by the percentage of the interests in the partnership not held by the taxpayer.

Example 1: Corporation A’s interest in Partnership P is 20%. Corporation A’s distributive share of Partnership P’s income is included in business income of Corporation A to be apportioned by formula. Corporation A owns a building (original cost of $100,000) which is rented to Partnership P for $12,000 per year. Corporation A must include the original cost of $100,000 for the building in its Property Factor. Therefore, no portion of the rental value of the rented property will be reflected in the Property Factor of Corporation A. Example 2: Same facts as in Example 1 except Partnership P owns the building and rents it to Corporation A. Corporation A will include $20,000 (20% of $100,000) in its Property Factor because of its interest in Partnership P, and in addition, Corporation A will include $76,800 (($12,000 8) 80%) of rental value in its Property Factor in order to give weight in the property factor to the rented building used in Corporation A’s operation. Thus, the value of the building to be used in the Property Factor of Corporation A is $96,800 ($20,000, plus $76,800).

(2) Payroll factor.

(i) General rule. The numerator and denominator of the payroll factor shall be determined as set forth in § 153.25 (relating to payroll factor); however, the special rules in subparagraph (ii) will also apply.

(ii) Special rules. The partnership’s payroll shall be included in the denominator of the taxpayer’s payroll factor to the extent of the taxpayer’s interest in the partnership. The amount of a payroll applicable to this Commonwealth shall also be included in the numerator of the taxpayer’s payroll factor.

Example 1: Corporation A’s interest in Partnership P is 20%, and its distributive share of Partnership P’s income is included in business income of Corporation A to be apportioned by formula. Corporation A’s own payroll is $1,000,000 and the payroll of Partnership P is $800,000. Corporation A’s total payroll for purposes of the Payroll Factor is $1,160,000 (1,000,000, plus 20% of $800,000).

(3) Sales factor.

(i) General rule. The numerator and denominator of the sales factor shall be determined as set forth in § 153.26 (relating to sales factor); however, the special rules set forth in subparagraph (i) will also apply.

(ii) Special rules.

(A) The partnership’s sales which give rise to business income shall be included in the denominator of the taxpayer’s sales factor to the extent of the taxpayer’s interest in the partnership. The amount of the sales attributable to this Commonwealth shall also be included in the numerator of the taxpayer’s sales factor. Intercompany sales between the partnership and the taxpayer shall be eliminated from the denominator and numerator of the taxpayer’s sales factor as follows: sales by the taxpayer to the partnership to the extent of the interest in the partnership; sales by the partnership to the taxpayer not to exceed the taxpayer’s interest in partnership sales.

(B) Notwithstanding an intercompany eliminations described in clause (A), sales made by the taxpayer or the partnership to nonpartners shall be included in the taxpayer’s sales factor in an amount equal to the taxpayer’s interest in the partnership.

(C) Application of clauses (A) and (B) is illustrated by the following examples:

Example 1: Corporation A’s interest in Partnership P is 20%, and its distributive share of Partnership P’s income is included in business income of Corporation A to be apportioned by formula. Corporation A’s sales were $20,000,000 for the year, $5,000,000 of which were made to Partnership P. Partnership P made sales of $10,000,000 during the same year, none of which were to Corporation A or the other partners. The denominator of Corporation A’s Sales Factor is $21,000,000 determined as follows:

Example 2: The following facts are applicable to Examples 2(a) through (c) below. Corporation A’s interest in Partnership P is 20%, and Corporation B’s interest is 80%. The distributive share of partnership income is included in business income of Corporation A and Corporation B, respectively.

(a) The sales made by Corporation A, Corporation B, and Partnership P are as follows:

The denominator of Corporation A’s Sales Factor is $20,000,000 determined as follows:

The denominator of Corporation B’s Sales Factor is $60,000,000 determined as follows:

(b) The sales made by Corporation A, Corporation B, and Partnership P are as follows:

The denominator of Corporation A’s Sales Factor is $21,000,000 determined as follows:

The denominator of Corporation B’s Sales Factor is $60,000,000 determined as follows:

(c) The sales made by Corporation A, Corporation B, and Partnership P are as follows:

The denominator of Corporation A’s Sales Factor is $20,200,000 determined as follows:

The denominator of Corporation B’s Sales Factor is $82,000,000 determined as follows:

(e) Nonbusiness income.

(1) The determination of whether a taxpayer’s distributive share of partnership income is business or nonbusiness income shall be made in accordance with this subsection if the conditions of subsection (b) are met.

(i) The first step is to determine which portion of the taxpayer’s income and its distributive share of the partnership items constitute ‘‘business income’’ and ‘‘nonbusiness income’’ under section 401(3)2.(a)(1)—(17) of the TRC (72 P. S. § 7401(3)2.(a)(1)—(17)) and this chapter. The various items of nonbusiness income are then directly allocated to specific states under section 401(3)2.(a)(4)—(8) of the TRC (72 P. S. § 7401(3)2.(a)(4)—(8)) and this chapter. The taxpayer’s distributive share of the nonbusiness income shall be reported in the same manner as other nonbusiness income derived from other activities of the taxpayer. See § 153.24 (relating to business income and nonbusiness income).

(f) Accounting period.

(1) The corporate taxpayer and the partnership are required to maintain their accounting periods as prescribed under section 706 of the IRC (26 U.S.C.A. § 706).

(2) Where the partnership keeps its books on a fiscal or calendar year which is different from the tax year of the taxpayer, the taxpayer shall report its share of the partnership income and apportionment factors in its tax year in which or with which the partnership year ended.

(g) Accounting method.

(1) In determining the corporate partner’s distributive share, the same method of accounting shall be used that the partnership uses in keeping its books. This is true even though the partnership method of accounting is not the same as that which the corporate partner used in preparing its corporate return. Thus, a cash basis partner would have to include items which are accrued but unpaid by an accrual basis partnership.

(h) Filing requirements.

(1) A corporation filing under this section shall file a copy of the partnerships’ Federal Form 1065 and a detailed description of partnership activity. The description shall include a detailed explanation of all business and nonbusiness income.

(i) Effective date. This section will take effect for the tax years beginning January 1, 1982.

The provisions of this § 153.29 issued under section 408(a) of the Tax Reform Code of 1971 (72 P. S. § 7408(a)).

The provisions of this § 153.29 adopted March 11, 1983, effective March 12, 1983, 13 Pa.B. 991.

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.30 Safe harbor leases.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

(1) Lessee—The lessee under a safe harbor lease.

(2) Lessor—The lessor under a safe harbor lease.

(3) Safe harbor lease—An agreement which is characterized as a lease under section 168(f)(8) of the IRC (26 U.S.C.A. § 168(f)(8)) and the Treasury regulations thereunder.

(b) Determination of taxable income.

(1) To the extent otherwise permitted:

(i) The Federal cost recovery and interest expense deductions and the Federal rental income of a lessor attributable to safe harbor leases will be reflected in the lessor’s Pennsylvania taxable income.

(ii) The Federal deduction for rent paid and the Federal interest income of a lessee will be reflected in the lessee’s Pennsylvania taxable income.

(2) Income and deductions associated with safe harbor leases are considered part of a corporation’s regular trade or business and consequently are included in computing the business income of the corporation.

(c) Ownership of property.

(1) Under section 168(f)(8) of the IRC and the Treasury regulations thereunder, a transaction may qualify as a safe harbor lease if it is treated by the parties as a lease for Federal tax purposes only. The regulations expressly provide that the lessee may be the owner of the property under state or local law. In terms of subjectability to taxation within this Commonwealth and apportionment, safe harbor leases will have different consequences depending upon whether title to the property covered by the lease has passed to the lessor. The determination of whether title to the property covered by the safe harbor lease passes to the lessor will be determined under general principles of Pennsylvania law.

(2) The parties to the safe habor lease are required to demonstrate whether the lessor has required and retained title to the property covered by the safe harbor lease.

(d) Subjectability of lessor to Pennsylvania corporate taxation.

(1) If the sole contact of a corporation with this Commonwealth is the lease of property located in this Commonwealth under a safe harbor lease where title to the property does not pass to the corporation, the corporation will not be subject to Pennsylvania corporate taxation.

(2) If the lessor under a safe harbor lease actually takes title to the property located in this Commonwealth covered by the lease, the lessor will be treated as the owner of the property and, during the time that the title is retained by the lessor, the lessor will be subject to Pennsylvania corporate taxation.

(e) Three factor apportionment formula.

(1) If title to property covered by a safe harbor lease does not pass to the lessor, the lessee will be considered to be the owner of the property. The lessee of the property shall include the value of the property in the denominator of the property fraction, and the numerator of the fraction if the property is located in this Commonwealth. The lessor may not include the property in its property fraction. The lessee may not include a down payment or installment payment relating to the safe harbor lease in either the numerator or denominator of its sales fraction. The lessor may not include rental income attributable to the safe harbor lease in either the numerator or denominator of its sales fraction.

(2) When title to property covered by a safe harbor lease does pass to the lessor, the lessor shall report the property in the denominator of its property fraction, and in the numerator of the fraction if the property is located within this Commonwealth. The lessee shall include the value of the property in the denominator of its property fraction, and in the numerator if the property is located within this Commonwealth, at eight times its net rental value. The lessor shall include in the denominator of its sales fraction, and in the numerator if the property is located in this Commonwealth, rental income attributable to the property covered under the safe harbor lease during the time that the purchaser retains title. The lessee shall include in the denominator of its sales fraction, and in the numerator if the property is located within this Commonwealth, a down payment and installment payment attributable to the safe harbor lease.

(f) Single taxable assets fraction.

(1) If title to property covered by a safe harbor lease does not pass to the lessor, the lessee will be considered to be the owner of the property. The lessee shall include the value of the property in the denominator of its single taxable assets fraction, and the numerators of the fraction if the property is located within this Commonwealth. The lessor may not include the property in its single taxable assets fraction.

(2) When title to property covered by a safe harbor lease does pass to the lessor, the lessor shall include the property in the denominator of its single taxable assets fraction, and in the numerator of the fraction if the property is located within this Commonwealth. The lessee may not include the property in its single taxable assets fraction.

The provisions of this § 153.30 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.30 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273.

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.43 Sales factor.

If the apportionment provisions do not fairly represent the extent of the taxpayer’s business activity in this Commonwealth, section 401(3)2.(a)(18) of the TRC (72 P. S. § 7401(3)2.(a)(18)) may be utilized on a case-to-case basis to effectuate an equitable apportionment by any of the methods provided therein.

The provisions of this § 153.43 amended through November 16, 1984, effective November 17, 1984, 14 Pa.B. 4163. Immediately preceding text appears at serial pages (81535) to (81536).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.54 Changes made by Federal government.

(a) General. If the amount of taxable income, as returned by a taxpayer to the Federal government, is finally changed or corrected by the Commissioner of the Internal Revenue or by another agency or court of the United States, the taxpayer, within 30 days after the receipt of the final change or correction, shall make a report of change, under oath or affirmation, to the Department showing the finally changed or corrected taxable income, upon which tax is required to be paid to the United States. See section 406 of the TRC (72 P. S. § 7406). A change or correction of taxable income includes an increase or decrease in Federal taxable income before net operating loss deduction and special deductions.

(b) What is required to be filed with the Department. The following are required to be filed with the Department:

(1) A Report of Change as prescribed by the Department.

(2) Where a Federal audit has been conducted a copy of the summary of the Federal agent’s report, commonly referred to as an ‘‘RAR.’’

(3) The Department may require the taxpayer to submit additional information or proof as it deems necessary.

(c) When a Report of Change is required to be filed. A Report of Change is required to be filed with the Department within 30 days of receipt of the final change or correction in taxable income as returned to the Federal Government. A Report of Change is required to be filed whether the Federal taxable income has been increased or decreased. See section 406(a) of the TRC.

(d) When a change or correction in Federal taxable income is final and received. A change or correction will be final and received as follows:

(1) A change or correction which increases the taxable income as returned to the Federal Government is final when a Federal Notice and Demand for Payment is issued to the taxpayer. Such a change or correction is received by the taxpayer on the date the taxpayer receives the Federal Notice and Demand for Payment.

Example 1. Taxpayer files a 2003 Report with the Department in conformity with its Federal Return as filed in 2003. In 2004 the Internal Revenue Service audits the taxpayer’s Return which results in an increase of the taxpayer’s Federal taxable income. Taxpayer does not contest this change. Thirty days after receipt of a Federal Notice and Demand for Payment, the taxpayer is required to file a Report of Change with the Department.

Example 2. Taxpayer files a 2003 Report with the Department in conformity with its Federal Return as filed in 2003. In 2004 the Internal Revenue Service audits the taxpayer’s Return which results in an increase of taxpayer’s Federal taxable income. Taxpayer contests this change and files a petition in the United States Tax Court. The United States Tax Court upholds the Internal Revenue Service’s action. Taxpayer does not appeal the United States Tax Court’s decision. Thirty days after receipt of a Federal Notice and Demand for Payment, the taxpayer is required to file a Report of Change with the Department.

Example 3. Taxpayer files a 2003 report with the Department in conformity with its Federal return as filed in 2003. In 2004 the Internal Revenue Service audits the taxpayer’s return which results in an increase of the taxpayer’s Federal taxable income. Taxpayer contests this change and pursues all administrative and judicial remedies available without paying the contested amount of tax. The United States Supreme Court upholds the Internal Revenue Service’s action. Thirty days after receipt of a Federal Notice and Demand for Payment, the taxpayer is required to file a Report of Change with the Department.

(2) A change or correction which decreases the taxable income as returned to the Federal Government is ‘‘final’’ when the taxpayer receives a refund or credit. The change or correction is received by the taxpayer on the date the taxpayer receives the refund or credit.

(3) A change or correction which does not increase or decrease the taxpayer’s Federal tax is final when the taxpayer receives a notice from the IRS that its return will be adjusted in accordance with the examination report. The change or correction is ‘‘received’’ by the taxpayer on the date the taxpayer receives notice from the IRS that its return will be adjusted in accordance with the examination report.

Example. Taxpayer files a 2003 report with the Department in conformity with its Federal return as filed in 2003. In 2005 the Internal Revenue Service audits taxpayer’s Federal return. The audit does not result in an increase in the Federal tax, but a change in the Commonwealth taxable income does occur due to the Federal action. Taxpayer is required to file a Report of Change within 30 days of notification by the Internal Revenue Service of its action.

(e) More than one change or correction in Federal taxable income for a particular tax year. A taxpayer is required to file a Report of Change for each change or correction by the Commissioner of Internal Revenue or by any other agency or court of the United States in the taxpayer’s taxable income as reported to the Federal Government.

Example. As a result of a Federal audit of its 2003 Federal return, the taxpayer’s Federal taxable income has been increased and the taxpayer has paid the Federal government additional tax. Since the taxpayer’s Commonwealth taxable income also increased for 2003, taxpayer has filed a Report of Change with the Department. Thereafter, in a separate and subsequent court action the taxpayer contests the change in its Federal taxable income for 2003 and receives a refund from the Federal Government. Since its Commonwealth taxable income for 2003 has been decreased by this separate and subsequent action, the taxpayer is required to file a second Report of Change with the Department.

(f) Penalties for failure to file a Report of Change. Where there has been a final change or correction in the amount of taxable income, as returned by the taxpayer to the Federal government, which results in an increase in the taxable income, the taxpayer is required to file a Report of Change with the Department within 30 days after receipt of the final change or correction. If the taxpayer fails to file a Report of Change within the 30-day period, there shall be added to the tax a penalty of $5.00 for every day during which the taxpayer is in default, but the Department may abate a penalty in whole or in part. See section 406(a) of the TRC.

(g) Report of Change required to report Federal change or correction.

(1) Corporate Net Income Tax settled prior to January 1, 2008. When a Federal change or correction in taxable income as reported to the Federal government occurs within 1 year of the date of settlement and, therefore, a Commonwealth amended report could be timely filed as provided in § 153.64 (relating to amended report), the taxpayer nevertheless is required to file a Report of Change. Filing an amended report will not satisfy the requirement of filing a Report of Change.

Example. Taxpayer files a Federal Return on March 15, 2003. Based upon that return, the taxpayer files its Commonwealth Report on April 15, 2003. In August of 2003, the IRS discovers an error in the taxpayer’s return. Taxpayer shall file a Report of Change even though the final change or correction was received within the period in which the taxpayer could file an amended report. An amended report will not satisfy the requirement of filing a Report of Change.

(2) Corporate Net Income Tax not settled prior to January 1, 2008. When a change or correction in taxable income as reported to the Federal government occurs, the taxpayer is required to file a Report of Change regardless of whether or not an amended report could have been timely filed as provided in § 151.14 (relating to amended report). This requirement applies to changes or corrections initiated by either the taxpayer or the Federal government. Filing an amended report will not satisfy the requirement of filing a Report of Change.

Example. Taxpayer files a Federal Return on March 15, 2007. Based upon that return, the taxpayer files its Commonwealth Report on April 15, 2007. In August of 2008, the IRS conducts an audit and notifies taxpayer that its Federal taxable income is different than the reported figure. Taxpayer shall file a Report of Change even though the final change or correction was received within the period in which the taxpayer could file an amended report. An amended report will not satisfy the requirement of a Report of Change.

(h) Changes initiated by the taxpayer.

(1) A Report of Change shall be filed, and additional tax due paid, within 30 days of the date the amended Federal return is filed, or would have been filed in the case of a corporation participating in the filing of a consolidated Federal return.

(2) The taxpayer shall provide a copy of the amended Federal Income Tax return if the Report of Change is filed due to a change in Federal taxable income based on the filing of an amended Federal Income Tax return. In addition, the Department may also require proof of acceptance of the amended Federal Income Tax return. Examples of proof of acceptance by the Federal government include the following:

(i) Copy of the IRS refund check.

(ii) IRS statement of adjustment to your account.

(iii) IRS account transcript.

(iv) Other documentation at the discretion of the Department.

(3) Amended Federal Income Tax returns include any document allowed or authorized by the IRS for a taxpayer to adjust the taxpayer’s Federal taxable income.

Example 1. Taxpayer files a Federal Return on March 15, 2007. Based upon that return, the taxpayer files its Commonwealth Report on April 15, 2007. In August of 2008, the taxpayer discovers taxable income was underreported and files an amended Federal Income Tax return. Taxpayer shall file a Report of Change even though the final change or correction was received within the period in which the taxpayer could file an amended report. An amended report will not satisfy the requirement of a Report of Change.

Example 2. Taxpayer files a Federal Return on March 15, 2007. Based upon that return, the taxpayer files its Commonwealth Report on April 15, 2007. In March 2009, when filing the Federal Income Tax return for 2008, the taxpayer files Federal Form 1139, Corporation Application for Tentative Refund, adjusting 2006 Federal taxable income for a capital loss carryback for 2008. Taxpayer shall file a Report of Change even though the final change or correction was received within the period in which the taxpayer could file an amended report. An amended report will not satisfy the requirement of a Report of Change.

The provisions of this § 153.54 adopted December 30, 1977, effective December 31, 1977, 7 Pa.B. 3980; amended June 18, 2010, effective June 19, 2010, 40 Pa.B. 3356. Immediately preceding text appears at serial pages (249896) to (249899).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.61 Settlement.

(a) General rule. Settlement of taxes due shall be made, so far as possible, so that notice thereof may be mailed to the taxpayer within 18 months after the tax report was required to be made. See section 407(a) of the TRC (72 P. S. § 7407(a)).

(b) Extensions of time to file reports. If a taxpayer requests an extension of time in which to file its Federal return, settlement will be made, so far as possible, so that notice thereof may reach the taxpayer within 18 months after the taxpayer files its Pennsylvania return. In the case of a taxpayer requesting a Pennsylvania extension which did not request a Federal extension, settlement will be made, so far as possible, so that notice may be mailed to the taxpayer within 18 months after the taxpayer files the return. See section 405 of the TRC (72 P. S. § 7405).

(c) Delinquent reports. In the case of a tax report which is filed after the original due date, or if an extension has been requested, after the extended due date, settlement will be made, so far as possible, so that notice may be mailed to the taxpayer within 18 months after the tax report was filed with the Department.

The provisions of this § 153.61 amended under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.61 amended January 13, 1978, effective January 14, 1978, 8 Pa.B. 141; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial pages (94421) to (94422).

This section cited in 61 Pa. Code § 153.66 (relating to applicability).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.62 Copy of the settlement will be sent to the taxpayer.

(a) General. Promptly after the date of settlement, the Bureau is required to send a copy of the settlement of corporate taxes to the taxpayer. See section 407(c) of the TRC (72 P. S. § 7407(c)).

(b) Where the tax settlement computations differ from the tax computations as submitted by the taxpayer. Where the tax settlement computations differ from the tax computations as submitted by the taxpayer, the Bureau will send a copy of the tax settlement in the form of a photocopy of the settlement sheet, which is located on the back of the submitted report, as settled by the Bureau and audited and approved by the Department of the Auditor General.

(c) Where the tax settlement computations show no change from the tax computations as submitted by the taxpayer. Where the tax settlement computations show no change from the tax computations as submitted by the taxpayer, the Bureau will send a copy of the settlement.

The provisions of this § 153.62 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.62 adopted January 13, 1978, effective January 14, 1978, 8 Pa.B. 141; amended October 5, 1984, effective October 6, 1984, 14 Pa.B. 3624. Immediately preceding text appears at serial page (36133).

This section cited in 61 Pa. Code § 153.66 (relating to applicability).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.63 Resettlement by the Department.

(a) Resettlement of settlements. If, within a period of 1 year after the date of a settlement, the Department is not satisfied with the settlement, the Department may resettle the tax due based upon the facts contained in the report, or upon information within its possession. See section 407(b) of the TRC (72 P. S. § 7407(b)).

(b) Appealed settlements. In the case of a settlement of tax which has been appealed to the Board of Finance and Revenue, the Department is authorized to resettle under section 407(b) of the TRC if the Board of Finance and Revenue has not acted upon taxpayer’s petition, or, if the Board of Finance and Revenue has acted upon taxpayer’s petition, the Department will have authority to make a resettlement, if the resettlement is consistent with the action of the Board of Finance and Revenue on any issue raised before the Board.

(c) Petitions for refund. The filing of a Petition for Refund with the Board of Finance and Revenue does not affect the jurisdiction of the Department to make a resettlement of tax due. Action taken on a Petition for Refund by the Board of Finance and Revenue does not affect the jurisdiction of the Department to make a resettlement of tax due, if the resettlement is consistent with the action of the Board of Finance and Revenue on any issue raised before the Board.

The provisions of this § 153.63 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.63 adopted January 13, 1978, effective January 14, 1978, 8 Pa.B. 141; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial pages (94422) and (36134).

This section cited in 61 Pa. Code § 153.54 (relating to changes made by Federal government); and 61 Pa. Code § 153.66 (relating to applicability).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.64 Amended report.

(a) General. An amended report may be filed by a taxpayer within 1 year after settlement of the original report. An amended report may be filed for the purpose of bringing to the attention of the Department a correction to the original report the taxpayer requests the Department to consider. If an amended Federal return is filed or would have been filed with the Federal government, a corrected report shall be filed with the Department under § 153.65 (relating to corrected reports).

(b) Amended report filed before settlement. When an amended report is filed in the Department before settlement of the original report, settlement will be based upon consideration of the information contained in the amended report, subject to verification by the Department.

(c) Amended report filed after settlement but within 90 days of settlement mailing date. After settlement of the original report but within 90 days after the date upon which the copy of the original settlement notice was mailed to the tax-payer, the taxpayer, if it seeks to have the settlement changed, shall file in the Department a Petition for Resettlement to which may be attached an amended report, subject to verification by the Department, in support of its petition. See section 1102 of the FC (72 P. S. § 1102).

(d) Amended report filed after 90 days of settlement mailing date but within 1 year of settlement. An amended report may be filed in the Department beyond 90 days after the date upon which the copy of the original settlement notice was mailed to the taxpayer but within 1 year after the date of settlement of the original report. The Department may resettle the original report based upon consideration of the information contained and verified in the amended report, subject to verification by the Department. See section 407(b) of the TRC (72 P. S. § 7407(b)).

(e) Amended report received after 1 year after settlement. After an amended report is received after 1 year of the date of settlement of the original report, the Department is without jurisdiction to make a resettlement, but the taxpayer may pursue its normal statutory remedy by timely filing a Petition for Refund. See section 503 of the FC (72 P. S. § 503).

The provisions of this § 153.64 amended under section 6 of The Fiscal Code (72 P. S. § 6).

The provisions of this § 153.64 amended January 13, 1978, effective January 14, 1978, 8 Pa.B. 141; amended September 9, 1988, effective September 10, 1988, 18 Pa.B. 4100. Immediately preceding text appears at serial pages (115345) to (115346).

This section cited in 61 Pa. Code § 153.66 (relating to applicability).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.65 Corrected report.

(a) General. A corrected report shall be filed by a taxpayer who files an amended return with the Federal government if the amended Federal return may result in a change in Pennsylvania taxable income or loss. In the case of a taxpayer participating in the filing of a consolidated Federal return, a corrected report shall be filed by the taxpayer if, had the taxpayer reported to the Federal government on a separate company basis, the taxpayer would have filed an amended return with the Federal government and the amended return may result in a change in Pennsylvania taxable income or loss. If the amended Federal return constitutes a claim for a credit or refund, it shall have been filed within the applicable Federal period of limitation for making the claim. Other amended Federal returns shall have been filed within the applicable Federal period of limitation on assessment. In the case of a taxpayer participating in the filing of a consolidated Federal return, the return which would have been filed shall be deemed timely if the corrected Pennsylvania report is filed within 30 days of the time the amended Federal return would have been required to be filed.

(b) Time for filing and payment. A corrected report shall be filed, and additional tax due paid, within 30 days of the date the amended Federal return is filed, or would have been filed in the case of a corporation participating in the filing of a consolidated Federal return.

(c) Effect of filing. A corrected report amends the original report as of the original due date, and tax due shall be resettled, in so far as possible, so that notice thereof reaches the taxpayer within 18 months after the corrected report was made.

(d) Limitations on resettlement. If, as a result of the filing of a corrected report, there is a change in the amount of the taxable income of a corporation, the Department has the power and duty to resettle the tax. Changes to the tax due made as a result of the filing of the corrected report are limited to those which result directly from the filing of the amended Federal return.

(e) Required documents. The taxpayer shall file the following:

(1) A corrected report which reflects a change in Pennsylvania taxable income or loss.

(2) A copy of the Federal 1120X Return or other amended Federal return filed with the Federal government. In the case of a corporation participating in the filing of a consolidated Federal return, the amended Federal return that would have been filed had the corporation filed on a separate company basis.

(3) If no Federal 1120X return or other amended Federal return has been filed with the Federal government, a complete and detailed statement sworn to by an authorized officer of the taxpayer indicating why the amended return was not filed.

(4) A complete and detailed statement sworn to by an authorized officer of the taxpayer indicating why the correction was not included in the original Pennsylvania Corporate Net Income Tax report.

(f) Proof of acceptance. The Department may, on a case-by-case basis, require the taxpayer to submit evidence that the amended Federal return has been accepted by the Federal government or was prepared in accordance with the Internal Revenue Code.

(g) Interest on underpayments and overpayments of tax. An underpayment of tax resulting from the filing of a corrected report shall bear interest from the original due date of the tax until paid. In the case of an overpayment, the corrected report will be deemed a final return or report under section 806.1(a)(5) of the FC (72 P. S. § 806.1(a)(5)).

The provisions of this § 153.65 issued under section 6 of The Fiscal Code (72 P. S. § 6).

The provisions of this § 153.65 adopted September 9, 1988, effective September 10, 1988, 18 Pa.B. 4100.

This section cited in 61 Pa. Code § 153.64 (relating to amended report); and 61 Pa. Code § 153.66 (relating to applicability).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.66 Applicability.

Sections 153.61—153.65, regarding settlement and resettlement, apply to taxes settled prior to January 1, 2008.

The provisions of this § 153.66 issued under section 6 of The Fiscal Code (72 P. S. § 6).

The provisions of this § 153.66 adopted June 18, 2010, effective June 19, 2010, 40 Pa.B. 3356.

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.71 Inquisitorial powers of the Department.

(a) [Reserved].

(b) [Reserved].

(c) Duties of the taxpayer. Taxpayers shall have the following duties:

(1) General. Every taxpayer shall maintain and keep for a period of 3 years after a report is filed under the TRC records of its business within this Commonwealth for the period covered by the report and other pertinent papers required by the Department. See section 409 of the TRC (72 P. S. § 7409).

(2) What constitutes records and papers. [Reserved].

(3) Microfilm (including microfiche) reproduction. A taxpayer may utilize microfilm (including microfiche) reproduction of general books of account and supporting records of detail which are records of its business within this Commonwealth and other pertinent papers as a method of maintaining and keeping the records and papers if the IRS approves of the taxpayer’s system of microfilm (including microfiche) reproduction and the general books of account and supporting records of detail produced by the reproduction. A taxpayer utilizing this system of record retention will make available upon request by the Department a reader-printer for the reading, location and reproduction of records and papers being maintained on microfilm.

The provisions of this § 153.71 adopted December 19, 1975, effective December 20, 1975, 5 Pa.B. 3276.

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

61 Pa. Code § 153.81 Elections under 26 U.S.C.A. § 338.

(a) General. Under section 338 of the IRC (26 U.S.C.A. § 338), a corporation which acquires at least 80% of the stock of another corporation—the target—within a 12 month period may elect, or, under certain circumstances, may be treated as having elected to treat the stock purchase as a purchase of assets. Where the target corporation is not includable in a consolidated Federal return for a period that includes the acquisition date, the tax liability, if any, resulting from a deemed sale of assets by a target corporation shall be reported in the Federal return filed for the target corporation’s taxable year that ends at the close of the acquisition date. If the target corporation is a member of an affiliated group for the taxable year that includes the acquisition date and the target corporation would be includable in a consolidated Federal return by the selling group for this period, the deemed sale of assets is treated as the target corporation’s last transaction occurring at the close of the acquisition date in a separate taxable year. The tax liability resulting from the deemed sale shall be reported by the target corporation in a final, separate deemed sale Federal return. This section sets forth special rules which shall be followed by a target corporation subject to Pennsylvania corporate taxation.

(b) Reports required. Target corporations shall file Corporate Net Income and Capital Stock or Foreign Franchise Tax reports for periods for which a Federal return is required to be filed, including a Federal 1-day deemed sale return. An election made with the Federal government is binding for Commonwealth purposes, as is a failure to elect.

(c) Due date for reports. Reports are due 30 days after the return to the Federal government is due, or would be due in the case of a corporation participating in the filing of a consolidated Federal return.

(d) Effect of election on tax liability.

(1) Corporate Net Income Tax. Taxable income generated as a result of a section 338 election is subject to Pennsylvania Corporate Net Income Tax and treated as business income subject to apportionment, if the taxpayer was entitled to apportionment for the taxable year ending immediately prior to the acquisition date. The income consequences of a Section 338 election shall be reflected on a separate company basis and not as part of a combined or consolidated report.

(2) Capital Stock or Foreign Franchise Tax. In computing the capital stock value of a target corporation on a deemed sale report, actual net worth as of the close of that day shall be used. In computing averge net income on a 1-day deemed sale report, the averge net income for the period ending immediately prior to the acquisition date shall be used.

(e) Apportionment. Where the effects of a Section 338 election are shown on a 1-day deemed sale Federal return, the apportionment factors or the taxable assets fraction, as the case may be, for the period ending immediately prior to the acquisition date shall be used.

(f) Bulk sales requirements. If only shares of stock are transferred a deemed sale of assets does not constitute a sale or transfer within the meaning of section 1403 of the FC (72 P. S. § 1403). If there is also a sale or transfer of assets in addition to the stock transfer, a bulk sale or transfer will have occurred if 51% of a stock of goods, wares or merchandise of any kind, fixtures, machinery, equipment, building or real estate is sold or transferred.

The provisions of this § 153.81 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 153.81 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273.

Treatment

Taxpayer’s gain from the financial liquidation of assets deemed to occur under a Federal tax election under 26 U.S.C.A. § 338(h)(10) is taxable as nonbusiness income. Canteen Corp. v. Commonwealth, 818 A.2d 594 (Pa. Cmwlth. 2003); affirmed 854 A.2d 440 (Pa. 2004).

History

• Authority: The provisions of this § 153.
• Source: The provisions of this § 153.

Chapter 155 Capital Stock Tax and Foreign Franchise Tax

61 Pa. Code § 155.1 Taxpayers.

(a) Inclusions. The following entities organized and incorporated under the statutes of the Commonwealth, the United States or another state, territory, foreign country or dependency and doing business in and liable for taxation in this Commonwealth or carrying on activities in this Commonwealth, including solicitation or either owning or having capital or property employed or used in this Commonwealth by or in the name of a limited partnership or joint-stock association, company, corporation, association, copartnership, person or in another manner are taxpayers for the purpose of this article (See section 601 of the TRC (72 P. S. § 7601)):

(1) Corporations having capital stock.

(2) Joint-stock associations.

(3) Limited partnerships, including:

(i) Registered partnerships formed and existing under the act of May 9, 1899 (P. L. 261, No. 153) (59 P. S. § § 241—311) prior to January 1, 1971, the effective date of its repeal by section 1203(e)(2) of the Business Corporation Law (15 P. S. § 2203(e)(2)).

(ii) Partnership associations formed and existing under the act of June 2, 1874 (P. L. 271, No. 153) (15 P. S. § § 12701—12710) prior to its repeal effective August 9, 1970, by section 14(a)(1) of the Professional Corporation Law (15 P. S. § 2914(a)(1)).

(4) Professional corporations formed under the Professional Corporation Law (15 P. S. § § 2901—2914) and professional associations formed under the Professional Association Act (15 P. S. § § 12601—12619) which elect, under section 4 of the Professional Corporation Law (15 P. S. § 2904) to accept the provisons thereof.

(5) Corporations having authority to issue capital stock and organized or created by or under the nonprofit corporation law of a state but which are not in fact nonprofit corporations.

(6) S corporations, as provided for under section 1361 of the IRC (26 U.S.C.A. § 1361) whether or not they have made a Pennsylvania election.

(7) Domestic International Sales Corporations, commonly known as DISCs, as provided for under section 991 of the IRC (26 U.S.C.A. § 991).

(8) Foreign Sales Corporations, commonly known as FSC’s, as provided for under section 921 of the IRC (26 U.S.C.A. § 921).

(9) General or limited partnerships formed under the statutes of the Commonwealth which elect to be governed by 59 Pa.C.S. § § 701—707 (relating to electing partnerships).

(10) Cooperative associations formed under the act of June 7, 1887 (P. L. 365, No. 252) (15 P. S. § § 12001—12023).

(b) Exclusions. The following entities are not taxpayers for purposes of this article (See section 601 of the TRC):

(1) Massachusetts Trusts or business trusts, or common law trusts or Real Estate Investment Trusts—commonly referred to as REITs—provided for under section 856 of the IRC (26 U.S.C.A. § 856) which are not organized or created by or under the statutory law of a state.

(2) First-class corporations formed under the Corporation Act of 1874 (P. L. 73, No. 32) (15 P. S. § § 3001—3411).

(3) Corporations organized or created by or under the nonprofit corporation law of a state which are, in fact, nonprofit corporations.

(4) Limited partnerships formed under or governed by 59 Pa.C.S. § § 501—545 (relating to the Uniform Limited Partnership Act) or the Uniform Limited Partnership Act of another state.

(5) Cooperative agricultural associations formed under or governed by the Cooperative Agricultural Association Act (15 P. S. § § 12101—12135).

(6) Banks, bank and trust companies, savings banks and trust companies authorized to do business under the statutes of this Commonwealth.

(7) Savings associations authorized to do business under the statutes of the Commonwealth.

(8) Insurance companies and title insurance companies authorized to do business under the statutes of the Commonwealth.

(9) Building and loan associations authorized to do business under the statutes of the Commonwealth.

(10) Agricultural credit associations formed under the act of May 25, 1933 (P. L. 1027, No. 236) (15 P. S. § § 12201—12216).

(11) Credit unions formed under the Credit Union Act (15 P. S. § § 12301—12353).

The provisions of this § 155.1 issued under section 270 of the Tax Reform Code of 1971 (72 P. S. § 7270); amended under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 155.1 adopted July 29, 1977, effective July 30, 1977, 7 Pa.B. 2143; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial pages (94423) to (94425).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.2 Family farm corporation exemption.

(a) General. A domestic or foreign corporation which qualifies as a family farm corporation is exempt from Capital Stock or Foreign Franchise taxation if the corporation is actually engaged in the business of agriculture.

(1) For the purposes of this exemption, the business of agriculture means commercially cultivating the ground to produce products in fields or in large quantities, including the preparation of soil, the planting of seeds, the raising and harvesting of crops, beekeeping and the rearing, feeding, breeding and management of livestock. The business of agriculture also includes aquaculture, which is defined as the raising of fish and other aquatic animals for direct commercial use as a food or food product.

(2) The following activities are not considered to be the business of agriculture:

(i) Recreational activities, such as hunting, fishing, camping, skiing, show competition or racing.

(ii) The raising, breeding or training of game animals or game birds, fish, cats, dogs or pets or animals intended for use in sporting or recreational activities.

(iii) Fur farming.

(iv) Stockyard and slaughterhouse operations.

(v) Manufacturing or processing operations.

(b) Conditions precedent. For a corporation to qualify for the family farm exemption from the Capital Stock or Foreign Franchise Tax, the following conditions shall be met:

(1) At least 75% of the corporation’s assets shall be devoted to the business of agriculture. The original cost of the assets is used in determining whether a corporation meets the asset test, unless the taxpayer can show by clear and convincing evidence that market value is different. To qualify as assets used in the business of agriculture, the assets shall be owned and used directly by the corporation claiming the exemption, be principally devoted to the business of agriculture and be property of the sort commonly utilized in the business.

(2) At least 75% of shares of stock issued by the corporation shall be owned by individuals who are members of the same family. Members of the same family include an individual, the individual’s brothers and sisters, the brothers and sisters of the individual’s parents and grandparents, the ancestors and lineal descendants of the foregoing and a spouse of the foregoing. Individuals related by the half blood or by legal adoption are treated as if they were related by the whole blood. Stock of the corporation owned, directly or indirectly, by or for a partnership, trust or estate are considered as owned proportionately by its partners or beneficiaries. Stock of the corporation owned by another corporation shall be considered owned by a family member in that proportion which the stock of the other corporation owned by family members bears to the stock in the other corporation, if family members own 50% or more of the stock of the other corporation. If more than one class of stock is issued, the 75% stock ownership test shall be met for each class of stock issued.

(c) Reporting requirements. In addition to filing requirements imposed upon corporations generally, a corporation claiming this exemption shall also file with the Department:

(1) A brief description of the agricultural business.

(2) A schedule of assets listing their original cost and designating which are and which are not used principally in the corporation’s agricultural business.

(3) A schedule of owners of stock including the number of shares of stock owned, the class of stock and the relationship of each stockholder within the family.

The provisions of this § 155.2 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 155.2 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273.

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.10 Single factor apportionment.

(a) General.

(1) All corporations. Corporations subject to either the Capital Stock or Foreign Franchise Tax, except regulated investment companies, shall be entitled each taxable year to use the single factor fraction. Taxpayers electing to use the single factor fraction for a taxable year shall be prohibited from simultaneously using three factor apportionment for the same taxable year, and use of the single factor fraction shall be limited to the Capital Stock or Foreign Franchise Tax, and will have no applicability to the Corporate Net Income Tax. See the act of June 22, 1931 (P. L. 685, No. 250) (72 P. S. § 1896).

(2) Foreign corporations. Foreign corporations may elect to compute and pay Foreign Franchise Tax on a property tax basis and utilize the single factor fraction. A foreign corporation electing to do so shall be treated as if it were a domestic corporation for the purpose of determining which of its assets are exempt from taxation and for the purpose of determining the proportion of the value of its capital stock which is subject to taxation.

(b) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: (1) Asset—Real property and tangible and intangible personal property. (2) Book value—The value at which a particular asset was included in determining net worth as defined in § 155.27 (relating to net worth-fixed formula). (3) Exempt assets—Assets owned by a taxpayer which are exempt from property taxation as set forth in subsection (d), including assets exempt for constitutional, statutory or public policy reasons. (4) Intangible personal property—Checking and savings accounts, advances, notes and accounts receivable, promissory notes, investments in common or preferred stock, bonds, patents, trademarks, goodwill, prepaid and deferred expenses and the like. The term does not include intangible personal property of a purely contingent character, such as claims for damage, including choses in action and contracts not reduced to judgment or treasury stock. (5) Located—The situs of real and tangible personal property. (6) Real and tangible personal property—Land, buildings, machinery, equipment, furniture, fixtures, automobiles, trucks, inventories, leasehold improvements, mineral interests and the like. The term does not include property leased to a taxpayer. (7) Taxable assets—Total assets less exempt assets.

(c) Taxable assets fraction. The taxable assets fraction is a fraction, the numerator of which is the average book value of taxable assets owned by the taxpayer during the taxable year and the denominator of which is the average book value of the total assets owned by the taxpayer during the taxable year.

(d) Exempt and taxable assets. The following assets are exempt or taxable, as specified, for purposes of the taxable assets fraction. This listing is not exclusive.

(1) Real and tangible personal property having a taxable situs outside this Commonwealth is exempt, including:

(i) Real and tangible personal property located outside this Commonwealth.

(ii) The allocated value of tangible personal property crossing state lines. The value of mobile assets, such as equipment, trucks, automobiles, railroad cars, buses, ships and the like, is exempt to the extent the assets are utilized in another state, if the corporation is subject to tax outside this Commonwealth. The assets shall be allocated to the Commonwealth on an equitable and reasonable basis, such as, on a time used or mileage basis.

(2) Intangible personal property is not exempt based on situs. The taxable situs of a corporation’s intangible personal property is the domiciliary state of the corporation. Since a foreign corporation electing to utilize the taxable assets fraction is required to compute its taxable assets fraction as if it were a domestic corporation, no intangible personal property of a corporation, whether foreign or domestic, is exempt based on situs.

(3) Certain assets are specifically exempt by Commonwealth statute. These include:

(i) Assests actually and exclusively employed in manufacturing, processing or research and development in this Commonwealth, except if employed by a corporation which enjoys the right of eminent domain.

(ii) Equipment, machinery, facilities and other assets employed or utilized within this Commonwealth for water and air pollution control or abatement devices for the benefit of the general public. See § 155.11 (relating to exemption).

(iii) Obligations of the Commonwealth, a public authority, commission, board or other agency created by the Commonwealth, a political subdivision of the Commonwealth or a public authority created by the Commonwealth.

(iv) In the case of a corporation owning, directly or through subsidiaries or subsidiary corporation, a majority of the total issued and outstanding shares of voting stock of a corporation, shares of stock owned in the other corporation are exempt. See the act of April 20, 1927 (P. L. 311, No. 177) (72 P. S. § 1894). In the case of a corporation owning less than a majority of the total and outstanding shares of voting stock in a foreign corporation, the shares of stock owned in the other corporation are not exempt by reason of 72 P. S. § 1894.

(v) Student loan assets that are owned or held by an entity created for the securitization of student loans, or by a trustee on its behalf, including:

(A) Student loan notes.

(B) Federal, State or private subsidies or guarantees of student loans.

(C) Instruments that represent a guarantee of debt, certificates or other securities issued by an entity created for the securitization of student loans, or by a trustee on its behalf.

(D) Contract rights to acquire or dispose of student loans and interest rate swap agreements related to student loans.

(E) Interests in or debt obligations of other student loan securitization trusts or entities.

(F) Cash or cash equivalents representing reserve funds or payments on or with respect to student loan notes, the securities issued by an entity created for the securitization of student loans, or the other student loan related assets. Solely for purposes of this exemption for student loan assets, ‘‘cash or cash equivalents’’ shall include:

(I) Direct obligations of the United States Department of the Treasury.

(II) Obligations of Federal agencies which obligations represent the full faith and credit of the United States of America.

(III) Investment grade debt obligations or commercial paper.

(IV) Deposit accounts.

(V) Federal funds and banker’s acceptances.

(VI) Prefunded municipal obligations.

(VII) Money market instruments and money market funds.

(4) Certain assets are exempt by reason of public policy. These include:

(i) Stock of domestic corporations which are subject to or relieved from Capital Stock Tax.

(ii) Stock of banks, title insurance companies, trust companies and other companies subject to a tax on shares.

(iii) Stock of nonprofit corporations.

(iv) Stock and obligations of cooperative agricultural associations and agricultural credit associations.

(v) Stock of credit unions.

(5) Certain assets are exempt by reason of constitutional interpretation. These include obligations of the United States government, its agencies, instrumentalities, possessions and territories unless taxation is specifically authorized. This exemption, reflected in 31 U.S.C.A. § 3124, does not apply to obligations of the United States which are secondary, indirect, contingent or mere guarantees. Certain other obligations issued under Federal statutes are specifically exempted from state taxation by the Federal statute authorizing issuance of the obligation. Stock of national banks is not exempt.

(e) Averaging property values.

(1) Annual averaging. The average value of real and tangible and intangible personal property owned by the taxpayer during the taxable year shall be determined by averaging book values at the beginning and ending of the taxable year.

(2) Monthly or daily averaging. The Department may require the monthly or daily averaging of book values of real and tangible and intangible personal property owned by the taxpayer during the taxable year where the averaging is reasonably required to reflect the average value of the taxpayer’s property. The Department may require or the taxpayer may request a monthly or daily averaging if substantial property is acquired or disposed of during the taxable year.

(f) Computation of taxable assets fraction.

(1) The taxable assets fraction of corporations engaged in manufacturing, processing or research and development in this Commonwealth is computed as follows: the numerator is the average book value of taxable assets and the denominator is the average book value of total assets.

Example. The taxpayer owns the following exempt and taxable assets:

The decimal equivalent, .200000, which represents the proportion of taxable assets, is then multiplied by the capital stock value to determine the taxable value of the taxpayer’s capital stock.

(2) The taxable assets fraction of corporations not engaged in manufacturing, processing or research and development within this Commonwealth is computed as follows: the numerator is the average book value of total assets less the average book value of exempt assets and the denominator is the average book value of total assets.

Example. The taxpayer owns the following exempt and taxable assets:

The decimal equivalent, .900000, which represents the proportion of taxable assets, is then multiplied by the capital stock value to determine the taxable value of the taxpayer’s capital stock.

The provisions of this § 155.10 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408); amended under sections 408 and 603 of the Tax Reform Code of 1971 (72 P. S. § § 7408 and 7603).

The provisions of this § 155.10 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273; amended December 4, 1998, effective December 5, 1998, 28 Pa.B. 5986. Immediately preceding text appears at serial pages (205439) to (205440), (216363) to (216364) and (236143).

Exemptions

A corporation providing scientific analysis of samples provided by clients does not fall under the manufacturing or research and development exemption. Lancaster Laboratories, Inc. v. Commonwealth, 578 A.2d 988 (1990); vacated in part 611 A.2d 815 (Pa. Cmwlth. 1992); affirmed in part 631 A.2d 739 (Pa. Cmwlth. 1993).

Foreign Corporations

Although assets such as the interest from United States obligations is excluded from the property tax imposed by Pennsylvania on its domestic corporations under this regulation, because the company elected to compute its tax as a foreign corporation, the company placed itself on the same footing as a foreign corporation paying its franchise tax. Thus, the interest income was not exempt in calculating the capital stock tax. Consolidated Rail Corp. v. Commonwealth, 670 A.2d 722 (Pa. Cmwlth. 1996); affirmed 691 A.2d 456 (Pa. 1997).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.11 Exemption.

Pollution control devices exemption. Exemptions for pollutions control devices shall be as follows:

(1) General. An exemption will be given for water and air pollution control or abatement devices which have been employed or utilized for the benefit of the general public during the tax year in question. The pollution control devices exemption is expressed as a deduction from the Capital Stock Tax exempt assets fraction, or as a deduction from the Property Factor in the case of a Foreign Franchise Tax taxpayer or a Capital Stock Tax taxpayer which elects to compute and pay its tax on the basis of the Three Factor Formula as provided in section 602(b) of the TRC (72 P. S. § 7602(b)).

(2) Condition precedent. As a condition precedent to the granting by the Department to the taxpayer of the pollution control device exemption, the taxpayer is required to apply to the Department of Environmental Protection and obtain a certificate for the purpose of claiming exemption for each specific pollution control device. This certification is designated ‘‘Notice of State Certification’’ (DEP Form ER-BWQ-21). See section 602.1 of the TRC (72 P. S. § 7602.1). The taxpayer is required to file with the Department the Notice of State Certification covering the specific control device for which exemption is claimed during the tax period in question. This requirement for the filing of a Notice of State Certification may apply not only to a new device but may also apply to modifications or changes of an existing device.

(3) Notice of State Certification by Department of Environmental Protection. Notice of State Certification shall conform with the following:

(i) The Notice of State Certification issued by the Department of Environmental Protection shall certify:

(A) That certain components are components to a water or air pollution device.

(B) That a device is installed and completed in place.

(C) That is employed or utilized to remove pollutants commencing in, or during, the tax year in question.

(D) That, where a plan approval or permit is required by the Department of Environmental Protection, plan approval or permit has been obtained.

(ii) The Department of Environmental Protection certification is not required to be filed annually. The exemption shall be subject to audit by the Department, or the taxpayer may be called upon by the Department to update the prior Certification upon which the particular exemption has been based.

The provisions of this § 155.11 adopted October 7, 1977, effective October 8, 1977, 7 Pa.B. 2899; corrected at 7 Pa.B. 3092; amended February 16, 1979, effective February 17, 1979, 9 Pa.B. 563. Immediately preceding text appears at serial page (36138).

This section cited in 61 Pa. Code § 155.10 (relating to single factor apportionment).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.21 General.

(a) Taxable years prior to calendar year 1984. The Department recognizes and understands that the determination of the capital stock value of a taxpayer is not precise or constant in every instance, and that the determination depends upon the pertinent factors relating to each taxpayer. This section and § § 155.22—155.30 (relating to valuation of capital stock) are not intended to establish fixed or inflexible rules for the determination of the capital stock value in every instance. These sections provide general guidelines that are to be used as a general basis upon which, if necessary, adjustments can be made in determining the capital stock value of the taxpayer.

(b) Calendar year 1984 and years thereafter. The act of December 23, 1983 (P. L. 360, No. 89) that amended Article VI of the TRC (72 P. S. § § 7601—7606) made certain important changes to the Capital Stock and Foreign Franchise Taxes. Commencing with calendar year 1984 and fiscal years beginning in 1984 and each year thereafter, ‘‘actual value’’ as the standard in determining the value of a corporation’s capital stock has been eliminated. ‘‘Capital stock value’’ is now determined under the act by application of a defined and fixed formula, making the general guidelines set forth by § § 155.22—155.24 (relating to definitions; determination of valuation factors; and valuation methods) inapplicable to the determination of fixed formula capital stock value. Rules applicable to the determination of fixed formula capital stock value are set forth in § § 155.25—155.28 (relating to capital stock value—fixed formula; average net income—fixed formula; net worth—fixed formula; and capital stock value methods—fixed formula).

(c) Calendar year 1983 and years thereafter. The act of December 23, 1983 (P. L. 370, No. 90) provides for a minimum Capital Stock and Foreign Franchise Tax of $75. Reference should be made to § § 155.28(c) and 155.30 (relating to minimum tax).

The provisions of this § 155.21 amended under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 155.21 adopted September 1, 1982, effective September 2, 1982, 8 Pa.B. 2457; amended January 16, 1987, effective January 17, 1987, 17 Pa.B. 273. Immediately preceding text appears at serial pages (94426) and (40509).

This section cited in 61 Pa. Code § 155.22 (relating to definitions); and 61 Pa. Code § 155.28 (relating to capital stock value methods—fixed formula).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.22 Definitions.

The following words and terms, when used in § § 155.21—155.24, have the following meanings, unless the context clearly indicates otherwise: Actual value—Cash value. Book income—Income as reported in Line 1 of Schedule M-1 of the Federal 1120 Form. Capital stock—Common stock, preferred and special stock. Capital stock value—Defined in section 601 of the TRC (72 P. S. § 7601) as the actual value of the taxpayer in cash as it existed at the close of the year for which the report is made, taking into consideration:

(i) The average selling price of stock.

(ii) Corporate earnings.

(iii) Dividends declared.

(iv) Stockholder equity. Corporate earnings—The book income as reported to the shareholders which is adjusted for distortions in the current and prior years created by nonrecurring-type gains and losses or by use or correction of inconsistent or erroneous accounting practices. Reference should also be made to § 155.23(b) (relating to determination of valuation factors). Daily weighted average—Computed by multiplying each listed price of the capital stock during the taxable year by the number of days the price was listed. The product is added and that sum is divided by the number of days the capital stock was listed.

Example: $20 listed for 80 days = 1600 15 listed for 40 days = 600 21 listed for 80 days = 1680 18 listed for 60 days = 1080

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.23 Determination of valuation factors.

(a) Selling price of stock shall be computed as an average price for the taxable year on a daily weighted or mean average. This selling price is that applicable to an active, continuing market involving a substantial number of capital stock transactions, that is, the capital stock of a corporation is registered or traded on a security exchange or over the counter on a regular and orderly basis under circumstances which usually and generally apply to the transactions. However, when the taxpayer’s capital stock is not traded in an active and continuing market and the taxpayer disposes of a substantial number of shares of capital stock or the taxpayer is involved in a substantial number of capital stock transactions during the taxable year, the selling price of stock shall be the average selling price of the disposed stock. Isolated or sporadic sales or sales of fractional interests of minority holdings are generally not determinative of the selling price of stock. Reference should also be made to § 155.22 (relating to definitions) wherein ‘‘corporate earnings’’ is defined. What is determined to be a substantial number of transactions shall depend upon the facts and circumstances pertinent to an individual case.

(b) Earnings of industrial taxpayers shall be capitalized at 10% (10 x earnings); for earnings of public utilities, at 8.0% (12 1/2 x earnings). If the earnings figure shows a loss, it shall be entered as zero. However, in the determination of the average earnings the loss shall be entered as computed. Reference should also be made to § 155.22 (relating to definitions).

(c) Dividends declared by industrial taxpayers shall be capitalized at 8.0% (12 1/2 x annual dividends); for public utilities, at 7.0% (14.285 x annual dividends). Reference should also be made to § 155.22.

(d) Stockholder equity shall be determined by taking the actual value, if available and determinable, of the total corporate assets less the total corporate liabilities.

(1) What is included as corporate assets and liabilities:

(i) Total corporate assets means real property and tangible and intangible personal property recorded on the corporate balance sheet.

(ii) Total corporate liabilities means current liabilities, funded debt and accrued liabilities. Generally, contingent liabilities and surplus reserves may not be considered corporate liabilities. A reserve for deferred Federal taxes may not be included as contingent liability. Other exclusions shall be made on a case-by-case basis.

(2) Valuation when the actual value is not available or cannot be determined:

(i) Real property and tangible and intangible personal property, other than marketable and nonmarketable securities and stock of affiliate and subsidiary corporations, shall be valued at net book value.

(ii) Marketable securities selling in an established market shall be valued at its quoted selling price.

(iii) Nonmarketable securities shall be valued at appraised market values.

(iv) Stock of subsidiary and affiliate corporations are valued on the basis of the capital stock reported by the subsidiary or affiliate corporation for Capital Stock or Foreign Franchise Tax purposes. However, if the subsidiary or affiliate corporation is not subject to Capital Stock or Foreign Franchise taxation, the corporation is valued at stockholder’s equity.

(3) Changes in the taxpayer’s capital structure during the tax year or years in question shall be prorated.

Example 1. The taxpayer acquired treasury stock on July 1. The value of the treasury stock is $300,000. The stockholder equity at the end of the tax year (December 31) is $1,000,000.

The revised stockholder equity is computed as follows:

The revised stockholder equity is $1,148,767.

Example 2. The taxpayer issued common stock on July 1. The value of the common stock issued is $300,000. The stockholder equity at the end of the tax year (December 31) is $1,000,000. The revised stockholder equity is computed as follows:

The revised stockholder equity is $851,233.

The provisions of this § 155.23 adopted September 1, 1978, effective September 2, 1978, 8 Pa.B. 2457.

This section cited in 61 Pa. Code § 155.21 (relaitng to general); 61 Pa. Code § 155.22 (relating to definitions); 61 Pa. Code § 155.24 (relating to valuation methods); and 61 Pa. Code § 155.28 (relating to capital stock value methods—fixed formula).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.24 Valuation methods.

(a) General. In general valuation will be made in accordance with the following:

(1) The Department recognizes that no arithmetical method is of itself adequate and complete in all instances in determining the capital stock value. In using an arithmetical method, further adjustments may be needed to take into consideration other influencing factors, in addition to those factors set forth in § 155.23 (relating to determination of valuation factors), such as the nature of the business of the taxpayer (industrial, manufacturing, investment, personal service, utility and so forth), the financial history of the taxpayer, the liquidity of the taxpayer’s balance sheet assets, extraordinary and nonrecurring transactions and other pertinent factors. The amount of weight given each factor may vary depending upon the facts and circumstances pertinent to each taxpayer.

(2) As a general rule, since the stockholder equity, as determined in subsection (b)(1), is representative of the taxpayer’s financial history, its balance sheet assets and liabilities, and the taxpayer’s present worth as represented by the taxpayer itself, stockholder equity will represent the minimum value the Department will employ to determine the capital stock value.

(i) Generally, the stockholder equity will adequately reflect the capital stock value of those taxpayers whose operations have produced a loss or low earnings in the current tax year or in the preceding tax years.

(ii) If, for those taxpayers whose operations have produced high earnings in the current tax year or in the preceding tax years the stockholder equity generally does not adequately reflect the capital stock value. Therefore, to account for the effect of the high earnings, those taxpayers will also employ the Three-way and Five-way Methods to determine the capital stock value.

(iii) What is determined to be high or low earnings shall depend upon the facts and circumstances pertinent to each individual case.

(3) When the taxpayer’s stock is involved in a substantial number of transactions or when a substantial number of the taxpayer’s shares are traded or disposed during the taxable year, the market value of stock becomes a factor for the determination of the capital stock value.

(4) A copy of the taxpayer’s Annual Report to the Securities and Exchange Commission or any other documents or reports which set forth the taxpayer’s corporate financial statements shall be submitted to the Department.

(b) Determination of the capital stock value. As a general rule, the Department requires that the valuation of capital stock of domestic corporations and foreign corporations doing business in this Commonwealth, for the purpose of determining Capital Stock-Foreign Franchise Tax liability, shall be computed by using one of the following methods:

(1) Stockholder Equity Method. This method uses 70% of stockholder equity to determine the capital stock value. Reference should also be made to § § 155.22 and 155.23(d) (relating to definitions; and determination of valuation factors).

(2) Three-Way Method (Computed Value Using Earnings Method). This method is to be used principally when earnings and average earnings capitalized are comparable to stockholder equity. This method uses the current earnings, the 5 year average earnings and stockholder equity to determine the capital stock value. This method is used when the taxpayer does not distribute dividends.

Example:

The average may be adjusted depending upon various other pertinent factors in determining the capital stock value.

(3) Five-Way Method (Computed Value Using Earnings and Dividends Method). This method is to be used when the taxpayer distributes dividends. This method uses the current earnings, 5 year average earnings, the current dividends, the 5 year average dividends, and stockholder equity to determine the capital stock value. This method is used principally when dividends capitalized, average dividends capitalized, earnings capitalized and average earnings capitalized are comparable to stockholder equity.

Example:

The average may be adjusted depending upon various other pertinent factors in determining the capital stock value.

(4) As a general rule, the value of the capital stock shall be the highest of the preceding three amounts. The amount, that is, the highest of (1), (2) or (3), as finally determined by the Department, taking into consideration the various factors and circumstances pertinent to each taxpayer, shall be the value of the capital stock of domestic corporations and foreign corporations doing business in this Commonwealth for the purpose of determining Capital Stock-Foreign Franchise Tax liability.

(c) Exceptions. Exceptions shall be as follows:

(1) Minimum capital stock value. The Department requires a minimum of $1,000 capital stock value for domestic companies. There is no minimum capital stock value for foreign corporations doing business in this Commonwealth.

(2) Incorporation—first year companies. A taxpayer for its first tax year (the year of incorporation) should compute the capital stock value based upon the daily average of the value of capital paid in during the tax year or the market value of stock. From that value the first year book income should be added or the first year book loss deducted.

Example 1. The taxpayer incorporated (in this Commonwealth) on January 1. It issued capital stock in the amount of $50,000 at that time. During the year ending December 31, its operations resulted in a loss of $15,000. The capital stock value is $35,000 ($50,000 minus $15,000).

Example 2. The taxpayer incorporated (in this Commonwealth) on January 1. It had no capital transactions until April 1 at which time it issued capital stock in the amount of $50,000. During the year ending December 31, its operations resulted in a loss of $15,000. The capital stock value is computed by apportioning the minimum value of $1,000 for 90/365 year ($247) and the paid in capital of $50,000 for 275/365 year ($37,671) and deducting the book loss of $15,000. The capital stock value is $22,918 ($37,918 minus $15,000).

Example 3. The taxpayer incorporated (in this Commonwealth) on April 1. It had no capital transactions until July 1 at which time it issued capital stock in the amount of $50,000. During the year ending December 31, its operations produced book income of $10,000. The capital stock is computed by apportioning the minimum value of $1,000 for 91/275 year ($331) and the paid in capital of $50,000 for 184/275 year ($33,455) and adding the book income of $10,000. The capital stock value is $43,786 ($33,786 plus $10,000). However, if the first year corporate taxpayer operated in prior years in another business form, such as a partnership or sole proprietorship, its earnings history shall be adjusted to reflect reasonable compensation to owners and Federal and State taxes which would have been imposed had the predecessor been a corporation. After the adjustments, the taxpayer shall apply the valuation methods set forth in subsection (b) to determine its capital stock value.

(3) Dissolution—last year companies. The taxpayer’s capital stock value is computed for the year of its dissolution by reference to the amount or value of its liquidating distributions. The amount or value of each distribution is averaged for the portion of the tax year held by the taxpayer. The average amounts are added and the total represents the taxpayer’s capital stock value.

Example 1. On December 31, (the last day of the tax year) the taxpayer files a certificate of election to dissolve. On the same day it distributes the assets to the stockholders. The actual value of the assets distributed is $100,000. The capital stock value is $100,000.

Example 2. On September 30, the taxpayer files a certificate of election to dissolve. The tax year ends December 31. The actual value of the assets to be distributed is $125,000. Distribution to the stockholder is made as follows: on October 1, $50,000; on November 1, $25,000; and a final distribution on December 31, $50,000. The capital stock value is calculated as follows: $50,000 x 274/365 = $ 37,534$25,000 x 304/365 = $ 20,822$50,000 x 365/365 = $ 50,000Total $108,356

The capital stock value is $108,356.

(4) Liquidation in progress. When a taxpayer is going out of business or has already discontinued business and is in the process of complete liquidation, its capital stock value is computed by reference to the net value of assets remaining at the end of the taxable year plus, if any, the value of liquidating distributions during the tax year averaged for the period of the tax year the distributed assets were held by taxpayer.

Example 1. The taxpayer has discontinued business operations and is in the process of complete liquidation. It makes no distribution during the tax year. On the last day of the tax year the actual value of net assets is $75,000. The capital stock value is $75,000.

Example 2. The taxpayer has discontinued business operations and is in the process of complete liquidation. The taxable year ends December 31. It makes one distribution on October 1 of $50,000. On the last day of the tax year the actual value of net assets remaining is $25,000. The capital stock value is computed as follows:

The capital stock value is $62,534.

If the remaining $25,000 is distributed on January 31 of the following year, the capital stock for the short period is $25,000.

(5) Cash sale of assets or outstanding shares. In cash sales the value is generally determined by reference to the selling price.

Example 1. The taxpayer transfers for cash and notes totaling $100,000 all of its assets and liabilities. The capital stock value is $100,000.

Example 2. The outstanding shares of the taxpayer were sold in a single transaction for $50,000. The taxpayer’s capital stock value is $50,000.

(6) Regulated investment companies. Section 602(g)(1) of the TRC (72 P. S. § 7602(g)(1)) provides that the capital stock value of a regulated investment company shall be determined by adding its net asset value as of the last day of each month during the taxable period or year and dividing the total sum by the number of months involved, for which purpose net asset value means the actual market value (that is, the quoted selling price or the appraised market value on a designated day) of assets owned by the corporation without exemptions or exclusions less its liabilities, debts and other obligations.

Example 1. The sum of the net asset values for the tax year is $267,000,000. The capital stock value is $22,250,000 ($267,000,000 ÷ 12).

(7) Sale of an asset. When a taxpayer sells an asset (real property or tangible or intangible personal property) at a value substantially higher or lower than book value, the stockholder’s equity is revised for the prior tax year by adding or subtracting the actual value of the asset sold in the current year. Therefore, the capital stock value is recomputed in prior years by considering revised equity. The adjustment of the capital stock value of a prior tax year or years whereby the capital stock value is increased shall be made by the Department under section 407(b) of the TRC (72 P. S. § 7407(b)). When the adjustment would result in a decrease of the capital stock value of a prior tax year or years, the taxpayer shall initiate the adjustment under sections 503(a)(1), 1102 or 1103 of the FC (72 P. S. § § 503(a)(1), 1102 or 1103).

Example 1. An asset had a book value of $50,000 for the current tax year. Taxpayer disposed of the asset for $500,000 which resulted in a $450,000 capital gain. The taxpayer’s capital stock value in the prior tax year was $70,000 based on a stockholder’s equity of $100,000 ($100,000 x 70%). The revised stockholder’s equity in the prior tax year is $550,000 ($450,000 plus $100,000). The capital stock value recomputed for the prior tax year shall be $385,000 ($550,000 x 70%).

Example 2. An asset had a book value of $500,000 for the current year. Taxpayer disposed of the asset for $100,000 which resulted in a $400,000 loss. The taxpayer’s capital stock value in the prior tax year was $700,000 based on a stockholder equity of $1,000,000 ($1,000,000 x 70%). The revised stockholder’s equity in the prior tax year is $600,000 ($1,000,000 minus $400,000). The capital stock value recomputed for the prior tax year shall be $420,000 ($600,000 x 70%).

(8) Stock for stock exchange transaction. When a taxpayer’s total outstanding shares are purchased in exchange for the shares of the purchasing company, the capital stock value for the current tax year and prior tax year or years will be based upon the exchange value of the stock. The exchange value of the shares will be based upon the current market value of the shares. The capital stock value for the current tax year shall be computed at approximately 90% of the exchange value of shares. The capital stock value for the immediate prior tax year shall be computed at approximately 80% of the exchange value of shares. The capital stock value for the second prior tax year shall be computed as approximately 70% of the exchange value of shares and so forth.

Example 1. The taxpayer’s total outstanding shares are purchased by A corporation for one million shares of A corporation. The value of the one million shares is $25,000,000. The capital stock value for the current tax year shall be $22,500,000 ($25,000,000 x 90%). The capital stock value for the immediate prior tax year shall be $20,000,000 ($25,000,000 x 80%). The capital stock value for the second prior tax year shall be $17,500,000 ($25,000,000 x 70%).

The provisions of this § 155.24 adopted September 1, 1978, effective September 2, 1978, 8 Pa.B. 2457.

The capitalization rates for earnings and dividends incorporated into 61 Pa. Code § 155.24 have no applicability to capital stock valuation for years prior to the promulgation of the provisions in August of 1979. Commonwealth v. Bessemer and Lake Erie Railroad Co., 427 A.2d 699 (Pa. Cmwlth. 1981); exceptions dismissed 433 A.2d 909 (Pa. Cmwlth. 1981).

This section cited in 61 Pa. Code § 155.21 (relating to general); 61 Pa. Code § 155.22 (relating to definitions); and 61 Pa. Code § 155.28 (relating to capital stock value methods—fixed formula).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.25 Capital stock value—fixed formula.

(a) For calendar years 1984, 1985 and 1986 and fiscal years beginning in 1984, 1985 and 1986:

Capital Stock Value is the amount computed under the following formula: one-half times the sum of the average net income capitalized at the rate of 9 1/2% plus 75% of net worth, the algebraic equivalent of which is:

.5 x (average net income/.095 + (.75) (net worth)).

(b) For calendar year 1987 and fiscal years beginning in 1987 and each year thereafter:

Capital Stock Value is the amount computed under the following formula: the product of one-half times the sum of the average net income capitalized at the rate of 9 1/2% plus 75% of net worth from which product shall be subtracted $50,000, the algebraic equivalent of which is:

(.5 x (average net income/.095 + (.75) (net worth))) - 50,000

The provisions of this § 155.25 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 155.25 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273.

This section cited in 61 Pa. Code § 155.21 (relating to general).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.26 Average net income—fixed formula.

(a) Average net income is the sum of the taxpayer’s net income or loss for each of the current and immediately preceding 4 years, divided by five.

(b) Net income or loss is the amount set forth as income per books on the income tax return filed by the taxpayer with the Federal government, or if no return is made, as would have been set forth had the return been made. The net income or loss shall be computed on an unconsolidated basis exclusive of the net income or loss of an investee corporation and exclusive of the net income or loss of an investee corporation accounted for under the equity method of accounting. The amount set forth as income per books on the income tax return filed with the Federal government or as would have been set forth had the return been made, shall be adjusted to include dividends received from investee corporations, including dividends from investments accounted for under the consolidated or equity methods of accounting.

(c) In computing average net income, losses shall be entered as computed, but the average net income may not be less than zero.

(d) Net income or loss shall be subject to correction by the Department for fraud, evasion or error.

(e) In the case of a taxpayer which has not been in existence for a period of 5 calendar years, average net income is the average net income for the number of years that the taxpayer has been in existence. A taxpayer in existence for a part of a year shall be considered to have been in existence for that year based on the number of days in the year that the taxpayer was in existence.

Example 1. The taxpayer, incorporated August 1, 1982, reports on a calendar year basis. Its net income for the period August 1 through December 31, 1982 (153 days) was $20,000. Its net income for 1983 was $50,000 and for 1984, $70,000. Average net income for 1984 would be $57,870 ($140,000 ÷ 2 153/365).

Example 2. The taxpayer filed on a calendar year basis until December 1980. In 1981 it changed its filing period to a fiscal year ending June 30. In order to do so, it filed a short period report for January 1 through June 30, 1981. Thereafter, taxpayer continued to file on a fiscal year basis. In computing average net income for the period ending June 30, 1985, taxpayer would include its January 1 through June 30, 1981 net income or loss as well as its July 1, 1981 through June 30, 1985 net income or loss and divide the result by 4 181/365.

Example 3. The taxpayer, incorporated May 1, 1971, filed a calendar year report for 1980. Between January 1, 1981 and December 31, 1984, the taxpayer, as a result of various mergers and filing period changes, had 6 book years. The taxpayer’s average net income for 1984 would include the net income or loss for each of the 6 book years between January 1, 1980 and December 31, 1984, divided by five.

(f) Average net income does not include net income or loss of the corporation for a period of time prior to incorporation, such as net income or loss of a partnership prior to incorporation. Net income or loss of a predecessor corporation may not be attributed to a successor corporation. In the case of a mere change in identity, form or place of organization of one corporation, net income or loss prior to the change shall be utilized in determining average net income. Net income or loss may not be adjusted in the event of a change in corporate structure, but to the extent that a change occurs as a result of a tax evasion motive, net income or loss may be adjusted to negate the effects of the change in corporate structure. The following examples demonstrate the application of this subsection with respect to mergers, consolidations and reincorporations. Where there is evidence of a tax evasion motive, average net income will be determined based on the substance of the transaction.

Example 1. Effective December 31, 1984, Corporation A merges into Corporation B. The net income or loss for the two corporations are:

Year…Corporation A…Corporation B 1981…$60,000…$150,000 1982…$10,000…$100,000 1983…($100,000)…$ 80,000 1984…($100,000)…$ 60,000 Total 1985…— …$100,000

The average net income for 1985 for Corporation B, the corporation which survived the merger, would be $98,000 ($490,000 ÷ 5), determined without regard to the net income or loss of Corporation A prior to the merger.

Example 2. Effective December 31, 1984, Corporation A and Corporation B consolidate to form a new corporation, Corporation C. Both Corporations A and B had been in existence for more than 5 years prior to the consolidation. Corporation C’s average net income would be determined for 1985 based only on the corporation’s net income or loss for 1985, and no recognition would be given to the net income or loss of either Corporation A or Corporation B prior to the consolidation.

Example 3. Effective December 31, 1984, Corporation A, formerly incorporated in State Y, reincorporates in State X. The average net income for 1985 would be computed taking into account net income or loss for 1985, as well as net income or loss for the 4 years prior to January 1, 1985.

(g) No adjustment to net income or loss may be made for Federal income tax which would have been paid by a corporation electing S Corporation treatment under Section 1361 of the IRC (26 U.S.C.A. § 1361) or for Commonwealth Corporate Net Income Tax which would have been paid by a corporation electing Pennsylvania S corporation treatment under article 3 of the TRC (72 P. S. § § 7301—7361), or for Commonwealth personal income tax paid by the shareholders of the corporation.

(h) No adjustment to net income or loss may be permitted on account of nonrecurring or extraordinary items.

(i) A taxpayer which totally ceases operations, has abandoned the business for which it was incorporated and is divested of assets shall be deemed to have ceased to exist for the purpose of computing average net income and upon recommencing business activities, shall be considered to have come into existence upon the date activities recommence. This subsection does not apply to situations where the cessation of activities occurred due to a tax evasion motive.

(j) Corporations planning significant reductions in business operation, as well as corporations in the process of liquidating, should be aware of the effects tail earnings may have on subsequent years’ tax liability and plan accordingly.

The provisions of this § 155.26 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 155.26 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273.

Application

This section does not apply retroactively and the Department of Revenue followed the Department’s previously established interpretation of section 408 of the Tax Reform Code of 1972 (72 P. S. § 7408). Doyle Equipment Co. v. Commonwealth, 542 A.2d 644 (Pa. Cmwlth. 1988).

Calculating Tax Liability

Under subsection (g), an S corporation may not assume the tax liability of its shareholders and then deduct that as an expense in calculating its annual net income for capital stock purposes. Scott Electric Co. v. Commonwealth, 692 A.2d 289 (Pa. 1997); exceptions overruled, decision adhered to 704 A.2d 205 (Pa. Cmwlth. 1998).

‘‘Net income per books’’ as the term is used in calculating tax liability on capital stock values for Subchapter S Corporations did not permit corporations to deduct hyphothetical Federal income tax it did not pay. Tool Sales and Service Co., Inc. v. Commonwealth, 613 A.2d 143 (Pa. Cmwlth. 1992); affirmed 637 A.2d 607 (Pa. 1993).

Capital Stock Value

Corporation has not demonstrated a due process violation, but can claim only that where the total property, payroll, and sales of the unitary business enterprise included in the fractions of the three-factor formula, its tax due would be approximately 44.5% less than the figure arrived at by the Board of Finance and Revenue in its calculation under the three-factor formula because the 44.5% disparity between calculations does not lie outside of the constitutional margin of error delineated by the United States Supreme Court. Unisys Corp. v. Commonwealth, 812 A.2d 448 (Pa. 2002); cert. denied 540 U. S. 812 (U. S. 2003).

Consistent with GAAP

The regulatory treatment of income per books, by not allowing for adjustments for extraordinary or nonrecurring items, is consistent with the GAAP treatment of the same. Shawnee Development, Inc. v. Commonwealth, 799 A.2d 882 (Pa. Cmwlth. 2002); dec. vacated 799 A.2d 882 (Pa. Cmwlth. 2002), ord. aff’d 819 A.2d 528 (Pa. 2003).

Fiscal Year

There was no inconsistency between this regulation and section 601 of the Tax Reform Code (72 P. S. § 7601). This regulation reasonably supplements the statute by providing for a case where a corporation changes its fiscal year and shortens the period of its taxable year. The Department’s expertise in this area is entitled to deference in interpreting the statutes they enforce, particularly when such interpretation treats both new and old corporations in a uniform rather than discriminatory manner. Consolidated Rail Corp. v. Commonwealth, 670 A.2d 722 (Pa. Cmwlth. 1996); affirmed 691 A.2d 456 (Pa. 1997).

Not Clearly Erroneous; Nonconfiscatory

The taxpayer’s bald assertion that its stock must be of no value because it is insolvent is not sufficient to meet its heavy burden to show that the regulation is clearly erroneous, or that it works an unconstitutional confiscation of its property. Shawnee Development, Inc. v. Commonwealth, 799 A.2d 882 (Pa. Cmwlth. 2002), dec. vacated 799 A.2d 882 (Pa. Cmwlth. 2002), order aff’d. 819 A.2d 528 (Pa. 2003).

This section cited in 61 Pa. Code § 155.21 (relating to general).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.27 Net worth—fixed formula.

(a) Net worth is the sum of the taxpayer’s issued and outstanding capital stock, surplus and undivided profits as per books set forth on the income tax return filed by the taxpayer with the Federal government, or if no return is made, as would have been set forth had a return been made.

(b) In the case of a taxpayer which has investments in the common stock of another corporation, net worth is the consolidated net worth of the taxpayer computed in accordance with generally accepted accounting principles. Book value for investments of stock of other corporations includes original cost plus the investor’s share of the investee’s earnings or losses. For the purpose of this subsection, investments in the common stock of another corporation means investments which shall be accounted for using the equity method of accounting or which shall be consolidated under generally accepted accounting principles.

(c) Net worth may not be less than zero.

(d) Net worth does not include the cost of treasury stock.

(e) Net worth as reported by the taxpayer is subject to correction by the Department for fraud, evasion or error.

(f) Net worth includes the amount of a contingent liability or surplus reserve which is not recorded as a liability or a reduction in an asset account by an entry in the books of account of the corporation. Contingent liability or surplus reserve which is included as a parenthetical comment in the main body of the financial statements or by a footnote to the financial statements may not result in a reduction or increase to net worth.

(g) Changes in a taxpayer’s capital structure, including contributions and distributions of capital, purchases of treasury stock and liquidation distributions, may not be prorated.

Example 1. The taxpayer, which files on a calendar year basis, issued common stock on July 1. The value of the common stock issued is $300,000. The net worth at the end of the tax year is $1 million. The net worth to be used in computing capital stock value is $1 million.

Example 2. The taxpayer, which reports on a calendar year basis, has discontinued business operations. On January 1 of the taxable year, taxpayer has a net worth of $100,000 and total assets of $1 million. On December 1 of the taxable year, taxpayer distributes all of its assets. The net worth to be used in computing capital stock value is zero.

(h) Commencing with calendar year 1987 and fiscal years beginning in 1987 and each year thereafter, the following rule applies: if net worth as arrived at under subsections (a)—(g) for the current tax year is greater than twice or less than 1/2 of the net worth which would have been calculated under subsections (a)—(g) as of the first day of the current tax year, then net worth for the current tax year shall be the average of these two amounts.

The provisions of this § 155.27 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 155.27 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273.

Capital Stock Value

Corporation has not demonstrated a due process violation, but rather can claim only that where the total property, payroll, and sales of the unitary business enterprise included in the fractions of the three-factor formula, its tax due would be approximately 44.5% less than the figure arrived at by the Board of Finance and Revenue in its calculation under the three-factor formula, where a 44.5% disparity between calculations does not lie outside of the constitutional margin of error delineated by the United States Supreme Court. Unisys Corp. v. Commonwealth, 812 A.2d 448 (Pa. 2002); cert. denied 540 U. S. 812 (U. S. 2003).

This section cited in 61 Pa. Code § 155.10 (relating to single factor apportionment); and 61 Pa. Code § 155.21 (relating to general).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.28 Capital stock value methods—fixed formula.

(a) Prior methods inapplicable. The capital stock value arrived at by application of the formula set forth in section 601(a) of the TRC (72 P. S. § 7601(a)) may not be affected by the valuation factors or methods set forth in § § 155.21—155.24 (relating to general; definitions; determinations of valuation factors; and valuation methods). This includes methods formerly applied to valuing first year companies (§ 155.24(c)(2)), last year companies (§ 155.24(c)(3)), companies with liquidations in progress (§ 155.24(c)(4)), valuations relating to cash sales of assets or outstanding shares (§ 155.24(c)(5)), valuations based on the sale of an asset (§ 155.24(c)(7)) or valuations based on a stock for stock exchange transaction (§ 155.24(c)(8)).

(b) Short taxable year. Tax due for a short taxable year shall be prorated as follows:

(1) First year companies. Tax due for a short taxable year resulting from the commencement of business activities within this Commonwealth during the taxable year shall be prorated either on the basis of proration of tax, or proration of the property factor, as required in this section. The payroll of sales factors may not be prorated.

(i) In the case of a corporation which has done business outside this Commonwealth for more than 1 year but has been subject to Commonwealth taxation for less than 1 year, the numerator of the property factor shall be prorated to reflect the portion of the year for which business was done in this Commonwealth. The tax due shall be prorated only where all three factors are 100% Commonwealth.

Example 1. A foreign corporation has operated outside of this Commonwealth for more than 1 year, but was only subject to Pennsylvania taxation for the last 90 days of the taxable year. The average value of real and tangible personal property in this Commonwealth is $80,000, and the average value of the property everywhere is $150,000. The numerator of the property factor would be $19,726 ($80,000 x 90/365 days.) The tax would not otherwise be prorated.

Example 2. If, in Example 1, all three apportionment factors were 100% Commonwealth, the property factor would not be prorated, but the tax would be prorated by multiplying the tax by a fraction, which is 90/365 days.

(ii) In the case of a corporation which has been doing business outside of this Commonwealth for the same period for which it has been subject to Commonwealth taxation, which is less than 1 year, the property factor is not prorated, but the tax due is prorated based on the portion of the year during which the corporation did business in and out of this Commonwealth.

(iii) In the case of a corporation which has done business outside of this Commonwealth for a period of less than 1 year and has been subject to Commonwealth taxation for a shorter period than it has done business outside of this Commonwealth, the property factor shall be prorated unless it reports 100% Commonwealth factors—in which case the property factor would not be prorated—and the tax would be prorated for the period of operation everywhere.

Example 1. A corporation did business outside of this Commonwealth commencing July 15, but did not become subject to Commonwealth taxation until October 1, and files on a calendar year basis. The numerator of the property factor would be prorated by multiplying it by a fraction, which is 92/170 days. The tax due would be prorated by multiplying the tax by a fraction, which is 170/365 days.

Example 2. If, in Example 1, the corporation was incorporated July 15 but did not transact business anywhere until October 1, the numerator of the property factor would not be prorated, but the tax would be prorated for the Commonwealth period only, by multiplying the tax by a fraction, which is 92/365 days.

Example 3. If the corporation in examples 1 and 2 reported 100% Commonwealth factors, the property factor would not be prorated but the tax would be prorated for the Commonwealth period only, by multiplying the tax by a fraction, which is 92/365 days.

(2) Last year companies.

(i) In the case of a corporation ceasing business activities everywhere, tax due shall be prorated on a per day basis.

Example. The taxpayer, a domestic corporation which files on a calendar year basis, is not entitled to apportionment and has no exempt assets. Its capital stock value for the calendar year 1985 was $20,000. Taxpayer made its final distribution on August 31, 1985. Its tax, at the rate of 10 mills, would be $133.15, computed as follows:

$20,000 at 10 mills = $200

$200 x 243/365 days = $133.15

(ii) In the case of a corporation withdrawing from this Commonwealth but continuing to do business elsewhere, the numerator of the property factor shall be prorated.

(c) Minimum Capital Stock and Foreign Franchise Tax. The minimum tax due is $75 which will be prorated if the corporation does not have a full tax year in this Commonwealth. See section 7602 of the TRC (72 P. S. § 7602). This subsection applies to corporations which file reports with the Department, with the exception of family farm corporations. See § 155.29 (relating to minimum tax).

The provisions of this § 155.28 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 155.28 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273.

This section cited in 61 Pa. Code § 155.21 (relating to general).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.29 Minimum tax.

(a) General. Under the act of December 23, 1983 (P. L. 370, No. 90) that amended Article VI of the TRC (72 P. S. § § 601—614), applicable commencing with calendar year 1983 and to each year thereafter, a minimum Capital Stock or Foreign Franchise Tax of $75 is imposed on corporations maintaining a corporate tax account. The minimum tax shall be due even in those instances where the actual tax due under the fixed formula or alternative capital stock valuation methods is less than $75. The minimum tax will be prorated if the corporation does not have a full tax year in this Commonwealth.

(b) Family farm corporations. Corporations qualifying as family farm corporations under section 602.2 of the TRC (72 P. S. § 7602.2) are not subject to the minimum tax.

(c) Inactive corporations. Corporations which are inactive and which have qualified to file and have filed an Out of Existence Affidavit (Form REV-238 CT), in the case of domestic corporations, or a Withdrawal Affidavit (Form REV-238 CT), in the case of foreign corporations, are not subject to the minimum tax commencing with the date the affidavit is filed. Corporations which are inactive and which have not filed either an Out of Existence or Withdrawal Affidavit are subject to the minimum tax. An inactive corporation is one which owns no property, has no employes, does no business and carries on no activities. See § 151.11 (relating to termination).

(d) Skeleton reports. Corporations which are inactive and which have been qualified to file and have filed Skeleton Reports under § 151.12 (relating to minimum reporting) are subject to the minimum tax.

Example. Corporation A, an inactive foreign corporation, has not filed a Withdrawal Affidavit. In order to retain its corporate name, Corporation A files a Skeleton Report for the calendar year 1985. Corporation A, being inactive, has no net worth. Corporation A had average net income of $20,000 for 1985, based on the following net income or loss: 1981…$90,000 1982…$40,000 1983…($10,000) 1984…($20,000) 1985…$0

Notwithstanding the fixed formula value of Corporation A of $105,263 (.5 x ($20,000/.095 + (.75)(0)), the Foreign Franchise Tax due would be the minimum tax of $75.

The provisions of this § 155.29 issued under section 408 of the Tax Reform Code of 1971 (72 P. S. § 7408).

The provisions of this § 155.29 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273.

This section cited in 61 Pa. Code § 155.28 (relating to capital stock value methods—fixed formula).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

61 Pa. Code § 155.30 Regulated investment companies.

(a) General. Commencing with the calendar year 1985 and each year thereafter, the Capital Stock or Foreign Franchise Tax of a regulated investment company is the sum of the following products:

(1) Seventy five dollars multiplied by the quotient, rounded to the nearest whole number, produced by dividing the net asset value of the regulated investment company by 1 million.

(2) The apportioned undistributed Personal Income Tax income of the regulated investment company multiplied by the Personal Income Tax rate for the same tax year.

(b) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise: Apportioned undistributed Personal Income Tax income—Undistributed Personal Income Tax income multiplied by a fraction, the numerator of which is income distributed during the taxable period to shareholders who are Commonwealth resident individuals, estates or trusts and the denominator of which is income distributed during the taxable period. Monthly net asset value—The actual market value of assets owned by the regulated investment company without exemptions or exclusions, less liabilities, debts and other obligations as of the last day of the month. Net asset value—Determined by adding the monthly net asset values for each month during the taxable period and dividing the sum by the number of months involved. Personal Income Tax income—Income computed in the same manner and on the same basis as the income of an individual under Article V (relating to personal income tax). Regulated investment company—A domestic corporation and a foreign corporation which is registered to do business in this Commonwealth, maintains an office in this Commonwealth, has filed a timely election to be taxed as a regulated investment company with the Federal government and qualifies to be taxed as a regulated investment company under the IRC. Undistributed Personal Income Tax income—Personal Income Tax income, other than Personal Income Tax income undistributed on account of the Capital Stock or Foreign Franchise Tax liability of the regulated investment company, less Personal Income Tax income distributed to shareholders.

(c) Determination of income considered to be distributed.

(1) Personal Income Tax income is deemed to be either distributed to shareholders or undistributed in the same proportion that the total income received by the regulated investment company during the taxable year is distributed to shareholders or undistributed.

(2) At the election of the regulated investment company, income distributed after the close of a taxable year, but deemed distributed during the taxable year for Federal income tax purposes, is deemed distributed during the year.

(3) If a regulated investment company in a taxable year has both current income and income accumulated from a period year, distributions made during the year shall be deemed to have been made first from current income.

The provisions of this § 155.30 issued under sections 408 and 603 of the Tax Reform Code of 1971 (72 P. S. § § 7408 and 7603).

The provisions of this § 155.30 adopted January 16, 1987, effective January 17, 1987, 17 Pa.B. 273; amended December 10, 1999, effective December 11, 1999, 29 Pa.B. 6249. Immediately preceding text appears at serial pages (205462) to (205463).

This section cited in 61 Pa. Code § 155.21 (relating to general).

History

• Authority: The provisions of this § 155.
• Source: The provisions of this § 155.

Chapter 158 Mutual Thrift Institutions Tax

61 Pa. Code § 158.1 Imposition of tax.

There is imposed on every mutual thrift institution located within this Commonwealth, an excise tax on the privilege of doing business in this Commonwealth, measured at the rate of 11 1/2% upon the annual net earnings or income of the institution. See section 1501 of the TRC (72 P. S. § 8501).

History

• Authority: The provisions of this Chapter 158 issued under section 408 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 158 adopted January 16, 1987, effective January 17, 1987, 17 Pa.

61 Pa. Code § 158.2 Mutual thrift institutions.

As used in this chapter, mutual thrift institution or institution means every savings bank without capital stock incorporated by or under the statutes of the Commonwealth, every building and loan association, every savings and loan association incorporated under the statutes of this Commonwealth, every Federal savings and loan association incorporated under the statutes of the United States and every savings institution having capital stock incorporated by or under the statutes of this Commonwealth or under the statutes of the United States and located within this Commonwealth.

History

• Authority: The provisions of this Chapter 158 issued under section 408 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 158 adopted January 16, 1987, effective January 17, 1987, 17 Pa.

61 Pa. Code § 158.3 Net operating loss.

(a) General. For the calendar year 1983 and fiscal year beginning in 1983 and each year thereafter, a net operating loss shall be allowed as a deduction and carried forward 3 succeeding years. Each prior year’s loss shall be carried to the earliest year to which the loss may be first carried, and if not utilized in the 3 succeeding years, the loss will expire. A net operating loss deduction is permitted only to the extent of net earnings or income and may not be utilized in the current year to decrease net earnings or income below zero or to increase a net loss. The amount of a prior year’s loss may be determined with respect to time limitations imposed with respect to the tax report for the year in which the net operating loss is claimed as a deduction against net earnings or income.

(b) Change in ownership.

(1) Under section 1052(e.1) of the TRC (72 P. S. § 8502(e.1)), in the case of a change in the ownership of a mutual thrift institution effected in a manner described in section 381 or 382 of the IRC (26 U.S.C.A. § § 381 or 382), a net operating loss from a year prior to the change in ownership may be utilized, but subject to certain limitations provided in the IRC with respect to the use of net operating losses after a change in ownership shall apply for the purpose of computing the portion of the net operating loss carryover recognized for purposes of the Mutual Thrift Institutions Tax, whether the change is effected by purchase, liquidation, acquisition of stock or reorganization. The applicable limitations include limitations imposed by the IRC solely on account of a change in ownership, including, but not limited to, sections 269, 318 (insofar as it defines the scope of IRC 382), 381 and 382 of the IRC (26 U.S.C.A. § § 269, 318, 381 and 382).

(2) Because the computation of income and loss for purposes of the tax differs in many respects from the computation of taxable income and loss for Federal and Pennsylvania Corporate Net Income Tax purposes, the carryover of losses is not limited by the Federal consolidated return regulations or section 338 of the IRC (26 U.S.C.A. § 338), providing for the considered termination of corporate existence upon the making of certain elections for Federal income tax purposes.

History

• Authority: The provisions of this Chapter 158 issued under section 408 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 158 adopted January 16, 1987, effective January 17, 1987, 17 Pa.

61 Pa. Code § 158.4 Report and payment of tax; extensions.

(a) A mutual thrift institution closing its fiscal year upon December 31 shall annually, on or before April 15 of each year, make a report to the Department, setting forth the entire amount of net earnings or income or net operating loss received or accrued by the mutual thrift institution from sources during the preceding year.

(b) A mutual thrift institution closing its fiscal year books upon some other date shall make an annual report of net earnings or income or net operating loss received or accrued during its fiscal year on or before 105 days after the close of its fiscal year.

(c) A mutual thrift institution is required to make payment of Tentative Tax under Article XXX of the TRC (72 P. S. § § 10001—10004). The remaining portion of tax due shall be paid at the time the tax report is required to be made.

History

• Authority: The provisions of this Chapter 158 issued under section 408 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 158 adopted January 16, 1987, effective January 17, 1987, 17 Pa.

61 Pa. Code § 158.5 Settlement and resettlement of tax.

(a) Settlement. Settlement of tax due shall be made, so far as possible, so that notice thereof may be mailed to the institution before the end of the year succeeding the year for which the tax report was made. See section 801 of the FC (72 P. S. § 801). In the case of an institution which requests an extension of time in which to file its report, settlement shall be made, so far as possible, so that notice thereof may be mailed to the institution not later than 60 days after the end of the year succeeding the year for which the tax report was made. In the case of a tax report which is filed after the original due date, or if an extension has been requested, after the extended due date, settlement shall be made, so far as possible, so that notice thereof may be mailed to the institution before the end of the year succeeding the year in which the report was filed with the Department.

(b) Resettlement. Within 90 days after the date upon which the copy of a settlement was mailed to the institution with which the settlement was made, the institution or the Commonwealth may file with the Department a petition for resettlement. See section 1102 of the FC (72 P. S. § 1102). Within 2 years of a settlement or resettlement, except those appealed from, the Department may resettle the tax due (see section 1105 of the FC (72 P. S. § 1105)). With respect to settlements or resettlements which have been appealed from, the Department is authorized to resettle under section 1105 of the FC if the Board of Finance and Revenue has not acted upon taxpayer’s petition. If the Board of Finance and Revenue has acted upon taxpayer’s petition, the Department will have authority to make a resettlement, if the resettlement does not negate and is consistent with the action of the Board of Finance and Revenue on an issue raised before the Board.

History

• Authority: The provisions of this Chapter 158 issued under section 408 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 158 adopted January 16, 1987, effective January 17, 1987, 17 Pa.

61 Pa. Code § 158.6 Institutions exempt from other corporate taxes.

Institutions subject to the Mutual Thrift Institutions Tax are exempt from other corporate taxes imposed by the Commonwealth, including, but not limited to, the Corporate Net Income, Capital Stock—Franchise, Bank Shares and Corporate Loans Taxes.

History

• Authority: The provisions of this Chapter 158 issued under section 408 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 158 adopted January 16, 1987, effective January 17, 1987, 17 Pa.

Chapter 159 Public Utility Realty Tax

61 Pa. Code § 159.1 General.

(a) Power of Department to audit annual reports submitted by local taxing authorities. The Department has the power to audit the annual reports submitted by local taxing authorities.

(b) Right to contest audit or distribution by Department. Affected public utilities and local taxing authorities have no statutory or administrative right to contest the audit or the distribution by the Department.

(c) Correctness of annual reports. Annual reports submitted to the Department by local taxing authorities are prima facie correct, but the prima facie correctness may be rebutted by evidence submitted by affected public utilities.

(d) Rights of affected public utilities. Affected public utilities have a right to assist the Department in the audit by the Department of the annual reports submitted by the local taxing authorities.

(e) Confidentiality of annual reports. Section 731 of the FC (72 P. S. § 731), pertaining to confidential information, does not apply to reports submitted by local taxing authorities.

The data a local taxing authority submits is presumed correct and, therefore, no administrative remedy or statutory appeal is necessary and this section is constitutional. Harrisburg v. McNulty, 628 A.2d 914 (Pa. Commw. 1993).

61 Pa. Code § 159.2 Reports by local taxing authorities.

Cut-off date on adjustments. The cut-off date on adjustments shall conform with the following:

(1) An adjustment to the assessed values, tax rates, realty tax equivalent or total tax receipts shall be submitted by a local taxing authority to the Department on or before August 1 of the year the Department will distribute to each reporting local taxing authority its share of the total realty tax equivalent.

(2) If the adjustment is submitted by a local taxing authority to the Department after the August 1 cut-off date, the adjustment will be incorporated into the determination by the Department in its next subsequent distribution.

Chapter 160 Utilities Gross Receipts Tax

61 Pa. Code § 160.11 Railroad gross receipts tax credit.

(a) Availability. Railroad companies may, under section 1101.2 of the TRC (72 P. S. § 8101.2), apply for a tax credit for tax years commencing 1981 equal to 25% of the actual amount expended during the preceding calendar year, starting 1980, in this Commonwealth for the maintenance and improvement of rights-of-way.

(b) Applications. Application for credit shall be made upon Form REV-1269 AS (9-80) SCHEDULE RR not later than 60 days prior to the commencement of the tax year to which the credit is to be applied. Terms and conditions set forth in section 1101.2 of the TRC (72 P. S. § 8101.2) shall be met.

(c) Adjustment of credit. Assuming no material change in the facts between the date of application and the close of the tax year to which it relates, the decision of the Secretary granting or denying a claimed tax credit is final, subject only to review by the Commonwealth Court in the manner prescribed by 2 Pa.C.S. § § 701—704 (relating to judicial review of Commonwealth agency action). The amount of a credit granted is, of course, subject to adjustment by the Department with respect to that portion of the credit application based upon estimated rather than actual expenditures. The adjustment shall be made by the Department following submission by the railroad company of the annual report required by section 1101.2 of the TRC (72 P. S. § 8101.2) showing actual expenditures for the entire year.

History

• Authority: The provisions of this Chapter 160 issued under section 1101.
• Source: The provisions of this Chapter 160 adopted January 2, 1981, effective January 3, 1981, 11 Pa.

Chapter 161 Unauthorized Insurance Companies

61 Pa. Code § 161.1 Taxpayers.

[Reserved].

History

• Source: The provisions of this Chapter 161 adopted September 1, 1978, effective September 2, 1978, 8 Pa.

61 Pa. Code § 161.11 General.

(a) The Unlicensed Insurers Act requires a surplus lines agent who sells insurance coverage of an unlicensed insurer to file a Gross Premiums Tax Report—Surplus Lines Agent (Form RCT-123) with the Department and the Insurance Commissioner. See section 11(c) of the act of January 24, 1966 (P. L. 1509, No. 531) (40 P. S. § 1006.11(c)).

(b) An insured who buys insurance from an unlicensed insurer, or renews the insurance, other than insurance procured through a surplus lines agent, is required to file a Gross Premiums Tax Report—For Premiums paid to Unauthorized Insurance Companies, Associations, Exchanges, etc. (Form RCT-122) with the Department and the Insurance Commissioner. See section 11(e) of the act of January 24, 1966 (P. L. 1509, No. 531) (40 P. S. § 1006.11(e)).

(c) From the effective date of this section parties filing Gross Premiums Tax Report—Surplus Lines Agent and Gross Premiums Tax Report—For Premiums paid to Unauthorized Insurance Companies, Associations, Exchanges, etc., under the requirements in subsection (a) and (b) may file both copies with the Department.

(d) Filing of both copies with the Department will be considered compliance with the filing requirements.

(e) Upon receipt the Department will transmit one copy of the report to the Insurance Commissioner.

(f) The Department will furnish one copy of the report to the Insurance Commissioner regardless of the number of copies actually filed by the public with the Department.

History

• Source: The provisions of this Chapter 161 adopted September 1, 1978, effective September 2, 1978, 8 Pa.

Chapter 162 Insurance Companies Subject to Tax in this Commonwealth

61 Pa. Code § 162.1 Retaliatory charge imposed on insurance companies.

(a) A taxpayer domiciled outside of this Commonwealth and subject to the Insurance Premiums Tax imposed by Article IX of the TRC (72 P. S. § § 7901—7906) or the Marine Insurance Tax (72 P. S. § § 2281—2284) shall report to the Department taxes, licenses or fees which an insurance company domiciled in this Commonwealth would be required to pay to the taxpayer’s state of domicile or political subdivisions thereof if the Commonwealth company conducted the same volume and kind of business in the taxpayer’s state of domicile which the taxpayer conducts in this Commonwealth.

(b) For each tax, license or fee, taxpayer shall include a description of the tax, license or fee, the percentage rate or amount, and items used in the determination of the base to which the rate or amount is applicable. The taxpayer shall include with its Pennsylvania Insurance Premiums or Marine Insurance Tax report, or as soon thereafter as possible, a copy of every tax report filed by the taxpayer with its domiciliary state or political subdivisions thereof. Reports which are not included in the Pennsylvania Insurance Premiums Tax report shall be forwarded to the Speciality Tax Division, Department of Revenue, Strawberry Square, Harrisburg, Pennsylvania 17127.

History

• Authority: The provisions of this Chapter 162 issued under section 408 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 162 adopted January 16, 1987, effective January 17, 1987, 17 Pa.

61 Pa. Code § 162.11 Calculation of foreign title insurance company gross premiums.

(a) The following words and terms when used in this section, have the following meanings: Excess fee—The difference between the all-inclusive fee for the actual liability covered by a title insurance policy and the all-inclusive fee for a hypothetical title insurance policy written to cover the maximum liability specified in the current approved attorney fee schedule.

(b) Except as provided in subsection (c), gross premiums for all title insurance policies, including policies issued under an all-inclusive fee schedule, shall be calculated by applying the liability coverage to the insurer’s approved attorney fee schedule approved by the Insurance Department.

(c) The taxable premium for policies that are written in excess of the maximum liability coverage amount specified in the approved attorney fee schedule shall be calculated as follows:

(1) If the title insurance policy is written under the approved attorney system, the taxable premium is the entire fee.

(2) If the title insurance policy is written under the all-inclusive system, the taxable premium is the sum of the following:

(i) The approved attorney fee for the maximum liability coverage specified in the approved attorney fee schedule.

(ii) The excess fee.

Example:

A title insurance policy is written with a liability coverage of $20 million. A fee of $38,583 is charged under the all-inclusive system. The approved attorney fee schedule is consulted, which for purposes of illustration, only, is as follows:

The $20 million liability of the policy exceeds the maximum liability specified in the approved attorney fee schedule of $1 million. Under paragraph (2), the taxable premium is the sum of two components. First, under subparagraph (i), the maximum liability coverage specified is $1 million and the corresponding fee totals $2,300. Second, the excess fee needs to be calculated utilizing fees in the all-inclusive fee schedule, which for purposes of illustration, only, is as follows:

Using the maximum liability coverage of $1 million, the corresponding fee totals $4,333. The excess fee under subparagraph (ii) is $34,250 ($38,583-$4,333). The taxable premium for the policy is the sum of the two components which is $36,550 ($2,300 + $34,250).

(d) A title insurance company shall calculate the amount of its taxable premiums on the basis of the number of policies and the total liability covered by the policies within the liability ranges as prescribed in the approved attorney fee schedule then in effect. A title insurance company shall submit a schedule setting out the relevant data by policy coverage ranges and calculating the taxable gross premiums as indicated. (Refer to the schedule in the following example.) This schedule shall be attached to the title insurance company’s gross premiums tax report. Copies of the applicable approved attorney fee schedule and the all-inclusive fee schedule in effect for the title insurance company also shall be attached to the gross premiums tax report.

Example:

A title insurance company writes 3,201 title insurance policies covering a total liability of $391,000,000 under the all-inclusive system during the tax year. The distribution of policies, utilizing the ranges set forth in the fee schedule is as follows:

Under this section, and utilizing this illustrative fee schedule, the title insurance company’s taxable gross premiums are $1,051,050.

The provisions of this § 162.11 issued under section 408(a) of the Tax Reform Code of 1971 (72 P. S. § 7408(a)).

The provisions of this § 162.11 adopted September 11, 1998, effective September 12, 1998, 28 Pa.B. 4630.

History

• Authority: The provisions of this Chapter 162 issued under section 408 of the Tax Reform Code of 1971 (72 P.
• Source: The provisions of this Chapter 162 adopted January 16, 1987, effective January 17, 1987, 17 Pa.

Chapter 170 Corporation Tax Pronouncements—Statements of Policy

61 Pa. Code § 170.1 Nonbusiness income—liquidations; effect of Laurel Pipe Line decision.

(a) The significant factual elements involved in Laurel Pipe Line Co. v. Board of Fin. & Revenue, 642 A.2d 472 (Pa. 1994) are as follows:

(1) The pipeline operation in issue had been discontinued and was idle for at least 3 years.

(2) The remaining pipeline operation of the company was independent from the pipeline operation that was sold, including a distinctive geographical separation.

(3) No proceeds of the sale were used to acquire any assets for future use in the business, nor were any reinvested back into the operations of the business.

(4) No proceeds of the sale were used to generate income for future use in the business operations, nor were any invested in financial securities that would generate income for the company.

(5) The entire after-tax net proceeds from the sale were distributed to the shareholders in the form of a dividend.

(b) The law applied in the case is the so called ‘‘functional test,’’ which is derived from the second clause of the statutory definition of ‘‘business income:’’ ‘‘and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer’s regular trade or business operations.’’ 72 P. S. § 7401(3)2.(a)(1)(A). The Supreme Court has interpreted the Commonwealth Court’s opinion in Welded Tube Co. v. Commonwealth, 101 Pa. Cmwlth. 32, 515 A.2d 988 (1986) as holding that under the functional test ‘‘income meets the functional test if the gain arises from the sale of an asset which produced business income while it was owned by the taxpayer.’’ Laurel, 642 A.2d at 475.

(c) The Supreme Court in Laurel notes that in Welded Tube the taxpayer had a regular practice of acquiring property in the expansion of its business and reinvesting any gains in its ongoing business. In contrast, Laurel engaged in what the Supreme Court describes as a ‘‘singular disposition’’ of property.

(d) In finding that the disposition at issue in Laurel was not an integral part of Laurel’s business, the Supreme Court focuses on the following facts:

(1) The ‘‘singular’’ nature of the disposition.

(2) The pipeline was idle for 3 years.

(3) The disposition was not made in the course of acquiring new assets.

(4) This was a liquidation as evidenced by a lack of reinvestment of the proceeds in the business—no assets were acquired and no proceeds were used to generate income or invested in financial securities that would generate income for the company—and the entire net proceeds were distributed to the shareholders.

(5) The pipeline disposed of was a separate and distinct ‘‘aspect’’ of Laurel’s business, and the remaining pipeline was independent from the sold pipeline.

(6) Laurel divested itself of this ‘‘aspect’’ of its business and the structure of its business has changed as a result.

(e) That no one fact alone controlled the result in Laurel is evident by the Court’s statement that ‘‘the totality of the circumstances surrounding the sale of the . . . pipeline has persuaded us that the transaction is one that can be characterized as a partial liquidation which has changed the structure of the taxpayer’s business.’’ 642 A.2d at 477. By citing the Welded Tube decision without apparent disagreement, the Supreme Court impliedly has approved that decision; but there are basic factual differences which dictated a contrary result in Laurel. These differences are:

(1) Laurel involved a partial liquidation while Welded Tube was a reorganization.

(2) In Laurel, a separate aspect of its business was sold while in Welded Tube only a part of the company’s business was sold.

(3) Laurel returned the proceeds to its shareholders while Welded Tube reinvested its proceeds.

(4) Laurel’s business structure changed while Welded Tube’s did not.

(f) Unlike Welded Tube, Laurel deals with the liquidation of a distinct aspect of the taxpayer’s business, which aspect ceases following the liquidation.

(g) The policy implications are as follows:

(1) Laurel’s interpretation of Welded Tube’s statement of the functional test—that is, ‘‘Income meets the functional test if the gain arises from the sale of an asset which produced business income while it was owned by the taxpayer,’’—is clarified with respect to liquidations by the decision in Laurel. 462 A.2d at 475. A liquidation to which the Laurel decision applies is a liquidation where a separate and distinct aspect of the taxpayer’s business ceases and the proceeds are returned to the shareholders. Such an aspect of the taxpayer’s business may be comprised of assests once used in the taxpayer’s regular trade or business operations if there is evidence that the assets no longer comprise a part of the operations.

(2) It is the policy of the Department that any disposition of assets for which nonbusiness income is claimed pursuant to a liquidation must have been removed from the relevant apportionment factors prior to the disposition for a period of time consistent with the facts of the individual case. In addition, the taxpayer is required to show by clear and convincing evidence that for the period the assets were not a part of its regular trade or business operations. The proceeds from such a disposition shall be distributed to the shareholders of the corporation and may not be used to acquire assets for future use in business operations or to generate income for use in future business operations.

The provisions of this § 170.1 adopted November 11, 1994, effective November 12, 1994, 24 Pa.B. 5659.

History

• Source: The provisions of this § 170.

61 Pa. Code § 170.3 Nonbusiness income—application of Canteen Corporation decision.

(a) Canteen Corp. v. Commonwealth, 818 A.2d 594 (Pa. Cmwlth. 2003) will not be applied to taxable years beginning after December 31, 1998.

(b) The policy implications are as follows:

(1) It is the policy of the Department of Revenue that the part of the decision in Canteen Corp. v. Commonwealth, 818 A.2d 594 (Pa. Cmwlth. 2003), which held that gains or losses from section 338 transactions produce nonbusiness income, does not apply to taxable years beginning after December 31, 1998, because of statutory amendments to the definition of ‘‘business income.’’ In accordance with § 153.81 (relating to elections under 26 U.S.C.A. § 338) taxable income generated as a result of a section 338 election will be treated as business income.

(2) The part of the decision which held that the fictional sale of assets by the target corporation must be recognized by the Commonwealth will be followed so that the target corporation’s sales factor will include, when required by law, the proceeds assigned to each asset which is deemed to have been sold.

(c) The rationale for this statement of policy is as follows:

(1) The Commonwealth Court in Canteen reasoned that the Commonwealth could not include the fictional gain produced by this Federal election in taxable income and then ignore the additional fiction that under this election the company is deemed to have sold all of its assets in a complete liquidation and distribution of assets. Following this reasoning, the Commonwealth Court relied on the Pennsylvania Supreme Court’s holding in Laurel Pipe Line v. Board of Finance and Revenue, 537 Pa. 205, 642 A.2d 472 (1994) that the gain realized from a partial liquidation of a discrete business segment and distribution of proceeds to shareholders is nonbusiness income.

(2) The Pennsylvania Supreme Court in Laurel Pipe Line emphasized that the statutory definition of the functional test of business income is conjunctive in that it required ‘‘the acquisition, management, and disposition of the property constitute integral parts of the taxpayer’s regular trade or business operations’’ to find business income. The court held that the pipeline was not disposed of as an integral part of Laurel’s regular trade or business; therefore, the gain was nonbusiness income.

(3) The act of June 22, 2001, (P. L. 353, No. 23) (Act 23), made it clear through the amended definition of ‘‘business income’’ that the functional test of business income is disjunctive in that it merely requires that ‘‘if either the acquisition, the management, or the disposition of the property constitutes an integral part of the taxpayer’s regular trade or business operations’’ the income is business income.

(i) Therefore, although this type of disposition is not an integral part of taxpayer’s regular trade or business, the gain or loss realized from the sale of any asset that was either acquired or managed as an integral part of the taxpayer’s regular trade or business operations is business income.

(ii) In addition, Act 23 further provided that ‘‘business income . . . includes all income which is apportionable under the Constitution of the United States.’’ As of March 25, 2006, no United States Supreme Court decision has addressed the imposition of a state corporate income tax relative to corporate liquidations.

(d) This section shall be effective immediately and apply to all open cases, tax settlements and appeals.

The provisions of this § 170.3 adopted March 24, 2006, effective March 25, 2006, 36 Pa.B. 1403.

History

• Source: The provisions of this § 170.

61 Pa. Code § 170.11 Documentation requirements to establish out-of-State sales after Gilmour Manufacturing decision.

(a) In Commonwealth v. Gilmour Manufacturing Corporation, 573 Pa. 143, 822 A.2d 676 (2003), the Supreme Court held that for purposes of calculating its Pennsylvania sales apportionment factor for the Corporate Net Income Tax, a Pennsylvania corporation is not required to include in the numerator sales of goods to out-of-State buyers who retrieve the goods at the seller’s place of business in this Commonwealth and then transport the goods out of this Commonwealth. The Court determined that section 401(3)2(a)(16) of the Tax Reform Code (72 P. S. § 7401(3)2(a)(16)) mandated that conclusion with regard to the ‘‘dock sales,’’ regardless of whether the buyer personally retrieves the item using his own means of transport or by engaging the services of a for-hire motor carrier. The Court ruled that the Department regulation on the subject, § 153.26(b)(2) (relating to sales factor), was inconsistent with the statutory requirement insofar as it required the inclusion of the sales in the numerator of the taxpayer’s sales factor.

(b) The Court’s holding excludes from the Pennsylvania portion of the apportionment factor only sales to out-of-State buyers who transport the goods out of this Commonwealth. Sales to purchasers who do not transport the goods outside of this Commonwealth for use or resale are Pennsylvania sales for purposes of calculating the sales factor numerator. Thus, in the absence of sufficient evidence establishing an ultimate destination to an out-of-State location, sales of goods in which delivery is made to the buyer at a Pennsylvania location must be reported as Pennsylvania sales and included in the numerator of the Pennsylvania sales apportionment fraction.

(c) Documentation sufficient to establish an out-of-State sale includes:

(1) Bills of lading of the carrier establishing that the goods were destined for or delivered to an out-of-State location.

(2) Delivery instructions from the purchaser to the carrier establishing that the goods were to be transported out of this Commonwealth.

(3) Warehouse receipts of the purchaser showing that the goods were delivered to an out-of-State location.

(4) Invoices issued by the taxpayer/seller to the purchaser showing an out-of-State delivery address.

(d) Documentation which will be deemed insufficient to establish that the ultimate destination of goods is to an out-of-State location:

(1) Invoices issued by the taxpayer/seller to the purchaser showing an out-of-State mailing address.

(2) Affidavits or other declarations from the seller, its employees or agents that the ultimate destination of goods was an out-of-State location.

(e) Examples of documentation are as follows: A taxpayer sells plumbing fixtures to Company X, a New Jersey corporation which has retail stores in New Jersey and Pennsylvania.

(1) Examples of sufficient documentation:

Example 1. Company X uses a carrier to pick the goods up at A’s warehouse in Pennsylvania. Company X provides documentation it procured from the carrier showing that the merchandise was delivered to X’s warehouse in New Jersey.

Example 2. A taxpayer secures a copy of the delivery instructions from Company X to the carrier directing that the fixtures be taken to Company X’s warehouse in New Jersey.

Example 3. Company X uses a carrier to pick up the merchandise. The taxpayer secures a copy of the bill of lading showing the fixtures were delivered to the New Jersey location.

(2) Examples of insufficient documentation:

Example 1. A taxpayer produces invoices submitted to Company X at its headquarters in New Jersey and a remittance letter accompanying the check from X’s New Jersey headquarters.

Example 2. The same as Example 1, except the taxpayer provides an affidavit from its sales manager asserting that the merchandise sold to Corporation X was delivered to X’s warehouse in New Jersey.

The provisions of this § 170.111 adopted July 14, 2006, effective July 15, 2006, 36 Pa.B. 3673.

History

• Source: The provisions of this § 170.

Subpart C Liquid Fuels Tax

Chapter 301 General Provisions

61 Pa. Code § 301.1 Definitions.

The following words and terms, when used in this subpart, have the following meanings, unless the context clearly indicates otherwise: Act—The Liquid Fuels Tax Act (72 P. S. § § 2611a—2611z). Board—Board of Finance and Revenue of this Commonwealth. Bureau—The Bureau of Liquid Fuels Tax of the Department. Political subdivision—A county, city, borough, incorporated town, township, school district, vocational school district and county institution district. Tax or liquid fuels tax—The tax imposed upon liquid fuels in this Commonwealth as set forth in the act.

Chapter 303 Tax Refunds for Political Subdivisions

61 Pa. Code § 303.1 Purpose.

This chapter is promulgated by the Board and the Department in order to effect refunds of liquid fuels tax to political subdivisions as set forth in the act, in accordance with the opinion of the Attorney General of the Commonwealth of July 28, 1970.

History

• Authority: The provisions of this Chapter 303 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 303 adopted September 18, 1970, effective September 19, 1970, 1 Pa.

61 Pa. Code § 303.11 Refund.

The refund of the tax on liquid fuels to political subdivisions apply only to the political subdivisions who have not been granted exemption of the tax by their registered distributor at the time of purchase.

History

• Authority: The provisions of this Chapter 303 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 303 adopted September 18, 1970, effective September 19, 1970, 1 Pa.

61 Pa. Code § 303.12 Claims.

Claims for refunds by political subdivisions shall be made annually, ending December 31, and shall be submitted to the Board not later than March 31, of the succeeding year: and the Board will refuse to consider a claim received or postmarked after that date.

History

• Authority: The provisions of this Chapter 303 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 303 adopted September 18, 1970, effective September 19, 1970, 1 Pa.

61 Pa. Code § 303.13 Form.

Claims for reimbursement of the tax shall be made upon a form furnished by the Board and shall include the name and address of the claimant, the period of time and the number of gallons of liquid fuels used for which reimbursement is claimed, and a descriptive list of the automotive equipment of the political subdivision which consumed the fuel. The claim shall contain verification or certification that the liquid fuels for which reimbursement is claimed have been used only by the equipment of the political subdivision and that no part of such claim has been paid except as stated.

History

• Authority: The provisions of this Chapter 303 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 303 adopted September 18, 1970, effective September 19, 1970, 1 Pa.

61 Pa. Code § 303.14 Declaration.

The claim shall contain a declaration that it is true and correct to the best of the knowledge of the claimant and shall be signed by a responsible official of the political subdivision.

History

• Authority: The provisions of this Chapter 303 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 303 adopted September 18, 1970, effective September 19, 1970, 1 Pa.

61 Pa. Code § 303.21 Receipts.

Every claim shall be accompanied by receipts indicating that the liquid fuels tax was paid on the liquid fuels for which reimbursement is claimed.

History

• Authority: The provisions of this Chapter 303 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 303 adopted September 18, 1970, effective September 19, 1970, 1 Pa.

61 Pa. Code § 303.22 Satisfaction.

The claimant shall satisfy the Board that he has paid the tax and that the liquid fuels have been consumed by the political subdivision.

History

• Authority: The provisions of this Chapter 303 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 303 adopted September 18, 1970, effective September 19, 1970, 1 Pa.

61 Pa. Code § 303.23 Filing fee.

The Board will deduct the sum of $1.50 which shall be considered as a filing fee for every claim for reimbursement granted. The filing fees are specifically appropriated to the Board and to the Department for expenses incurred in the administration of the reimbursement provision of this chapter.

History

• Authority: The provisions of this Chapter 303 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 303 adopted September 18, 1970, effective September 19, 1970, 1 Pa.

61 Pa. Code § 303.24 Investigation.

The Board will refer to the Department for investigation a claim for reimbursement with which it is not satisfied, and it will be the duty of the Department to investigate the claim and report to the Board.

History

• Authority: The provisions of this Chapter 303 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 303 adopted September 18, 1970, effective September 19, 1970, 1 Pa.

61 Pa. Code § 303.25 Affidavit.

The Board will have the right, in order to further substantiate the credit claim, to request a sworn affidavit from the vendor stating that it has sold the specific number of gallons of motor fuel to the claimant and that the liquid fuels tax has been paid on the motor fuel.

History

• Authority: The provisions of this Chapter 303 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 303 adopted September 18, 1970, effective September 19, 1970, 1 Pa.

Chapter 305 Licensed Dealer-Users

61 Pa. Code § 305.1 Requirements.

A licensed dealer-user shall keep complete and accurate records of tax paid or tax free fuels received within this Commonwealth from any and all sources. Fuels include diesel fuel, fuel oil, kerosene, tractor fuels, jet fuels, liquefied gases, but not gasoline. Records shall be kept of the following operations and retained for at least 2 years; failure on the part of a dealer-user to comply with the act and this subpart shall result in suspension or revocation of dealer-user licenses:

(1) A physical inventory shall be taken of fuels on hand at the start of business on the first day of each month. A record shall be kept of tank measurements and the gallons, as per calibration charts which are required to be in dealer-user possession for each storage facility.

(2) A record of fuels received shall be kept showing the gallons received, date, name of supplier and address. Purchase invoices and the like shall be available to cover all receipts.

(3) A record shall be kept of all taxable or nontaxable fuels sold or used. Serially numbered sales tickets of unlimited sequence bearing dealer-user printed name and address shall be made out for each withdrawal showing date, customer name and address, gallons used, sold or delivered. Tickets shall be prepared, at least in duplicate, one copy given to the customer and the other copy retained in files in numerical order. Tickets shall be accounted for and the fuel use tax shall be shown separately on all that cover taxable sales or use of fuels. Tickets covering disbursements of fuels not subject to the fuel use tax shall bear an explanation of the use. Tax will be collected on fuels delivered to customers, including other licensed dealer-users, by the dealer-user delivering or placing the fuel into fuel supply tanks of motor vehicles. In no event shall it be permissible to collect the fuel use tax on fuels delivered to customers in any other manner.

(4) A daily record shall be kept of meter readings of pumps dispensing fuels. Fuels metered, as well as any nonmetered gallons, shall be properly accounted for and supported by serially numbered sales tickets.

(5) A stock control shall be prepared for each calendar month showing opening physical inventory, receipts, closing physical inventory, consumption, disbursements and stock losses or gains.

(6) An adequate record of cash received and paid out shall be kept for the normal conduct of the business covered.

The provisions of these § § 305.11—305.15 adopted November 3, 1978, 8 Pa.B. 3036, unless otherwise noted.

History

• Authority: The provisions of this Chapter 305 issued under the Fuel Use Tax Act (72 P.
• Source: The provisions of this Chapter 305 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 305.11 General.

Each change effected in corporate structure by corporate merger, creation of a new corporation or discontinuation of corporation activities, must be reported to the Department. This section provides for the method of reporting according to the type of activity undertaken by a corporation or corporations.

This section cited in 61 Pa. Code § 305.12 (relating to definitions).

History

• Authority: The provisions of this Chapter 305 issued under the Fuel Use Tax Act (72 P.
• Source: The provisions of this Chapter 305 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 305.12 Definitions.

The definitions set forth in proposed Regulation 9 at 8 Pa.B. 3051 (November 4, 1978) applies to § § 305.11—305.15 (relating to merger, creation or discontinuance of activities).

History

• Authority: The provisions of this Chapter 305 issued under the Fuel Use Tax Act (72 P.
• Source: The provisions of this Chapter 305 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 305.13 Merger.

(a) When two or more corporations licensed for fuel use tax purposes are merged into a single corporation, the surviving corporation or new corporate entity shall report to the Department concerning the status of the merged corporation or corporations with respect to fuel use tax which may be due the Commonwealth from locations at which the merged corporation or corporations maintained corporate operations.

(b) The corporation which is merged shall report the merger to the Department in writing within 5 days of the date of merger. The notice shall contain the name and address of the purchaser or transferee.

(c) It shall be the duty of a purchaser of a corporation or of the resulting new corporate entity to surrender to the Department a fuel use tax license which had been issued to the corporation and to pay taxes, interest, penalties, fees and fines which are due from the corporation as of the date of merger, within 10 days of the date of the transaction.

(d) For the purpose of determining the amount of fuel use tax payable by the surviving corporation or new corporate entity, it shall apply for a fuel use tax license and it shall report on or before the next to the last business day of each month, upon forms prescribed by the Department and under oath or affirmation, the amount of fuel used at each of the corporation’s business locations during the preceding month.

(e) The surviving corporation or new corporate entity shall include with each report payment of the tax due on fuel used during the preceding month. Fuel not accounted for will be deemed to have been used for a taxable purpose.

(f) If the report is filed and the tax paid on time, a discount of 2.0% of the gross amount of tax shall be allowed to the corporation filing the report and remitting the tax.

This section cited in 61 Pa. Code § 305.12 (relating to definitions).

History

• Authority: The provisions of this Chapter 305 issued under the Fuel Use Tax Act (72 P.
• Source: The provisions of this Chapter 305 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 305.14 Creation.

If a new corporation is created which is subject to the provisions of the Fuel Use Tax Act (72 P. S. § § 2614.1—2614.24), it shall apply for a license on forms prescribed by the Department and report and remit tax upon fuel used at each of the corporation’s business locations on or before the next to the last business day of each month. The report shall be upon forms prescribed by the Department and made under oath or affirmation. If the report is filed and the tax paid on time, a discount of 2% of the gross amount of tax shall be allowed to the corporation filing the report and remitting the tax.

This section cited in 61 Pa. Code § 305.12 (relating to definitions).

History

• Authority: The provisions of this Chapter 305 issued under the Fuel Use Tax Act (72 P.
• Source: The provisions of this Chapter 305 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 305.15 Dissolution.

If a corporation licensed for fuel use tax purposes is dissolved without its merger with another corporation, it shall notify the Department in writing within 5 days after the discontinuation of its corporate activities. The notice shall contain the date of discontinuation. Within 10 days after the discontinuance the licensee shall surrender to the Department any fuel use tax license under which it had operated and pay taxes, interest, penalties and fines, which are due by it.

This section cited in 61 Pa. Code § 305.12 (relating to definitions).

History

• Authority: The provisions of this Chapter 305 issued under the Fuel Use Tax Act (72 P.
• Source: The provisions of this Chapter 305 adopted September 1, 1958, unless otherwise noted.

Chapter 307 Proof of Authority

61 Pa. Code § 307.1 Renewal requirements.

Liquid fuels permits, certificates of authority, powers of attorney and liquid fuels tax bonds shall be renewed annually, and applications for liquid fuels permits shall incorporate or be accompanied by up-to-date and sworn or certified financial statements showing resources and liabilities of the applicant.

History

• Authority: The provisions of this Chapter 307 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 307 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 307.2 Signing.

The Department requires that the application of a corporation for liquid fuels permit be signed by the president or vice president and the secretary or assistant secretary or treasurer or assistant treasurer of the corporation. If signed by any other officer of the corporation, a certificate of the secretary shall accompany the application showing the authority of the officer to bind the corporation by the officer’s act. The signature and title of the officer should be placed on the two lines immediately beneath the line provided for the signature of the corporation on the application.

History

• Authority: The provisions of this Chapter 307 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 307 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 307.3 Additional names.

The Department requires that every corporate applicant for a liquid fuels permit give under line six of the application the name of the executive officer charged with the duty of filing liquid fuels tax reports, either in accordance with the minutes adopted by a board of directors meeting, or as set forth in the bylaws of the corporation.

History

• Authority: The provisions of this Chapter 307 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 307 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 307.4 Authorization of persons to file.

If a corporation wishes to authorize an employe or agent to file liquid fuels tax reports, the name of the employe or agent shall be shown under line six of the application, and evidence of authority in the form of a certified copy of the minutes of the board of directors, by which authority to sign and file reports was granted, shall accompany the application for liquid fuels permit, but this may not be construed in any way to relieve the officers of the corporation of the responsibilities imposed by the act.

History

• Authority: The provisions of this Chapter 307 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 307 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 307.5 Partnership or association.

In the case of a partnership or association, the application for liquid fuels permit and liquid fuels tax reports may be filed by any one of the partners or members.

History

• Authority: The provisions of this Chapter 307 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 307 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 307.6 Power of attorney.

In the event an individual, a partnership or an association desires to authorize an employe or agent to sign and file liquid fuels tax reports, a sworn power of attorney designating and identifying the employe or agent and his signature shall be filed with the Department. The powers of attorney shall be drawn to expire with the filing of the liquid fuels tax report of the final month in each permit year. Powers of attorney shall be renewed annually and ordinarily forwarded with application for liquid fuels permits, unless the power of attorney is not to become effective until after the first month of the permit year, in which case it shall be submitted to the Department not later than the time of submission of the first report signed by the attorney.

History

• Authority: The provisions of this Chapter 307 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 307 adopted September 1, 1958, unless otherwise noted.

61 Pa. Code § 307.7 Revocation.

Powers of attorney may be revoked during a permit year by giving the Department due notice. Distributors are held responsible for the acts of employes, agents and attorneys.

History

• Authority: The provisions of this Chapter 307 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 307 adopted September 1, 1958, unless otherwise noted.

Chapter 309 Interstate Shipment

61 Pa. Code § 309.1 Sale or delivery.

(a) Shipments of liquid fuels by Commonwealth registered distributors making tank truck shipments from points within this Commonwealth to points outside of this Commonwealth and shipments of liquid fuels from points outside of this Commonwealth to points within this Commonwealth for the distributor’s own use, sale or delivery or both, shall be accompanied by sales delivery tickets, transfer tickets, route cards or bills of lading which shall contain the invoice number, point of shipment, point of delivery, total gallonage and date of transaction.

(b) A registered distributor making shipment of tax-free liquid fuels by use of leased equipment or through the use of a contract carrier or common carrier must maintain in his files the lease agreement or contract for hire under which the fuel was shipped. The documents evidencing the lease agreement or contract for hire must be made readily available for inspection upon request by the Department so that the destination to which the fuel was shipped may be verified.

(c) The following definitions apply to this section: Association—A partnership, limited partnership or another form of unincorporated enterprise owned by two or more persons. Carrier—A person who transports and delivers products capable of being used as fuel in the fuel supply tanks or other fueling receptacles or devices of an aircraft or aircraft engine or of a motor vehicle, or who uses fuels with the meaning of the word ‘‘use’’ as defined in this subsection. Corporation—A corporation or joint stock association organized under the statutes of the Commonwealth, the United States or another state, territory, or foreign country, or dependency. Dealer-user—A person who delivers or places fuels into the fuel supply tanks or other fueling receptacles or devices of an aircraft or aircraft engine or of a motor vehicle, or who uses fuels within the meaning of the word ‘‘use’’ as defined in this subsection. Department—The Department of Revenue of the Commonwealth. Fuels—Combustible gases and liquids used for the generation of power in aircraft or aircraft engines or used in an internal combustion engine for the generation of power to propel vehicles of any kind or character on the public highways, except those fuels which are ‘‘liquid fuels’’ as defined in this subsection. Liquid fuels—Products derived from petroleum, natural gas, coal, coal tar, vegetable ferments, and other oils, including, among others, gasoline, naphtha, benzol, benzine or alcohols, either alone or when blended or compounded, which are practically and commercially suitable for use in internal combustion engines for the generation of power, or which are prepared, advertised, offered for sale, or sold for use for that purpose; provided, that kerosene, fuel oil, gas oil, Diesel fuel, tractor fuel by whatever trade name or technical name known having an initial boiling point of not less than 200°F. and of which not more than 95% has been recovered at 464°F. (ASTM method # D-86), liquefied gases which would not exist as liquids at a temperature of 60°F. and a pressure of 14.7 pounds per square inch absolute, and naphthas and benzols and solvents sold for use for industrial purposes, are not included within this definition. Motor vehicle—Vehicles, engines, machines or mechanical contrivance which are propelled by an internal combustion engine or motor. Persons—A natural person, association or corporation. When used in clauses prescribing and imposing a fine or imprisonment, or both, the term as applied to association shall mean the partners or members thereof, and as applied to corporations, the officers thereof. Use—

(i) The importation into this Commonwealth of fuels in the supply tanks or other fueling receptacles or devices of a motor vehicle in excess of 50 gallons.

(ii) The delivery or placing of fuels into the fuel supply tanks or other fueling receptacles or devices of an aircraft or aircraft engine or of a motor vehicle in this Commonwealth for use in whole or part for the generation of power in an aircraft or aircraft engine or motor vehicle or in whole or in part for the generation of power to propel such motor vehicle on the public highways of this Commonwealth. The delivery of fuels into supply tanks or other fueling receptacles or devices shall constitute a conclusive presumption that the fuel so delivered is to be used in propelling such motor vehicles on the public highways of this Commonwealth or for the generation of power in aircraft or aircraft engines.

The provisions of this § 309.1 amended November 3, 1978, 8 Pa.B. 3035. Immediately preceding text appears at serial page (40531).

History

• Authority: The provisions of this Chapter 309 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 309 adopted September 1, 1958, unless otherwise noted.

Chapter 313 Motor Carriers Road Regulations

61 Pa. Code § 313.1 Notice.

Every motor carrier required to file reports under section 8 of the Motor Carriers Road Tax Act (72 P. S. § 2617.8) shall give notice of being subject to the act to the Department on forms furnished by the Department. A motor carrier who has filed reports under section 8 of the act (72 P. S. § 2617.8) or who has made application for a vehicle marker under section 11 of the act (72 P. S. § 2617.11) is deemed to have complied with this section.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.2 Quarterly reports.

Every motor carrier required to file quarterly reports of its operations under section 8 of the Motor Carriers Road Tax Act (72 P. S. § 2617.8) shall timely file the reports on forms furnished by the Department.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.3 Exemption.

A motor carrier whose motor carrier vehicles are licensed in this Commonwealth and perform 90% or more of their travel on highways of this Commonwealth and who purchases a sufficient amount of fuel within this Commonwealth upon which the liquid fuel tax is paid commensurate with the operations of the motor carrier on the highways may be exempted from filing quarterly reports as required by section 8 of the Motor Carriers Road Tax Act (72 P. S. § 2617.8). To qualify for the exemption, the motor carrier shall, on or before April 1 of each year, file with the Department, on forms supplied by the Department, an application stating the facts. A motor carrier exempt from filing quarterly reports under this section shall immediately notify the Department of a change in the nature of its purchases of fuel, travel on the highways in this Commonwealth or its operations affecting this exemption.

The provisions of this § 313.3 issued under The Fiscal Code, § 6 (72 P. S. § 6).

The provisions of this § 313.3 amended May 22, 1981, effective May 23, 1981, 11 Pa.B. 1809. Immediately preceding text appears at serial pages (54495) and (54496).

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.4 Fee.

A motor carrier required to display the identification marker and carry a registration card on its vehicles shall annually register every motor vehicle with the Department on registration forms provided by the Department and pay a fee of $2 for every vehicle registered. Identification markers and registration cards shall become valid on April 1 of each year and shall be valid through the next succeeding March 31, except that a registration card and identification marker issued prior to April 15, 1965, shall be valid through March 31, 1966.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.5 Identification marker.

A motor carrier required to display the identification marker shall permanently affix the identification marker on the top 1/2 of the outside door panel on the driver, left hand, side and shall follow the directions as indicated on the reverse side of the identification marker.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.7 Nontransferability.

Identification markers shall be issued for a specific motor carrier vehicle and are not transferable to any other motor carrier vehicle.

The provisions of this § 313.7 issued under The Fiscal Code, § 6 (72 P. S. § 6).

The provisions of this § 313.7 amended May 22, 1981, effective May 23, 1981, 11 Pa.B. 1809. Immediately preceding text appears at serial page (54496).

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.8 Loss or illegibility.

If an identification marker has become lost or illegible through accident or usage, the registration card shall be returned to the Department for cancellation and the motor vehicle to which the identification marker was originally issued shall be reregistered with the Department and a registration fee of $2 shall be paid.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.9 Cancellation for disposition of vehicle.

If a motor carrier vehicle for which an identification marker has been issued is sold, traded or otherwise disposed of by the motor carrier or passes from the possession, custody or control of the motor carrier through lease, license or otherwise, the motor carrier shall notify the Department of the transaction and the identification marker will be cancelled. If the motor carrier neglects or fails to report the sale, transfer or disposition, it shall be held responsible for the reporting requirements and the tax due for the vehicle.

The provisions of this § 313.9 issued under The Fiscal Code, § 6 (72 P. S. § 6).

The provisions of this § 313.9 amended May 22, 1981, effective May 23, 1981, 11 Pa.B. 1809. Immediately preceding text appears at serial page (36162).

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.10 Hardship.

(a) If the registration of a motor carrier vehicle by a motor carrier and the issuing of an identification marker for the vehicle shall cause undue hardship because the process fails to meet the carrier’s time requirements, the Department may issue a temporary 5-day permit.

(b) A request by a motor carrier for a temporary 5-day permit shall contain the following information:

(1) The name and address of the motor carrier.

(2) The make and serial number of the motor carrier vehicle for which the 5-day permit is to be issued.

(3) The license number and state where the motor carrier vehicle has been licensed.

(c) The motor carrier shall pay a fee of $5 prior to the issuance of the 5-day temporary permit.

(d) Temporary 5-day permits may be denied a motor carrier that has failed to file quarterly reports and pay taxes, fines and penalties due.

The provisions of this § 313.10 issued under section 6 of The Fiscal Code (72 P. S. § 6).

The provisions of this § 313.10 amended May 22, 1981, effective May 23, 1981, 11 Pa.B. 1809. Immediately preceding text appears at serial page (36162).

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.12 Records of miles.

Every motor carrier subject to the Motor Carriers Road Tax Act (72 P. S. § § 2617.1—2617.26) and 75 Pa.C.S. Chapter 21 shall keep satisfactory records of the miles traveled in all of its motor vehicle operations, both within and without this Commonwealth.

The provisions of this § 313.12 issued under section 6 of The Fiscal Code (72 P. S. § 6).

The provisions of this § 313.12 amended May 22, 1981, effective May 23, 1981, 11 Pa.B. 1809. Immediately preceding text appears at serial page (36163).

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.13 Records of fuel.

Every motor carrier subject to the Motor Carriers Road Tax Act (72 P. S. § § 2617.1—2617.26) and 75 Pa.C.S. Chapter 21 shall keep satisfactory records of all motor vehicle fuel used in propelling motor vehicles, both within and without this Commonwealth.

The provisions of this § 313.13 issued under section 6 of The Fiscal Code (72 P. S. § 6).

The provisions of this § 313.13 amended May 22, 1981, effective May 23, 1981, 11 Pa.B. 1809. Immediately preceding text appears at serial page (36163).

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.14 Substantiating evidence.

Every motor carrier shall be prepared to present evidence to substantiate the credit claimed for payment of the liquid fuels tax on motor fuels purchased within this Commonwealth. Such evidence shall consist of invoices of the vendor of the motor fuel which shall show the name and address of the motor carrier, the point of delivery, the date of each sale, the number of gallons of each sale, the total monetary value of each sale, and the license number or unit number of the motor vehicle being fueled. Sales made out to cash are not acceptable. The Department will have the right in order to further substantiate the credit claimed, to require a sworn affidavit from the vendor stating that it has sold the specified number of gallons of motor fuel to the motor carrier and that the liquid fuels tax has been paid on such motor fuel.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.15 Excess credit.

The excess credit provided in section 4(a) of the Motor Carriers Road Tax Act (72 P. S. § 2617.4(a)) during any given quarter shall be applicable to the next succeeding six quarterly periods, and during the next succeeding six quarterly periods, the motor carrier may apply it against any tax liability accrued. If the excess credit is not used within the prescribed period, the credit shall expire at the end of the sixth quarterly period and may not be applied against any subsequent period.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.16 Operating divisions.

If more than one operating division of a motor carrier shall operate motor vehicles in this Commonwealth, a single report shall be filed by the motor carrier covering all of his operations, unless special permission is obtained from the Department to report the operations of each division separately.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.17 Quarterly reports.

A motor carrier requesting refunds or credit under the Motor Carriers Road Tax Act (72 P. S. § § 2617.1—2617.26) shall file quarterly reports.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.18 Refund claimant.

(a) A refund claimant, as provided for in section 4(a) of the Motor Carriers Road Tax Act (72 P. S. § 2617.4(a)), shall submit his claim for refund to the Board of Finance and Revenue on forms provided by the Department. A verified copy of the report or the tax return filed with the taxing authority of the other state to which a similar lawful tax was paid shall be filed with the claim. A refund claimant shall prove that the fuel on which the tax was paid to the other state was the same fuel on which the liquid fuels tax had previously been paid.

(b) The amount of refund to which a motor carrier shall be entitled shall be determined as follows:

(1) A refund will not be payable unless the number of gallons of motor vehicle fuel purchased in this Commonwealth, upon which the liquid fuels tax has been paid, exceeds the number of gallons of motor vehicle fuel used in this Commonwealth during the quarter covered by the refund claim.

(2) If purchases of motor fuel in this Commonwealth exceed the use in this Commonwealth by an amount greater than the number of gallons on which a deficiency tax has been paid to other state, the motor carrier shall be entitled to a refund equal to the then current rate of the liquid fuel tax of the other state multiplied by the number of gallons by which the deficiency tax was paid to the other state, but in no case to exceed the then current rate per gallon of the liquid fuels tax.

(3) If purchases of motor fuel in this Commonwealth exceed the use in this Commonwealth by an amount less than the number of gallons on which a deficiency tax has been paid to other state, the motor carrier shall be entitled to a refund equal to the then current rate of the liquid fuel tax of the other state multiplied by the number of gallons by which those purchases in this Commonwealth exceed its use in this Commonwealth, but in no case exceed the then current rate per gallon of the liquid fuels tax.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.19 Microfilming of records.

In accord with Internal Revenue Ruling 75-265, IRB 975-27, 34 and under section 1 of the Uniform Photographic Copies of Business and Public Records as Evidence Act (28 P. S. § 141) (Repealed), general books of account, including cash books, journals, voucher registers, ledgers, records of liquid fuels used or sold and delivered within the Commonwealth, delivery tickets, invoices, bills of lading, financial statements and other pertinent records as may be required by the Bureau of Liquid Fuels may be kept on microfilm, provided the microfilming thereof accurately reproduces lines and markings which appear on the original documents.

The provisions of this § 313.19 adopted February 13, 1976, effective February 14, 1976, 6 Pa.B. 327.

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

61 Pa. Code § 313.20 Exempt vehicles.

Vehicles operated by the following motor carriers shall be exempt from the requirement to display the identification marker on motor carrier vehicles operating within this Commonwealth:

(1) Charitable organizations registered with the Department of State.

(2) Religious organizations.

(3) Political subdivisions, authorities and agencies and governmental units.

(4) Emergency vehicles including those of volunteer fire companies, volunteer ambulance or volunteer rescue squads and tow-trucks and wreckers.

(5) Nonpublic schools not including colleges and universities.

(6) Vehicles in transit from manufacturer to distributor, distributor to dealer or dealer to customer.

(7) One-way rental vehicles registered in the name of a motor carrier which has entered into a presently effective Identification Marker Compliance Agreement with the Department. ‘‘One-way rental vehicle’’ means a motor carrier vehicle having a gross weight or registered gross weight of 17,001 pounds to 18,000 pounds; primarily leased to and operated by the general public for short-term transportation of property; and clearly identified as a one-way vehicle of the motor carrier. The vehicle may be leased on a round trip or one way basis.

The provisions of this § 313.20 issued under section 6 of The Fiscal Code (72 P. S. § 6); and 75 Pa.C.S. § 2102(d)(1).

The provisions of this § 313.20 adopted September 12, 1980, effective September 13, 1980, 10 Pa.B. 3668; amended through July 22, 1983, effective July 23, 1983, 13 Pa.B. 2255. Immediately preceding text appears at serial page (61155).

History

• Authority: The provisions of this Chapter 313 issued under the Motor Carriers Road Tax Act (72 P.
• Source: The provisions of this Chapter 313 adopted October 1, 1964, unless otherwise noted.

Chapter 315 Exempt Sales

61 Pa. Code § 315.1 Scope and purpose.

Among those eligible for exemption from the payment of the Liquid Fuels Tax are fuels delivered to the Commonwealth and every political subdivision thereof, and fuel delivered to any nonpublic schools not operated for profit. The provisions of this chapter are intended to define those categories and to explain the requisites for exemption.

History

• Authority: The provisions of this Chapter 315 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 315 adopted May 12, 1958; amended through October 22, 1976, effective October 23, 1976, 6 Pa.

61 Pa. Code § 315.2 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Political subdivision—A county, city, borough, incorporated town, township, school district, vocational school district and county institution district. For exemption purposes, the following are included under the definition of political subdivision:

(i) Authorities formed under enabling legislation such as the Municipal Authority Act of 1945 (53 P. S. § § 301—322).

(ii) Instrumentalities or agencies of the Commonwealth unless otherwise provided. Examples are Delaware River Joint Toll Bridge Commission, Delaware Valley Regional Planning Commission, Delaware River Basin Commission, Delaware River Port Authority, Pennsylvania Turnpike Commission, Susquehanna River Basin Commission, Clarion State College and Pennsylvania State University. Nonpublic schools not operated for profit—A school other than a public school within the Commonwealth, wherein a resident of the Commonwealth may legally fulfill the compulsory school attendance requirements of Commonwealth law, and in the operation of which there is no contribution of pecuniary gain or profit, no dividends or distribution of income to its owners, officers or directors, and no incidental profits are distributed to its owner. The definition of school does not include institutions of higher learning.

History

• Authority: The provisions of this Chapter 315 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 315 adopted May 12, 1958; amended through October 22, 1976, effective October 23, 1976, 6 Pa.

61 Pa. Code § 315.3 Requirements.

(a) In order for a political subdivision to purchase liquid fuels in bulk, tax exempt, the fuel shall be purchased from a registered Commonwealth distributor and the fuel shall be placed in bulk storage facilities owned or leased by the political subdivision.

(b) When a school district leases or owns vehicles, whether or not the vehicles are operated by school district employes, the school district may purchase liquid fuels tax exempt from a Commonwealth registered distributor, provided the fuel is placed in bulk storage facilities, leased or owned by the school district.

(c) If liquid fuels are dispensed to a political subdivision from the bulk storage facilities of a registered distributor through a private key controlled metering system the liquid fuels may be tax exempt.

The provisions of this § 315.3 amended January 26, 1979, effective January 26, 1979, 9 Pa.B. 345. Immediately preceding text appears at serial page (36167).

History

• Authority: The provisions of this Chapter 315 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 315 adopted May 12, 1958; amended through October 22, 1976, effective October 23, 1976, 6 Pa.

61 Pa. Code § 315.4 Distributor’s permits.

Liquid fuel permits, certificates of authority, powers of attorney and liquid fuel tax bond shall be renewed annually, and applications for liquid fuel permits shall incorporate or be accompanied by up-to-date and sworn or certified financial statements showing the resources and liabilities of the applicant.

History

• Authority: The provisions of this Chapter 315 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 315 adopted May 12, 1958; amended through October 22, 1976, effective October 23, 1976, 6 Pa.

61 Pa. Code § 315.5 Federal Reserve Banks.

Federal Reserve Banks shall be exempt from the imposition of the liquid fuels tax in this Commonwealth.

History

• Authority: The provisions of this Chapter 315 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 315 adopted May 12, 1958; amended through October 22, 1976, effective October 23, 1976, 6 Pa.

61 Pa. Code § 315.6 Volunteer services.

(a) In order for a volunteer fire company, volunteer ambulance service or volunteer rescue squad to purchase liquid fuel (gasoline) tax exempt, the fuel shall be purchased from a registered Commonwealth distributor, and the fuel shall be placed in bulk storage facilities on land either owned, or leased, with full control thereover, by the volunteer fire company, and the like. The purchaser shall furnish notarized proof to the registered distributor that it is either a volunteer fire company, a volunteer ambulance service or a volunteer rescue squad and that the fuel will be used solely for fire fighting purposes and only in official equipment owned by it.

(b) If a volunteer fire company, volunteer ambulance service or volunteer rescue squad purchases liquid fuel from a dealer or a nonregistered Commonwealth distributor and pays the full price therefor, including the tax, and if it uses the fuel solely for fire fighting purposes and only in official equipment owned by it, it may request a refund of the tax paid, by applying to the Board of Finance and Revenue, Room 130 Finance Building, Harrisburg, Pennsylvania 17120, on forms supplied by the said Board.

(1) Claims shall be made annually for the preceding year ending on the 30th day of June, and shall be submitted to the Board not later than the 30th day of September of each year. The Board will refuse to consider a claim received or postmarked later than that date.

(2) Each claim shall be accompanied by receipts indicating that the liquid fuels tax was paid on the fuel for which reimbursement is claimed.

(3) The claimant shall satisfy the Board that he has paid the tax and that the liquid fuels have been consumed by him for volunteer fire fighting, volunteer ambulance or volunteer rescue squad purposes.

(i) The Board may require a claimant to furnish information, proof or fuller explanation as it deems necessary.

(ii) The Board will have the power to refer to the Department of Revenue, for investigation, a claim for reimbursement, and it will be the duty of that Department to investigate the application and report its findings to the Board of Finance and Revenue.

(4) A person making a false or fraudulent statement for the purpose of obtaining reimbursement shall be guilty of a misdemeanor, and upon conviction, be sentenced to pay a fine of not more than $1,000 or to undergo imprisonment for not more than 6 months, or both.

(c) A volunteer fire company, volunteer ambulance service or volunteer rescue squad may purchase fuel (diesel) tax exempt from a dealer-user provided it furnishes notarized proof to the dealer-user that it is either a volunteer fire company, volunteer ambulance service or volunteer rescue squad, and that the fuel will be used solely for fire fighting purposes and only in official equipment owned by it.

History

• Authority: The provisions of this Chapter 315 issued under The Liquid Fuels Tax Act (72 P.
• Source: The provisions of this Chapter 315 adopted May 12, 1958; amended through October 22, 1976, effective October 23, 1976, 6 Pa.

Chapter 351 Oil Company Franchise Tax

61 Pa. Code § 351.1 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Act—75 Pa.C.S. § § 9501—9512 (relating to taxes for highway maintenance and construction). First sale—The sale to a wholesale or retail dealer, consumer or direct use in this Commonwealth of petroleum products occurring immediately after importation or production. Oil company—Every corporation, association, joint-stock association, partnership, limited partnership, co-partnership, natural individual or individuals, and a business conducted by a trustee or trustees wherein evidence of ownership is evidenced by certificate or written instrument, formed for or engaged in the sale or importation of petroleum products within this Commonwealth; or anyone deemed to be an oil company under 75 Pa.C.S. § § 9501 or 9502(f) (relating to definitions; and imposition of tax); or anyone who elects to be an oil company under 75 Pa.C.S. § 9502(i). Petroleum product—A product derived wholly or in part from crude oil and used for propelling a motor vehicle on the public highways. Examples of petroleum products are gasoline, gasohol, diesel fuel, LP gas and kerosene. Petroleum products do not include products for off-highway use. Petroleum revenue—Consideration derived from the first sale in this Commonwealth of petroleum products otherwise subject to the liquid fuels tax or the fuel use tax in this Commonwealth, whether in cash, credits or property of any kind, and without a deduction except for returned merchandise, Pennsylvania liquid fuels tax or fuel use tax or Federal excise tax. Consideration includes transportation or freight charges, whether included in the price of the product or stated separately. Report—Oil Company Franchise Tax Report (Form REV-1386), which may be obtained from Tax Information Service, Department of Revenue, Strawberry Square Tax Information Service, Harrisburg, Pennsylvania 17127.

The Department’s definition of ‘‘first sale’’ did not go beyond the authority delegated to it by the Legislature. Carlos R. Leffler, Inc. v. Commonwealth, 556 A.2d 18, 21 (Pa. Commw. 1989); affirmed 574 A.2d 600 (Pa. 1990).

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.2 Filing requirements.

(a) The following oil companies shall file a report each month:

(1) An oil company which produces petroleum products in this Commonwealth.

(2) An oil company which imports petroleum products into this Commonwealth.

(3) An oil company for which the Department has approved an election to report and pay the Oil Company Franchise Tax.

(4) An oil company which has been assigned an Oil Company Franchise Tax account number by the Department.

(b) Reports relating to fraudulent or mistaken claims of exemption shall comply with the following:

(1) A person not required to file a monthly report who fraudulently or mistakenly claims an exemption at the time of purchase and later resells or uses a petroleum product for a taxable use shall file a report relating solely to that resale or use.

(2) A person not required to file a monthly report who purchases a product for off-highway use and subsequently uses the product on the public highways or resells it for such use shall file a report relating to that resale or use.

(c) A person who willfully makes a false and fraudulent report shall be guilty of willful and corrupt perjury and, upon conviction, shall be subject to punishment as provided by law. The penalty shall be in addition to other penalties imposed by this chapter.

(d) A person who willfully fails, neglects or refuses to make a report or to pay the applicable tax shall be guilty of a misdemeanor of the third degree and, upon conviction, shall be sentenced to pay a fine not exceeding $2,500 or to undergo imprisonment not exceeding 1 year, or both. The penalty shall be in addition to other penalties imposed by this chapter.

This section cited in 61 Pa. Code § 351.5 (relating to exemptions).

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.3 Imposition of tax.

(a) Basis of tax. A tax of 3.5% of the petroleum revenue derived from the first sale of petroleum products made within this Commonwealth is imposed upon oil companies required to file a report.

(b) ‘‘First sale’’ defined. The first sale is the sale to a wholesale or retail dealer, or consumer, or direct use in this Commonwealth of petroleum products occurring immediately after importation or production.

(c) Deferred first sale. A first sale may be deferred when an oil company sells petroleum products to a purchasing oil company which agrees to pay the applicable Oil Company Franchise Tax on its subsequent sale or use. Refer to § 351.6 (relating to first sales to other oil companies which have an Oil Franchise Tax account number).

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.4 Valuation of sales for reporting petroleum revenue.

(a) Sales at arm’s length. An oil company may use its actual sales prices for valuing sales of petroleum products, or in lieu of using the actual sales price, the Department will accept the Average Wholesale Price as determined and publicized by the Department. However, an oil company may not use the actual price for one petroleum product and the Average Wholesale Price for another; nor may the oil company use an average of its own prices to report and pay the tax.

(b) Sales not at arm’s length: direct use. Sales not at arm’s length and first sales resulting from direct use are to be valued using the consideration which would have been received in an arm’s length transaction with an unrelated person (market price). The Average Wholesale Price as provided in subsection (a) may also be used.

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.5 Exemptions.

(a) General. First sales of petroleum products to purchasers listed in subsection (b) who are exempt from liquid fuels taxation or to purchasers for off-highway use do not generate petroleum revenue, provided that the sales are documented as set forth in subsection (d).

(b) Purchasers to whom exempt first sales may be made. The following are purchasers to whom exempt first sales may be made:

(1) United States Government.

(2) Commonwealth of Pennsylvania and its political subdivisions.

(3) Nonprofit elementary and secondary schools as defined in 61 Pa. Code § 315.2 (relating filing requirements).

(4) Volunteer rescue squads, volunteer fire companies and volunteer ambulance associations.

(5) Second Class County Port Authorities.

(c) Exempt use. First sales of petroleum products not actually used on the public highways to propel motor vehicles do not generate petroleum revenue. However, products for which the actual use is unknown are presumed to be taxable until it has been ascertained that the product will be used off-highway; see subsections (d)—(g) for exemption and adjustment procedures.

(d) Documentation. To substantiate an exempt first sale the selling oil company shall obtain a completed exemption certificate (Form REV-1385) or other documentation containing equivalent information. This form is available from Tax Information Service, Department of Revenue, Strawberry Square, Harrisburg, Pennsylvania 17127. The selling oil company shall also mark the invoice for that sale with the notation: ‘‘Exempt Sale—Not Subject to Oil Company Franchise Tax,’’ or similar language.

(e) Subsequent documentation of exemption. An oil company shall pay the applicable Oil Company Franchise Tax on petroleum products if it does not have an exemption certificate or other documentation containing equivalent information at the time of the sale. If an oil company later receives the certificate after the sale has been reported and the applicable tax has been paid, it may then adjust a subsequent month’s tax report (See Instructions, Form REV-1386) to reflect the additional documented exempt sale. This form is available from Tax Information Service, Department of Revenue, Strawberry Square, Harrisburg, Pennsylvania 17127.

(f) Liability for taxable sale or use of products previously claimed exempt. The seller is not responsible for the Oil Company Franchise Tax if a purchaser executes an exemption certificate or provides other documentation containing equivalent information at the time of the purchase even if the purchaser subsequently resells the petroleum product or uses it for a taxable purpose. In such a case, the purchaser is deemed to be an oil company and shall report and pay applicable tax with respect to that transaction, even though he has no Oil Company Franchise Tax Account Number.

(g) Fraudulent exemptions. A purchaser who intentionally provides an oil company with false or fraudulent documentation of exemption, thereby enabling that oil company to obtain a credit or exemption, or a purchaser who fraudulently receives a credit for taxes paid, will be liable to pay to the Department 200% of the credit obtained plus interest as provided in § 351.7 (relating to reporting and payment).

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.6 First sales to other oil companies which have an Oil Franchise Tax account number.

First sales of petroleum products to another oil company which has an Oil Franchise Tax account number and agrees to report and pay the applicable Oil Company Franchise Tax upon its subsequent sale or use of the products do not generate petroleum revenue provided all such sales are documented. Thus, the selling oil company is relieved of the obligation to pay the applicable tax on this sale. This documentation must include:

(1) Identification of the product.

(2) Name of the purchasing oil company and its Oil Company Franchise Tax account number. The Department will not recognize the sale unless the purchaser has a number.

(3) Evidence of the agreement to report and pay the tax. Use of exemption certificate is preferred.

This section cited in 61 Pa. Code § 351.3 (relating to imposition of tax).

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.7 Reporting and payment.

(a) Due date. The report shall be filed and the tax due shall be paid for each month on or before the next to the last business day of the following month on Form REV-1386. Additional copies of Form REV-1386 may be obtained from the Tax Information Service, Department of Revenue, Strawberry Square, Harrisburg, Pennsylvania 17127 upon request.

(b) Additional tax for late filing. An amount equal to 15% of the gross tax will be added as an additional tax for filing a report after the due date.

(c) Late payment; interest. A tax not paid on or before the due date is subject to interest at the rate provided by law from the date due until paid.

(d) Failure to file; false report. Negligently or willfully failing to file a report or knowingly filing a false report subjects the offender to additional tax in the amount of 15% of the tax determined by the Department to be due, plus interest as provided in subsection (c).

This section cited in 61 Pa. Code § 351.5 (relating to exemptions).

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.8 Change of name or address.

An oil company required to file a report shall immediately notify the Department in writing of a change of name or address.

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.9 Termination of business.

An oil company required to file a report shall notify the Department in writing within 10 days of the discontinuance of its business.

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.10 Cancellation of Oil Company Franchise Tax account.

An oil company assigned an Oil Company Franchise Tax account which believes that it is not required to file a report or wishes to terminate its election to be deemed an oil company, may apply to the Department in writing requesting a review of its account and cancellation of its number. No Oil Company Franchise Tax account will be cancelled without the approval of the Department. A person having an Oil Company Franchise Tax account number is required to file a monthly report, whether or not tax is due, until the time that the account number has been withdrawn.

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.11 Recordkeeping.

(a) Records required; retention period. A person liable to pay the tax shall retain exemption certificates, supporting documentation and other related records relating to transactions affecting the tax, including, inter alia, the following, for a period of 3 years after the report is filed:

(1) Petroleum products exported.

(2) Sales of petroleum products upon which the Oil Company Franchise Tax has previously been paid.

(3) Sales of bulk quantities of petroleum products known to be for heating purposes.

(4) Sales of petroleum products to other oil companies which have agreed to report and pay the applicable Oil Company Franchise Tax.

(5) Exempt first sales or use, including subsequently acquired documentation and adjustments.

(b) Penalties. Failure to retain required records is a misdemeanor of the third degree, conviction of which subjects the offender to a fine not exceeding $1,000 or imprisonment for not more than 6 months or both. Failure to permit the Department to examine books and records is a misdemeanor of the third degree, conviction of which may subject the offender to a fine not exceeding $2,500 or imprisonment for not more than 1 year or both.

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

61 Pa. Code § 351.14 Enforcement.

Revenue Enforcement Agents are designated Special Investigators with the powers set forth by 75 Pa.C.S. § 9506(e) (relating to administration and enforcement).

History

• Authority: The provisions of this Chapter 351 issued under 75 Pa.
• Source: The provisions of this Chapter 351 adopted May 27, 1983, effective May 28, 1983, 13 Pa.

Subpart D Senior Citizens Property Tax or Rent Rebate

Chapter 401 Assistance

61 Pa. Code § 401.1 Definitions.

The following words and terms, when used in this subpart, have the following meanings, unless the context clearly indicates otherwise: Claimant—The term claimant shall be defined in accordance with the following:

(i) A claimant means an individual who has filed a claim for a rebate under the Senior Citizens Property Tax or Rent Rebate Act and is one of the following:

(A) Sixty-five years of age or over as of December 31 of the calendar year for which a property tax rebate or a rent rebate in lieu of property taxes is claimed.

(B) Whose spouse, if a member of the household, was 65 years of age or over as of December 31 of the calendar year for which a property tax rebate or a rent rebate in lieu of property taxes is claimed.

(C) Was a widow, or widower after January 1, 1972 only, and was 50 years of age or over as of December 31 of the calendar year for which a property tax rebate or a rent rebate in lieu of property taxes is claimed; ‘‘widow’’ or ‘‘widower’’ shall mean the surviving wife, or the surviving husband, as the case may be, of a deceased individual and who has not remarried.

(D) Was a permanently disabled person during some part of the calendar year for which a property tax rebate or a rent rebate in lieu of property taxes is claimed. The term ‘‘permanently disabled person’’ shall mean a person who is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to continue indefinitely.

(ii) The phrase ‘‘as of December 31 of the calendar year for which a property tax rebate or a rent rebate in lieu of property taxes is claimed’’ means at any time during that calendar year.

(iii) A claimant shall always own and occupy or rent and occupy the homestead on which a claim for a property tax rebate or a rent rebate in lieu of property taxes is filed.

(iv) A claim for a property tax rebate or a rent rebate in lieu of property taxes may be filed by the personal representative of a decedent’s estate if, and only if, the decedent lived during some part of the year next succeeding the calendar year for which a rebate is claimed. A surviving spouse will be eligible for a property tax rebate for those months the surviving spouse and the deceased spouse occupied the homestead and such homestead was the separate property of the decedent. Homestead—The term homestead shall be defined in accordance with the following:

(i) A dwelling whether owned or rented and so much of the land surrounding it as is reasonably necessary for use of the dwelling as a home, occupied by the claimant.

(ii) Premises occupied by reason of stock ownership or lease in a cooperative housing corporation. A claimant who owns stock in a cooperative housing corporation or association is a renter and not an owner, as the claimant does not own title to real property. That part of the land attributable to a tenant in a cooperative housing corporation shall be determined by the proportion that the value of the tenant’s stock bears to the total outstanding stock of the corporation.

(iii) Mobile homes and other similar living accommodations whether owned or rented if assessed as realty for local property tax purposes and the land, whether owned or rented, upon which they are situated.

Example. Claimant H and his wife W own a mobile home on which they are required to pay $200 a year for real property taxes. The couple rent the land on which the mobile home is located from Y Corporation for $400 a year. Claimant H may file a claim for a property tax rebate up to $200 for the real property taxes paid on the mobile home. Claimant H is also eligible for a rent rebate in lieu of property taxes up to $80 (20% times $400). However, the maximum amount of rebate payable to any one household for one year is $200.

(iv) The residential part of a multipurpose building together with that part of the land attributable to the premises occupied by the claimant, whether owned or rented.

(v) That part of a multidwelling building which constitutes the claimant’s residence together with that part of the land attributable to the premises occupied by the claimant, whether owned or rented.

(vi) Premises occupied by reason of the claimant’s ownership or rental of a dwelling located on land owned by a nonprofit incorporated association, of which the claimant is a member, if the claimant is required to pay a pro rata share of the property taxes levied against the association’s land.

(vii) Premises occupied by a claimant if he is required by law to pay a property tax by reason of his ownership or rental, including a possessory interest, in the dwelling, the land, or both.

(viii) For 1971 and 1972, land which is reasonably necessary for use of the dwelling as a home must not exceed 2 acres. Household income—The term household income shall be defined in accordance with the following:

(i) As applied only to those claims filed for 1971 and 1972 property tax rebates or rent rebates in lieu of property taxes, houshold income means all income, as described in § § 401.11 and 401.12 (relating to income limitations; and losses) and the definition of income as set forth in this section, received by the claimant and all other persons while residing in the homestead during a calendar year in which real property taxes or rent are due and payable, but shall not include the income of residents who are not related to the claimant and who pay reasonable, fixed rents. The income of a member of the household shall be included in household income even if the claimant did not receive any benefit from the income.

Example 1. Members of the household are claimant H and his wife W. Claimant H received a pension of $1,200 during the calendar year. W received $800 in Social Security benefits during the calendar year. Household income is $2,000.

Example 2. Members of the household during the entire year are claimant H and his wife W. Claimant’s son S was a member of the household during the first 2 months of the year. R, not related to claimant, rents a room in claimant’s home. Claimant H had an income of $3,500, including R’s rental payments. W had no income for the calendar year. S had income of $700 while he was a member of the household. R had income of $9,000. The household income is $4,200 ($3,500 + $700).

(ii) Effective beginning with those claims filed for 1973 property tax rebates or rent rebates in lieu of property taxes and all claims filed thereafter, household income means the total annual income, as described in § § 401.11 and 401.12 and the definition of ‘‘income’’ as set forth in this section, received by the claimant and all income received by the claimant’s spouse while he resided in the homestead during a calendar year in which real property taxes or rent are due and payable. Household income does not include the income of claimant’s children or others.

Example 1. Members of the household are claimant H, his wife W and their son S. Claimant H received a pension of $1,200 during the calendar year. W received $800 in Social Security benefits during the calendar year. S received an income of $6,000 during the calendar year. The total household income for the calendar year is $2,000 ($1,200 + $800 = $2,000).

Example 2. Husband H resides in the homestead, wife W was confined to a nursing home for the last 8 months of the calendar year for which rebates are being claimed. Both H and W are qualified claimants and may file for rebates. H as a property owner and W as a renter for 8 months. H need not include the income of W received while she was in the nursing home, but must include all W’s income received during the 4 months she resided in the homestead.

Example 3. Claimant A and her sister B both are over 65 years of age and reside together in their homestead. Either A or B, but not both, may file for a rebate and need only include her income as the total household income for 1973. Income—Income from whatever source derived, including but not limited to the following:

(i) Salaries.

(ii) Wages.

(iii) Bonuses.

(iv) Commissions.

(v) Income from self-employment or partnership income.

(vi) Alimony.

(vii) Support money.

(viii) Cash public assistance and relief.

(ix) The gross amount of pensions or annuities including railroad retirement benefits.

(x) The gross amount of cash benefits received under the Federal Social Security Act, except Medicare benefits.

(xi) Benefits received under State unemployment insurance statutes.

(xii) Veteran’s disability payments.

(xiii) Interest, including interest received from the Federal government, State government, or an instrumentality or political subdivision thereof.

(xiv) Realized capital gains except as provided in § 401.11.

(xv) Rental income.

(xvi) Workmen’s compensation and the gross amount of loss of time insurance benefits, except those benefits granted under section 306(c) of The Pennsylvania Workmen’s Compensation Act (77 P. S. § 513).

(xvii) Life insurance benefits and proceeds, except as provided in § 401.11.

(xviii) Gifts or bequests of cash or property, other than transfers by gift between members of a household, in excess of a total value of $300.

(xix) Money or the fair market value of a prize such as an automobile or a trip won in a lottery, a contest or by a form of gambling.

(xx) Royalties.

(xxi) Dividends. Real property taxes—The term real property taxes shall be defined in accordance with the following:

(i) All taxes on a homestead which are due and payable during the calendar year for which a property tax rebate is claimed. Real property taxes are considered to be ‘‘due and payable’’ at the earliest moment, as indicated on the tax bill, that the real property taxes may be paid to the taxing jurisdiction. Taxpayers may receive credit for all those real property taxes which are due and payable during a calendar year as long as such taxes are actually paid before the claim for a property tax rebate is filed. However, a rebate may not be granted on an amount of real property taxes greater than the amount of real property taxes actually paid.

Example 1. Claimant C receives his borough property tax bill on July 1, 1971, and his school district property tax bill on September 1, 1971. Both property tax bills may be paid immediately but must be paid before the end of calendar year 1971 in order to avoid any interest or penalty charges. Claimant C may receive credit for both these property tax bills, exclusive of all interest or penalty charges, as long as such bills were actually paid prior to the filing of his property tax rebate claim in 1972.

Example 2. Claimant A receives both his borough and school district property tax bills during calendar year 1971. Both bills may be paid with a 2% discount by September 1, 1971. However, the taxpayer may pay without discount in four equal installments, the last of which is not due until March 30, 1972. As these property taxes were due and payable during 1971, if the claimant is to receive the 2% discount, claimant A may receive credit for these property taxes as long as such taxes were paid prior to the time when he filed his claim for a property tax rebate in 1972, even if such bills were not paid until March 30, 1972. However, any interest or penalty charges shall be deducted.

(ii) The term real property tax does not include any of the following items:

(A) Municipal assessments.

(B) Interest.

(C) Delinquent charges or penalties.

(D) Per capita charges of any kind.

(iii) If the items set forth in subparagraph (ii) of this definition are so included, the property tax bills shall be adjusted by eliminating these items.

(iv) The amount of a discount which may be lost through failure to pay real property taxes early is not considered to be interest, a delinquent charge, or a penalty; therefore, a taxpayer may receive full credit for real property taxes which have been paid on time even though he did not pay his taxes early enough to receive a discount. Rent rebate in lieu of property taxes and rent paid—The term rent rebate in lieu of property taxes and rent paid shall be defined in accordance with the following:

(i) An amount equal to 20% of the gross amount actually paid to a landlord in cash or its equivalent in any calendar year in connection with the occupancy of a homestead by a claimant, irrespective of whether such amount constitutes payment solely for the right of occupancy or otherwise.

(ii) The term rent paid is that amount paid by or on behalf of a tenant to a landlord in connection with the right of occupancy of a homestead. Only those charges which are reasonably necessary for use of the dwelling as a home may be included as rent paid. Thus, any charges for medical services rendered or food provided by the landlord may not be included. Utility charges may be included as rent paid if they are included in the amount paid to a landlord in connection with the right of occupancy.

Example. For one year, claimant A rented of a duplex owned by landlord L. As rent, A paid $100 per month to L which included payment for A’s water and electricity. In addition, A paid $10 per month for a telephone to the Bell Telephone Company. A also paid to L of each month’s gas bill. Claimant A may only claim a rent rebate in lieu of property taxes on $1200 (12 x $100). As both the telephone and the gas charges were paid separately from the rent, they may not be included as rent paid.

The provisions of this § 401.1 amended July 19, 1985, effective July 20, 1985, and will apply retrospectively to January 1, 1985, 15 Pa.B. 2653. Immediately preceeding text appears at serial pages (36171) to (36176).

This section cited in 61 Pa. Code § 401.71 (relating to table of rebate).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.11 Income limitations.

Income does not include the following:

(1) Surplus food or other noncash relief, including food stamps, supplied by a government agency.

(2) Property tax rebate payments, rent rebate payments, and inflation dividends received under the Senior Citizens Rebate and Assistance Act (72 P. S. § § 4751-1—4751-12).

(3) Medicare benefits.

(4) The first $5,000 of the total of death benefit payments.

(5) The difference between the purchase price of a person’s residence and its selling price, to the extent that the person uses the proceeds from the sale of that residence to purchase a different residence within 2 years of the sale of the former residence.

(6) The amount of damages received, whether by civil suit or settlement agreement, on account of personal injuries. Damages received means an amount received through prosecution of a legal suit, action or other claim based on tort or tort type rights, or through a settlement agreement entered into in lieu of litigation, except to the extent that the amount duplicates reimbursements previously received. Damages include black lung benefits and benefits granted under section 306(c) of The Pennsylvania Workmen’s Compensation Act (77 P. S. § 513).

(7) Payments provided to eligible low income households under the Commonwealth’s Low Income Home Energy Assistance Program.

(8) With reference to client payments received by home providers of domiciliary care program administered by the Department of Aging under the act of June 20, 1978 (P. L. 477, No. 70) (71 P. S. § § 581-1—581-12), that portion of the payments which for a specific income year, does not exceed the actual expenses of providing domiciliary care services.

The provisions of this § 401.11 amended July 19, 1985, effective July 20, 1985, and will apply retrospectively to January 1, 1985, 15 Pa.B. 2653. Immediately preceding text appears at serial pages (36176) to (36177).

This section cited in 61 Pa. Code § 401.1 (relating to definitions).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.12 Losses.

Losses incurred in the operation of a business may only be used to offset gains from the operation of a business in the year during which the loss was incurred. Losses incurred in the operation of rental property may only be used to offset gains from the operation of rental property in the year during which the loss was incurred. Capital losses, whether long or short term, may only be used to offset capital gains for the year during which the loss was incurred.

This section cited in 61 Pa. Code § 401.1 (relating to definitions).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.21 Purpose.

The purpose of the term ‘‘homestead’’ is to determine the portion of the claimant’s property for which a rebate may be granted. A rebate is allowable only on that portion of the claimant’s property which is used as the home of the claimant, his spouse and all other individuals who are regarded as members of the claimant’s household. The homestead shall be located in the Commonwealth and shall be owned and occupied or rented and occupied by the claimant during the period of the calendar year for which a rebate is claimed.

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.22 Limitations.

(a) If the property of the claimant used by him as his home is a part of a large parcel of property, such as a farm, only the dwelling and so much of the land as is reasonably necessary for use of the dwelling as a home shall constitute the claimant’s homestead.

Example. Claimant A lives on a 20-acre farm. A’s dwelling is surrounded by a ½ acre yard and the remaining land is used for farming. C’s homestead is the dwelling and the ½ acre yard.

(b) When a claimant owns or rents two dwellings on one lot or a multi-family dwelling, homestead means only that dwelling or family unit occupied by the claimant together with that portion of the land which is reasonably necessary for use of the dwelling as a home. The method of apportioning the property taxes or rent paid between the amount attributable to the homestead and the amount attributable to the other part of the property is set forth in § 401.56 (relating to property taxes or rent paid for part of property used as homestead).

Example 1. Claimant B owns a duplex situated on a one-acre lot. He lives in one unit and his son lives in the other unit. B’s homestead is the ½ of the duplex occupied by B and ½ of the lot.

Example 2. Claimant C rents a two-story house which has been remodeled into two apartments. The house is situated on a one-acre lot. C lives in the lower apartment and sublets the upper apartment and ½ of the lot. C’s homestead is the lower apartment and ½ of the lot.

(c) If a husband and wife are both residents in the same nursing home or similar institution, each will be considered an occupant of a separate homestead.

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.31 Ownership.

(a) An owner includes a person in possession under a contract of sale, deed of trust, life estate, joint tenancy, tenancy in common or tenancy by the entirety. An individual who occupies a residence in a condominium or other similar living accommodation whereby he owns title to the premises is an owner.

(b) A contractual obligation to pay property taxes on property owned by another does not qualify an individual for a property tax rebate since he is not the owner of the property.

(c) A claimant will be eligible for a property tax rebate if he and his spouse occupy the homestead and the homestead is the separate property of either the claimant or his spouse.

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.41 Number of claimants from each homestead.

Only one claimant from a homestead each year shall be entitled to a property tax rebate or rent rebate in lieu of property taxes. If two or more persons are able to meet the qualifications for a claimant, they may determine who the claimant shall be. If they are unable to agree, or both file a claim in 1 year, the Department shall determine to whom a rebate is to be paid.

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.42 Temporary absence of claimant.

(a) A claimant whose home is his principal place of abode is not disqualified from receiving a rebate or any part of the rebate due to temporary absences from his home.

Example 1. Claimant A owns and occupies or rents and occupies his home in Pennsylvania. Every summer A vacations in the west. He stays for an extended trip of a month or two and returns to his home in Pennsylvania. Claimant A is a member of the household constructively occupying his home for the entire year provided that A has not rented out his home or apartment for the period he was absent.

Example 2. Claimant B owns and occupies his home in Pennsylvania. In March, B enters a hospital due to illness. In May, B returns home. Claimant B is a member of the household constructively occupying his own home for the entire year provided that B has not rented out his home or apartment for the period he was absent.

Example 3. Claimant C owns and occupies his home in Pennsylvania. C becomes ill and unable to care for himself. On April 10, C moves to a nursing home in Arizona to receive full-time care. C remains in the nursing home for the remainder of the year. C’s absence is not temporary. C is considered to have resided in his home only during January, February and March.

(b) A claimant who owns and occupies or rents and occupies his home for only a part of a year may file a claim for a property tax rebate or rent rebate in lieu of property taxes based on the length of his ownership and occupancy or rental and occupancy. Reference should also be made to § § 401.51—401.58 (relating to real property tax or rent assistance).

This section cited in 61 Pa. Code § 401.53 (relating to property taxes or rent on occupied homestead owned or rented for part of calendar year).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.43 Decedent’s estates.

(a) A claim for a property tax rebate or rent rebate in lieu of property taxes may be filed by the personal representative of a decedent’s estate if, and only if, the decedent were alive on or after January 1 of the year next succeeding the calendar year for which a rebate is claimed.

(b) Any rebate due as the result of a timely filed claim submitted and signed by an eligible claimant who dies after the filing, but before the final payment of his claim will be payable to the spouse of the deceased or to the estate of the deceased or to the personal representative of the decedent’s estate upon presentation to the Department of a ‘‘short certificate’’ authorizing the personal representative to act in behalf of decedent’s estate, or will be payable in accordance with a decree of the Orphans’ Court directing distribution of decedent’s property, or will be payable to an individual who submits proof in the form of receipts and affidavit that:

(1) The individual requesting payment has paid decedent’s funeral bill in an amount equal to or greater than the amount of property tax or rent rebate to which the decedent was entitled.

(2) There have been no proceedings to create an estate and no such proceedings are contemplated.

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.51 Claimants who rent from owners of real property exempt from real property taxes.

A claimant who is a tenant of an owner of real property which is exempt from the payment of real property taxes is not eligible to receive a rent rebate in lieu of property taxes unless the owner has made or was obligated to make a payment in lieu of taxes on the property in which the claimant resided for the year for which a rent rebate is claimed.

This section cited in 61 Pa. Code § 401.42 (relating to temporary absence of claimant).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.52 Claimants who rent and receive public assistance monies.

(a) A claimant who is a renter shall not be eligible for a rent rebate in lieu of property taxes during those months within which he receives public assistance monies from the Department of Public Welfare. For the calendar year 1974 and thereafter, the receipt of Supplemental Security Income payments (SSI) will not preclude a renter from receiving a rent rebate in lieu of property taxes, even though the renter had previously received public assistance from the Department of Public Welfare.

(b) Receipt of food stamps, medical assistance or blind pension from the Department of Public Welfare will not preclude a renter from claiming and receiving a rent rebate in lieu of property taxes as neither food stamps, Medical Assistance nor blind pensions necessarily involve the receipt of public assistance moneys.

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.53 Property taxes or rent on occupied homestead owned or rented for part ofcalendar year.

(a) A property tax rebate or rent rebate in lieu of property taxes is limited to the amount of property taxes, or 20% of the rent paid to a landlord, attributable to the period of any calendar year during which a claimant owned and occupied or rented and occupied the homestead. Hence, when a claimant owned and occupied or rented and occupied the homestead for only a part of the calendar year for which a rebate is claimed, except as provided in § 401.42 (relating to temporary absence of claimant), property taxes or rent paid shall be determined on only that portion of the calendar year during which the homestead was owned and occupied or rented and occupied by the claimant.

(b) Where the claimant vacates his homestead during a calendar year, except as provided in § 401.42, the amount of property taxes or rent paid attributable to that part of the calendar year during which the homestead was owned and occupied or rented and occupied by the claimant and his household shall be determined by multiplying the total amount of the property taxes or rent paid for the entire calendar year by the percentage of 12 months that the homestead was owned and occupied or rented and occupied by the claimant and his household.

(c) The method described in subsection (b) shall also apply where the homestead is purchased during a calendar year and is subsequently occupied by the claimant and his household. The property taxes shall be determined by multiplying the total amount of the property taxes for the entire calendar year by the percentage of 12 months that the homestead was owned and occupied by the claimant and his household.

Example. Claimant H and his wife W owned and occupied their home in Pennsylvania for many years. On September 30, they moved from the home and rented an apartment for $100 a month. The home was listed for sale and was sold on November 30 of the same year. Property taxes for the year, exclusive of municipal assessments, delinquent charges, and interest were $240. In the closing settlement statement, H was charged with $220 and the remainder was charged to the buyer. Although owned by the claimant for 11 months of the year, the homestead was only occupied by the claimant for nine months of the calendar year, therefore, the amount of property taxes on which the claimant is eligible to receive a property tax rebate is $180 (75% x $240). The claimant is also eligible to receive a rent rebate in lieu of property taxes for the three months during which he rented and occupied the apartment; the maximum amount of rent rebate in lieu of property taxes being $60, that is, 20% times the $300 rent paid for October, November, and December. However, the total amount of rebate payable to claimant H for the calendar year may not exceed $200.

This section cited in 61 Pa. Code § 401.58 (relating to calculations involving fractional parts of a month, fractional parts of a year, or both).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.54 Proration or rent paid to reflect ownership or rental interest.

When a homestead is owned or rented by two or more individuals and one or more of such persons is not qualified to be a claimant under the Senior Citizens Property Tax or Rent Rebate Act, ‘‘real property taxes’’ or ‘‘rent paid’’ shall include only that part of the real property taxes or rent paid which reflect the ownership or rental interest of the claimant and the other members of the household who meet the qualifications of a claimant. The ownership or rental interest of the claimant will be deemed to include the ownership or rental interest, if any, of the claimant’s spouse. Where title to property is held by a claimant and another or others, either as tenants in common or as joint tenants, or where a rental interest in property is held by a claimant and another or others, the share of each tenant in the property will be deemed to be equal, unless it is proven that the interests in question are not equal, in which event the claimant’s proportionate share shall be as proven.

Example 1. Claimant H and W, his wife and their son S own the homestead as tenants in common. H and W live in the homestead. S lives elsewhere and is not a member of the household. In this case, ‘‘real property taxes’’ means an amount equivalent to ½ of the taxes on the homestead since this amount reflects the ownership interest of the claimant and his spouse as H and W are deemed to hold the property as tenants by entirety. Since son S does not reside in the household, he would not qualify as a claimant and his ½ ownership interest may not be included in the calculation of ‘‘property taxes paid.’’

Example 2. Claimant A, a disabled person qualifying for a rent rebate in lieu of property taxes and B, his nonqualifying brother, jointly lease an apartment in which they both reside. In this instance, rent paid means ½ of the total rent since this amount would reflect the rental interest of claimant A.

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.55 Proration of taxes or rent paid to reflect eligiblity.

The Department shall apportion the rent paid or real property taxes to reflect a claimant’s eligiblity if the claimant is one of the following:

(1) A widow or widower between 50 and 64 years of age during the calendar year or part thereof for which a rebate rebate is claimed but who remarries during the calendar year.

(2) A permanently disabled person during the calendar year or part thereof for which a rebate is claimed but whose disability is lost during such calendar year.

(3) A renter who receives public assistance monies from the Department of Public Welfare for part of the calendar year for which a rent rebate in lieu of property taxes is claimed.

Example 1. Claimant A is a widow who reaches the age of 50 on March 1. On April 1, she remarries. A is eligible for a property tax rebate or rent rebate in lieu of property taxes for 3 months (January, February and March). Therefore, only ¼ of A’s property taxes or rent paid may be used in computing her rebate.

Example 2. Claimant B is 52 years old and became a widower on December 25, 1972. Claimant B is eligible to receive a rebate on his total 1972 property taxes or rent paid.

Example 3. Claimant C becomes permanently disabled on March 15. On July 1, C makes a miraculous recovery. C is eligible for a property tax rebate or rent rebate in lieu of property taxes for 6 months (January 1—June 30th). Therefore, ½ of C’s property taxes or rent paid may be used in computing his rebate.

Example 4. Claimant D, 75 years of age, rents his apartment for the entire year 1972. D receives public assistance moneys for October, November, and December of 1972. Claimant D is eligible for a 1972 rent rebate in lieu of property taxes based on ¾ of his rent paid.

This section cited in 61 Pa. Code § 401.58 (relating to calculations involving fractional parts of a month, fractional parts of a year, or both).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.56 Property taxes or rent paid for part of property used as homestead.

(a) Where the dwelling constituting the claimant’s home and the land surrounding it is in excess of that which is reasonably necessary for use of the dwelling as a home, the amount of property taxes or rent paid used in computing the claimant’s rebate will be limited to the amount of property taxes or rent paid attributable to that amount of land which is reasonably necessary for use of the dwelling as a home.

(b) Land which is ‘‘reasonably necessary for use of the dwelling as a home’’ includes land surrounding the home which is used for the following purposes:

(1) Yard.

(2) Flower garden.

(3) Recreational area, which may include a swimming pool, putting green, tennis courts, stable and grazing area for horses or ponies used for recreational purposes by members of claimant’s family.

(4) Land on which fruit or vegetables are grown or livestock or fowl raised for personal consumption by claimant and claimant’s family as opposed to being sold commercially or for a profit.

(5) Land not to exceed a reasonable number of acres the sole purpose of which is to provide privacy to the homeowner and his family, as for example, a field or stand of trees between the residence and a roadway. However, land used for commercial farming or for any other commercial purpose is not reasonably necessary for the use of the dwelling as a home.

(c) Whenever the parts of the land are not substantially of the same value, the ratio of the market value or assessed value of that land which is reasonably necessary for use of the dwelling as a home to the market value or assessed value of the entire parcel of land shall be used to determine the property taxes or rent paid on the land used for the homestead.

Example 1. Claimant A owns 8 acres of land of which each acre is of substantially the same value. Two acres of land surrounding his house are reasonably necessary for use of the dwelling as a home. Property taxes are $240 for the eight acres of land and $200 for the dwelling. Property taxes for the land necessary for use of the dwelling as a home are ¼ x $240 = $60. In addition, the property taxes on the dwelling ($200) will be included.

Example 2. Claimant B rents 30 acres of land. Five acres of land surrounding the house are reasonably necessary for use of the dwelling as a home. The other 25 acres are utilized as a commercial farm. The commercial farm accounts for 75% of the total market value of the 30 acres of land. Rent for the 30 acres and dwelling is $1,000 per year. Rent for the dwelling and land necessary for use of the dwelling as a home is 25% x $1,000 = $250.

(d) In the case of a multi-dwelling building, in which each unit is substantially of the same value, the property taxes or rent paid attributable to the unit used as the claimant’s homestead may be determined on the basis of the proportion which the claimant’s unit bears to the total number of units in the building.

Example. Claimant J owns a three-story house which has been remodeled into three apartments of equal size. Claimant J rents out the upper two apartments and lives in the lower apartment. Property taxes for the entire building are $330. Property taxes on the land are $120. Property taxes on J’s apartment are $110 (1/3 of $330). The taxes on that portion of the land attributable to J are $40 (1/3 of $120). The total amount of property taxes on J’s homestead is, therefore, $150 ($110 + $40).

(e) In the case of a multi-dwelling building in which the value of each unit is not substantially the same, the property taxes or rent paid attributable to the claimant’s home shall be determined by the proprotion which the market value or assessed value of claimant’s home bears to the market value or assessed value of the building.

Example. Claimant B owns a building. The front portion is used as a grocery store and there is a three-room apartment in the rear. B occupies the apartment. The assessed values of the grocery store and the apartment are $4,000 and $1,000, respectively. The property taxes on the entire building are $200. There is also a small yard in the rear of the building which is used jointly by B and the operator of the grocery store. The grocery store portion of the building is situated on ¾ of the land on which the building stands. The property taxes on this land are $100. The property taxes on B’s apartment are $40 (1/5 x $200). The property taxes on the land are $25 (¼ x $100). Therefore, the total property taxes on B’s homestead are $65.

(f) The inclusion of property taxes or rent paid as a business expense for income tax purposes precludes a claimant from using these payments as a basis for a property tax rebate or rent rebate in lieu of property taxes.

Example. Claimant A’s total property taxes on his home for the year 1973 are $250. A carries on a business in his home, and on his 1973 profit and loss statement for income tax purposes claims $200 as a tax expense of his business. Claimant A may only receive a property tax rebate on a maximum of $50.

This section cited in 61 Pa. Code § 401.22 (relating to limitations).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.57 Multiple homestead.

(a) Where a claimant changes his homestead during the calendar year for which a property tax rebate is claimed, the amount of property tax is determined by adding together the pro rata shares on each homestead for the period in which each homestead was owned and occupied by the claimant.

Example 1. Claimant C owns and occupies homestead No. 1 until March 31. C buys and occupies homestead No. 2 on April 1 and lives there for the remainder of the year. The total property taxes on homestead No. 1 are $200 and C’s share of such taxes is $50 (1/4 x $200). The total property taxes x $200). The total property taxes on homestead No. 2 are $100 and C’s pro rata share of such taxes is $75 (3/4 x $1002). Therefore, C may only claim $125 ($50 + $75) as his total property taxes when claiming a property tax rebate.

Example 2. Claimant R owns and occupies his home until June 30. The property taxes on this property amount to $400 for the entire year. On July 1, R moves into an apartment for which he pays $100 per month in rent. R’s pro rata share of property taxes is $200 (1/2 x $400) and R’s rent paid x $400) and R’s rent paid equals $600 (6 months x $100). Therefore, R will be required to compute his property tax rebate using Table A and his rent rebate in lieu of property taxes using Table B. Reference should also be made to § 401.71 (relating to table of rebate).

(b) Where a claimant has paid rent for more than 12 months in 1 year and the Department is not made aware of the amount of rent paid for those months during which the claimant occupied the premises, the amount of rent paid is computed by multiplying the average rent for the year (total amount of rent reported divided by the total number of months for which rent was paid) by 12 months.

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.58 Calculations involving fractional parts of a month, fractional parts of a year,or both.

(a) When a claimant is required to prorate the amount of property taxes or rent paid on which a property tax rebate or rent rebate in lieu of property taxes may be granted, such as where the homestead is owned and occupied or rented and occupied for less than the full calendar year as provided in § 401.53 (relating to property taxes or rent on occupied homestead owned or rented for part of calendar year), or when a widow or widower remarried during the calendar year as provided in § 401.55 (relating to proration of taxes or rent paid to reflect eligibility), or when a permanently disabled person loses the disability during the calendar year as provided in § 401.55, or when a renter received public assistance moneys from the Department of Public Welfare for less than 12 months of the calendar year, the following percentages shall be applicable to the number of months during which the claimant was qualified for a property tax rebate or rent rebate in lieu of property taxes.

(b) For the purposes of the calculations required under this chapter fractional parts of the month are disregarded. If the claimant owned and occupied or rented and occupied his homestead for more than ½ of 1 month, or a widow or widower or disabled person retained such status for more than ½ of 1 month, the claimant may receive rebate on those property taxes or rent, if actually paid, applicable to the entire month. Conversely, if the claimant owned and occupied or rented and occupied the homestead for or ½ or less than ½ of the month, or a widow or widower or disabled person retained such status for ½ or less than ½ of the month, such part of the month shall be disregarded in determining the property taxes or rent paid on which rebate may be granted.

(c) In determining whether assistance may be granted on the property taxes or rent, if actually paid, applicable to the full month, the following rules shall apply:

(1) Twenty-eight or 29 day month-homestead owned and occupied or rented and occupied or claimant was eligible for more than 14 days.

(2) Thirty or 31 day month-homestead owned and occupied or rented and occupied or claimant was eligible for more than 15 days.

The provisions of this § 401.58 amended February 20, 1981, effective June 23, 1979, 11 Pa.B. 726. Immediately preceding text appears at serial pages (36187) to (36188).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.71 Table of rebate.

(a) The amount of any claim for a property tax rebate for real property taxes due and payable during the calendar years 1971 and 1972, or a rent rebate in lieu of property taxes, as defined in § 401.1 (relating to definitions), for rent due and payable during calendar 1972 shall be determined in accordance with the following table:

(b) The amount of any claim for a property tax rebate or rent rebate in lieu of property taxes as defined in § 401.1, for real property taxes or rent due and payable during the calendar year 1973 and thereafter shall be determined in accordance with the following table:

(c) The ‘‘percentage’’ is based upon ‘‘household income’’ (column on left) as defined in § 401.1. The percentage of real property taxes or rent rebate in lieu of property taxes allowed as rebate (column on right) multiplied by the real property taxes or rent rebate in lieu of property taxes as defined in § 401.1, determines the amount of rebate allowed.

(d) No claim shall be allowed if the amount of rebate computed in accordance with this section is less than $10, and the maximum amount of rebate payable shall not exceed $200.

This section cited in 61 Pa. Code § 401.57 (relating to multiple homestead).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.72 Source of funds.

Expenses, salaries, and other costs incurred in the administration of the Senior Citizens Property Tax or Rent Rebate Act and approved claims shall be paid from the State Lottery Fund established by the act of August 26, 1971 (P. L. 351, No. 91) (72 P. S. § § 3761-1—3761-15).

History

• Source: The provisions of this § 401.

61 Pa. Code § 401.73 Proportional reduction.

In the event that the total amount of the claims and administrative expenses exceeds the amount in the State Lottery Fund in any one year, the amount allowed as a property tax or rent rebate shall be reduced in the proportion that the amount of such fund bears to the total amount of valid claims and administrative expenses in any one year. For the fiscal year beginning July 1, 1975, the amount in the State Lottery Fund shall include funds available including revenue estimated to be available for the purposes of administrative expenses and claims.

History

• Source: The provisions of this § 401.

Chapter 403 Filing of Claims

61 Pa. Code § 403.1 Deadline.

A claim for a property tax rebate or rent rebate in lieu of property taxes shall be filed with the Department of Revenue, Property Tax or Rent Rebate Bureau, on or before the thirtieth day of June of the year next succeeding the end of the calendar year in which real property taxes or rent were due and payable. Effective for 1972 claims for property tax rebates or rent rebates in lieu of property taxes only, widowers and renters requesting rebates by virtue of the amendment dated December 5, 1973 (Act 136) to the Senior Citizens Property Tax Assistance Act of March 11, 1971 (P. L. 104, No. 3) (72 P. S. § § 4751-1—4751-12), may file their first claim for a rebate with the Department no later than June 6, 1974. If the last day for filing of the claim falls on Saturday, Sunday or a legal holiday, a claim filed on the next regular business day will be accepted as timely filed.

61 Pa. Code § 403.2 Payments.

No payment on a claim shall be made from the State Lottery Fund earlier than the day following the last day provided in this chapter on which that claim may be filed with the Department. The payment of a property tax rebate or rent rebate in lieu of property taxes to an eligible claimant will not result in a lien or judgment being placed or obtained against the claimant’s property or estate.

61 Pa. Code § 403.3 Contents of claim forms.

Each claimant applying for a rebate under the Senior Citizens Property Tax or Rent Rebate Act shall file a claim, penalty of fraud provided, with the Department of Revenue, Property Tax or Rent Rebate Bureau, on forms supplied by the Department. The claim shall contain name of claimant, address, and Social Security number as well as the following:

(1) Reasonable proof of household income.

(2) Reasonable proof of the size and nature of the property claimed as a homestead.

(3) If for a property tax rebate, the tax receipts or other proof that the real property taxes have been paid.

(i) If the tax receipts fail to indicate that the claimant is the sole owner of the property exclusive of any interest owned by claimant’s spouse, reasonable proof of claimant’s ownership may be required by the Department.

(ii) Reasonable proof of ownership must be in the form of a legal document such as a deed, deed of trust, will, contract of sale or decree of distribution.

(4) If for a rent rebate in lieu of property taxes, reasonable proof that the rent in connection with the occupancy of a homestead has been paid.

(i) A completed ‘‘Rent Certificate,’’ which accompanies the claim form and instruction booklet, signed by the landlord of the claimant or an agent of the landlord shall be accepted as reasonable proof.

(ii) Rent receipts signed by the landlord or his agent indicating the claimant’s name, the address of the rental unit, the period of tenancy, the amount of rent paid, and the real property tax status of the rental unit may be accepted as reasonable proof.

(iii) A completed affidavit or certification executed by the claimant which indicates the name of the claimant, the address of the rental unit, the name and address of the landlord, the period of tenancy, the amount of rent paid, the real property tax status of the rental unit and that the claimant has been unable to obtain the signature of his landlord may be accepted as reasonable proof.

(5) If the claimant is a widow, or widower, an affidavit or certification of such status.

(6) Reasonable proof of disability.

(i) If the claimant is a permanently disabled person, the claim shall contain proof that he is eligible to receive disability benefits under either the Federal Social Security Act or the Federal Railroad Retirement Act. No person who has been found not to be disabled by the Social Security Administration or the Railroad Retirement Board shall be granted a rebate under the act. Proof that an individual was eligible for disability benefits under the Supplemental Security Income program (SSI) shall be acceptable proof of disability under this section.

(ii) A claimant who is not covered under the Federal Social Security Act or the Federal Railroad Retirement Act shall submit proof of permanent and total disability in the form of medical reports or records indicating diagnosis and prognosis of the claimant’s condition and signs, symptoms and laboratory findings if applicable or appropriate. These documents will be evaluated by the Bureau using the same standards used by the Social Security Administration in determining permanent and total disability.

(iii) A claimant who is not covered under the Federal Social Security Act or the Federal Railroad Retirement Act and who is unable to submit proof of permanent and total disability may be examined by a physician designated by the Department and his status determined using the same standards used by the Social Security Administration. The fee for such an examination, including necessary laboratory tests and X-rays, shall be determined prior to the examination and shall be paid to the physician by the Department. The claimant will not be reimbursed by the Department for any expenses incidental to the examination such as costs of meals or transportation.

(7) If a claimant is a senior citizen, the first claim shall include proof that the claimant or claimant’s spouse was 65 years of age or over, or 50 years of age or over in the case of a widow or widower, as of December 31 of the calendar year in which real property taxes or rent were due and payable.

(8) The claim form must be signed by the claimant. If, in lieu of his signature, the claimant ‘‘makes his mark’’ (X), two persons must sign the claim form as witnesses to his mark. If the claimant is unable to sign his name or make his mark on the claim form, an authorized attorney-in-fact or guardian shall sign the claim form and attach thereto a copy of the power-of-attorney, guardianship papers or other documents entitling him to sign the claim form.

61 Pa. Code § 403.4 Proof of age documents.

(a) Whenever under these regulations the claimant is required to furnish proof of age with his claim form, the following types of documents will generally be accepted as satisfactory proof of age:

(1) Birth certificate.

(2) Medicare card.

(3) Church Baptismal record showing date of birth and established during the first few years of life.

(4) Hospital birth record established during the first few years of life and certified by the custodian of the record.

(5) A document issued by the Social Security Administration clearly showing date of birth, Social Security card will not be acceptable.

(6) Passport or naturalization papers.

(7) Military discharge papers if age is shown.

(b) If none of the documents listed above is available, the claimant should furnish for consideration by the Department other types of documents showing his age or date of birth. Examples of these documents include a school record, church record, Bible or other family record, insurance policy, marriage record, employment record, delayed birth certificate, a child’s birth certificate showing age of the claimant, or voting or registration records.

61 Pa. Code § 403.5 Incorrect claims.

If the Department of Revenue, Property Tax or Rent Rebate Bureau, finds any claim to have been determined incorrectly, it shall redetermine the amount of the claim and notify the claimant of the reason for the redetermination and the amount of the corrected claim.

61 Pa. Code § 403.6 Fraudulent claims.

(a) If the Department of Revenue determines that a claim is excessive and filed with fraudulent intent, it shall disallow the claim in full and a penalty of 25% of the amount claimed shall be imposed. The penalty and the amount of the disallowed claim, if the claim has been paid, shall bear interest at the rate of 1/2 of 1% per month from the date of the claim until repaid. The claimant and any person who assisted in the preparation or filing of a fraudulent claim shall be guilty of a misdemeanor, and, upon conviction thereof, shall be sentenced to pay a fine not exceeding $1,000, or undergo imprisonment not exceeding 1 year or both.

(b) A claim, shall be disallowed if the claimant received title to the homestead primarily for the purpose of receiving a property tax rebate.

61 Pa. Code § 403.7 Offsetting overpayment of claims.

If the Department of Revenue finds any claim for a property tax rebate or rent rebate in lieu of property taxes to have been overpaid for any reason, it may deduct or offset the amount overpaid on that claim from a valid subsequent claim filed by the claimant or claimant’s spouse provided that the Department shall notify the subsequent claimant of the reason for and the amount of the deduction or offset.

Chapter 405 Appeal Procedure

61 Pa. Code § 405.2 Review by Board of Finance and Revenue.

(a) Within 90 days after the day of official receipt by the claimant of notice mailed by the Department of its decision on a Petition for Redetermination filed with it, the claimant who is adversely affected by the decision may by petition request the Board of Finance and Revenue to review the action. A Petition for Review may be filed with the Board of Finance and Revenue within 120 days after written notice is officially received by the claimant that the Department has failed to dispose of the Petition for Redetermination within the 6-month period provided for redetermination.

(b) Every Petition for review by the Board of Finance and Revenue filed hereunder shall state the reasons upon which the claimant relies, or shall incorporate by reference the Petition for Redetermination in which such reasons shall have been stated. The Petition shall be supported by affidavit that the facts set forth therein are correct and true.

(c) The Board of Finance and Revenue may sustain the action taken by the Department upon the Petition for Redetermination or it may take other action as it deems necessary and consistent with the Senior Citizens Property Tax or Rent Rebate Act (72 P. S. § § 4751-1—4751-12). Notice of the action of the Board of Finance and Revenue shall be given by mail to the Department and to the claimant.

(d) The Board of Finance and Revenue shall act in disposition of the petitions filed with it within 6 months after they have been received, and in the event of failure of the Board to dispose of a petition within 6 months, the action taken by the Department upon the Petition for Redetermination is deemed sustained.

History

• Source: The provisions of this § 405.

61 Pa. Code § 405.3 Appeal to Commonwealth Court.

A claimant aggrieved by the decision of the Board of Finance and Revenue may, within 30 days after receipt by the claimant of official Board notice, appeal to the Commonwealth Court from the decision of the Board of Finance and Revenue, in the manner now or hereafter provided by law for appeals from decisions of said Board in tax cases.

History

• Source: The provisions of this § 405.

61 Pa. Code § 405.4 Constitutionality.

If a word, phrase, clause, sentence, section or provision of the Senior Citizens Property Tax or Rent Rebate Act (72 P. S. § § 4751-1—4751-12), or an amendment thereto is held unconstitutional, the decision of the Court may not affect or impair the remaining provisions of the act or of an amendment thereto. The General Assembly has expressed its intent that the act and subsequent amendments thereto would have been adopted had the unconstitutional word, phrase, clause, sentence, section or provision thereof not been included therein.

History

• Source: The provisions of this § 405.

Chapter 407 Adoption and Promulgation of Regulations and Rulings

61 Pa. Code § 407.1 Regulations and rulings.

Regulations and rulings interpreting the act and amendments thereto are promulgated by the Department of Revenue pursuant to the authority of section 9 of the Senior Citizens Property Tax or Rent Rebate Act of March 11, 1971 (72 P. S. § 4751-9).

61 Pa. Code § 407.2 Informal opinions.

For reasons of sound administration, informal opinions, whether oral or written, expressed by the employes or representatives of the Property Tax or Rent Rebate Bureau are only considered as aids to taxpayers and do not have the force and effect of law or legal determinations and are not binding upon the Commonwealth. The opinions are subject to withdrawal or change at any time to conform with new or different interpretations of the law.

61 Pa. Code § 407.3 Procedures available to taxpayers to obtain official rulings.

If a taxpayer is uncertain about the law in his specific factual situation and is unwilling to rely upon the advice of private counsel in some matter not already covered by a ruling or regulation, he may request the Property Tax or Rent Rebate Bureau to promulgate a ruling on his problem.

Part II Auditor General

Subpart A Police and Firemen

Chapter 501 Pension Funds

61 Pa. Code § 501.1 Change of insurance carriers.

The following procedure shall be followed before changing insurance plans of pension funds of police or firemen supported in whole or in part from payments to municipalities by this Commonwealth:

(1) Before any change is made in insurance carriers for any pension plan of police or firemen, written notice of intention to change carriers shall be given to the Department of the Auditor General of the Commonwealth, Bureau of Firemen’s Relief Fund Audits, and Police Pension Fund Audits.

(2) The notice required by paragraph (1) shall contain a certification from the actuary of the proposed new insurance carrier declaring that he has reviewed the existing insurance plan and that in his professional opinion the change in plans shall not result in an overall monetary loss or disadvantage to the fund.

(3) A copy of the actuarial study shall be submitted with the certification.

(4) If the new plan may result in a monetary loss to the pension fund, the Department of the Auditor General shall receive a complete summary of the proposed insurance plan clearly indicating advantages of the change sufficient to justify any immediate monetary loss.

(5) No change should be made in insurance plans before the Department of the Auditor General has been afforded an opportunity to review the certification and the proposed new plan.

(6) Failure to adhere to the regulations of this section may result in the withholding from the municipality its share of the appropriate state allocation by the Department of the Auditor General.

History

• Authority: The provisions of this Chapter 501 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 501 adopted July 1, 1969, unless otherwise noted.

61 Pa. Code § 501.2 Availability of documents for inspection.

All pension annuity contracts, documents of receipts and expenditures, investment portfolio and other pertinent documents shall be available for annual inspection by the auditors of the Department of the Auditor General.

History

• Authority: The provisions of this Chapter 501 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 501 adopted July 1, 1969, unless otherwise noted.

61 Pa. Code § 501.3 Bonding requirements.

(a) If a treasurer of the particular municipality acts also as treasurer for the pension fund of the police or firemen, no additional bond shall be required, if he is bonded in accordance with law.

(b) If a person, other than the municipal treasurer, acts as the treasurer of the pension fund of the police or firemen, he shall before entering upon the duties of his office, give bond, conditioned for the faithful performance of his duties to the extent required by the local governing municipal body.

History

• Authority: The provisions of this Chapter 501 issued under The Fiscal Code (72 P.
• Source: The provisions of this Chapter 501 adopted July 1, 1969, unless otherwise noted.

Subpart C Audits of State-Aided Institutions

Chapter 521 Financial Report to Commonwealth

61 Pa. Code § 521.1 Purpose and scope.

The instructions set forth in this chapter are for use in the preparation of Form AG12 (Financial Report to the Commonwealth of Pennsylvania). The purpose of the report is the determination of the reasonable cost of inpatient hospital services, provided during the reporting period, as the basis for reimbursement under the Medical Assistance Program. Regulations formulating guidelines and procedures to be used in the determination of reasonable cost are set forth in ‘‘Principles of Reimbursement for Provider Costs.’’ The principles of reimbursement and the related policies establishing the guidelines and procedures are contained in the publication of the U.S. Department of Health, Education, and Welfare designated ‘‘Provider Reimbursement Manual,’’ HIM-15. This manual also contains instructional material designed to assist providers in giving effect to the cost principles. For any situation that is not covered by the guidelines contained in the manual, generally accepted accounting principles will apply.

History

• Authority: The provisions of this Chapter 521 issued under sections 6 and 403 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 521 adopted November 2, 1973, 3 Pa.

61 Pa. Code § 521.2 Reporting.

(a) Reports shall be filed with the Auditor General within 90 days after June 30th of each fiscal year, or within 90 days after receipt of the forms and instructions—whichever is later. Failure to file a report when due, unless a 30 day extension of time is granted in writing by the Auditor General, shall result in termination of payment and the agreement upon written notice by the Department of Public Welfare.

(b) The report shall be forwarded, in duplicate, to: Commonwealth of Pennsylvania, Department of the Auditor General, Bureau of Audits, State-Aided Institutions, Harrisburg, Pennsylvania 17120.

(c) The report shall cover a full fiscal period of 12-consecutive months beginning July 1st and ending June 30th. Providers beginning operations during a fiscal period shall prepare a report from the date of certification for occupancy to the end of the regular reporting period.

History

• Authority: The provisions of this Chapter 521 issued under sections 6 and 403 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 521 adopted November 2, 1973, 3 Pa.

61 Pa. Code § 521.3 Accounting basis.

The report shall be prepared on the accrual basis of accounting. Under the accrual basis of accounting, revenue is recorded in the period when it is earned, regardless of when it is collected, and expenses are recorded in the period when they are incurred, regardless of when they are paid. Particular attention shall be given to an accurate accrual of all costs at the close of the period for the equitable distribution of costs to the period applicable. Significant costs to be considered shall include, but not be limited to, employe payrolls, bonuses, and professional fees. Care shall be given to the proper allocation of costs for service and maintenance contracts to the period covered by such contracts.

History

• Authority: The provisions of this Chapter 521 issued under sections 6 and 403 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 521 adopted November 2, 1973, 3 Pa.

61 Pa. Code § 521.4 Supporting information.

Providers shall maintain adequate financial records and statistical data for proper determination of costs payable under the program. The report shall be based on financial and statistical records which must be verified by qualified auditors. Cost information shall be current, accurate, and in sufficient detail to support the claim for cost reimbursement. This includes all ledgers, books, records, and original evidences of cost, such as, purchase orders, vouchers, requisitions for materials, inventories, labor time cards, payrolls, bases for apportioning costs, and so forth, which pertain to the determination of reasonable cost, capable of being audited.

History

• Authority: The provisions of this Chapter 521 issued under sections 6 and 403 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 521 adopted November 2, 1973, 3 Pa.

61 Pa. Code § 521.5 Regulatory provisions.

(a) Providers shall abide by the Department of Public Welfare’s Medical Assistance regulations and other applicable State and Federal laws and regulations in the preparation of this report.

(b) The principles for reimbursement require the apportionment of the provider’s allowable costs in accordance with two prescribed methods:

(1) The ‘‘Departmental Method’’ shall be used by all hospitals having more than 99 beds, exclusive of bassinets in the nursery, on the first day of the cost reporting period.

(2) The ‘‘Combination Method’’ shall be used by all hospitals having less than 100 beds, exclusive of bassinets in the nursery, on the first day of the cost reporting period. The prescribed methods of apportionment shall be defined as follows:

(i) Departmental Method. The following provisions shall apply in determining the cost of services applicable to the Medical Assistance Program:

(A) Inpatient routine services. Cost for inpatient routine services shall be determined as follows:

(I) General care units. Average cost per diem for general routine patient care areas.

(II). Special care units. A separate average cost per diem for each intensive care unit, coronary care unit, and other special care inpatient hospital units.

(B) Ancillary services. The ratio of Medical Assistance patient charges to total patient charges for the services of each ancillary shall be applied to the cost of the department.

(ii) Combination Method. The following provisions apply in determining the cost of services applicable to the Medical Assistance Program:

(A) Inpatient routine services. Costs for inpatient routine services shall be determined as follows:

(I) General care units. Average cost per diem for general routine patient care areas.

(II) Special care units. A separate average cost per diem for the aggregate of intensive care, coronary care, and other special care inpatient hospital units.

(B) Ancillary services. The ratio of Medical Assistance patient charges for all ancillary services, to total patient charges for all such services shall be applied to the total cost of all ancillary services.

History

• Authority: The provisions of this Chapter 521 issued under sections 6 and 403 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 521 adopted November 2, 1973, 3 Pa.

61 Pa. Code § 521.6 Reporting forms.

Forms for determining reimbursable costs applicable to the Medical Assistance Program and the preparation of the report under either of the prescribed methods of apportionment are incorporated in the schedules and worksheets provided. All forms identified as Form AG12 ‘‘CD’’ shall be used by providers using either of the two prescribed methods of apportionment. Schedules B and B-1, identified as Form AG12 ‘‘C’’ Page 6 and Page 7, are required for use by Combination Method providers. Worksheets B and B-1, identified as Form AG12 ‘‘D’’ Page 6 and Page 7, are required for use by Departmental Method providers. These forms are detailed as follows:

(1) Schedule A—Reclassification and Adjustment of Trial Balance of Expenses … AG12 CD PAGE 3

(2) Schedule A-1—Adjustments to Expenses … AG12 CD PAGE 4

(3) Schedule A-2—Administrative and General ExpensesAnalysis … AG12 CD PAGE 5

(4) Schedule B—Cost Allocation—General Service Costs.For use of providers using COMBINATION METHOD … AG 12 C PAGE 6

(5) Schedule B-1—Cost Allocation—Statistical BasisCOMBINATION METHOD (under 100 beds) … AG12 C PAGE 7

(6) Worksheet B—Cost Apportionment—General Services.For use of providers using DEPARTMENTAL METHOD … AG12 D PAGE 6

(7) Worksheet B-1—Cost Apportionment-StatisticalBasis DEPARTMENTAL METHOD (over 99 beds) … AG12 D PAGE 7

(8) Schedule C—Departmental Distribution of PatientCare Costs … AG12 CD PAGE 8

(9) Schedule C-1—Departmental Distribution of PatientCare Charges … AG12 CD PAGE 9

History

• Authority: The provisions of this Chapter 521 issued under sections 6 and 403 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 521 adopted November 2, 1973, 3 Pa.

61 Pa. Code § 521.7 Specific instructions.

Form AG12 shall be completed in accordance with the following instructions:

Page 1. Provider Identification and Certifications

This page provides for identification of the provider and the period covered by the report. Certification is required by the provider’s administrator, chief financial officer, and by the preparer if other than the provider.

Page 2. Inpatient Statistics and Reimbursable Costs

I. Statistical Data.

Inpatient bed complement and occupancy. The bed complement is classified by the number of beds regularly available for inpatient routine services in the institution. Bassinets are those located in the nursery for regular use by newborn infants.

Separate statistics are required for reporting ‘‘General Care Units’’ and ‘‘Special Care Units.’’ A special care unit is defined as one in which the care required is extraordinary, on a concentrated and continuous basis, and must be physically identifiable as separate from general care areas. There must be specific written policies for each of such designated units which include, but are not limited to, burn, coronary care, pulmonary care, trauma and intensive care units but exclude postoperative recovery rooms, post anesthesia recovery rooms, or maternity labor rooms.

Statistics for the special care units should be entered in the aggregate in column 2 of Section I; the detail statistics for each of such special care units must be separately recorded as indicated in Section II.

Items No. 1 and No. 2. State the number of beds and, separately, newborn bassinets available for use at the beginning of the period by each classification of patient. Enter all data applicable to general care units in column 1 and data applicable to special care units in column 2.

Item No. 3. Total bed and bassinet days available. Compute the total days available for the period by multiplying the number of beds and bassinets by the number of days in the period. Any increase or decrease in the number of beds must be taken into consideration as well as the number of days elapsed during such increase or decrease.

Items No. 4, 5 and 6. Inpatient days. A patient day is the period of service for one day of care provided an inpatient adult, child, or newborn infant. Newborn inpatient days are counted as those days newborn infants occupy bassinets in the nursery. Days of care for infants remaining after the mother’s discharge and transferred from the nursery should be counted with other patient days and not included in the count of newborn inpatient days.

The day of the patient’s admission is counted but not the day of discharge. A patient admitted and discharged on the same day is counted as one patient day, provided a regular hospital bed is occupied and a hospital chart is set up for the patient.

Total patient days applicable to all patients are classified between general care units and special care units in columns 1 and 2 respectively. Compensable inpatient days of care eligible for reimbursement under the Medical Assistance Program are reported in the designated columns applicable to the respective classification of service in column 3 and in column 4.

Item 7. Percent occupancy. The ratio of actual patient days to the total available bed days should be shown separately for each classification. Determine the ratio for each classification of patients (columns 1 and 2) by dividing the actual inpatient days, line 6, by the total bed days available for the classification, line 3. Example:

Actual patient days—general care units … 58,400

Total general care unit days available during year(200 beds x 365 days) … 73,000

Percent Occupancy—general care units (58,400 ÷ 73,000) … 80%

Item 8. Discharges, including deaths. The formal release of patients. The day on which the patient begins a leave of absence is treated as a day of discharge and is not counted as an inpatient day unless he returns to the hospital by midnight of the same day. The day the patient returns to the hospital from such an absence is treated as a day of admission and is counted as an inpatient day if he is present at midnight of that day.

Item 10. Admissions. An inpatient admission is the acceptance by the provider of a patient for service involving the occupancy of a hospital bed, crib, or bassinet, and the maintenance of a hospital chart during the period of care. Births of newborn infants in the institution are counted as admissions and are to be included in the total number reported.

Item 11. Average number of employes for period. The number of fulltime equivalent employes is determined by adding the total number of hours worked by all full-time and part-time employes for a specific period and dividing the sum by the number of hours in the standard work period. Example:

Total hours worked by all employes for fiscal year … 1,040,000

Standard hours worked by full-time employe (40 hours X 52 weeks) … 2,080

Number of full-time equivalent employes (1,040,000 total hours ÷ 2,080 standard hours) … 500

II. Determination of Reimbursable Cost

This section provides for summarizing reimbursable costs applicable to the Medical Assistance Program by users of either the DEPARTMENTAL or COMBINATION method of apportionment.

The cost of inpatient routine services for Medical Assistance patients is determined on the basis of a separate average cost per diem for general care units:

Line 1. General care units.

Column 1. Enter the total inpatient days of service provided all patients. This total must agree with the number of days entered in Section 1, line 6, column 1.

Column 2. Enter the total inpatient days of service provided Medical Assistance patients. This total must agree with the number of days entered in Section I, line 6, column 3. It is required that the reported days and related charges applicable to Medical Assistance patients be supported by auditable summaries and detail records (kept available for examination and verification) of the eligibility of patients and approvals for services and charges.

Column 3. Enter the average cost per diem brought forward from Schedule C, page 8, line 3 of column 8.

Column 4. Provides for entering the routine service costs applicable to Medical Assistance patients by providers using the DEPARTMENTAL METHOD of apportioning costs. The amount is determined by multiplying the average cost per diem of general care units (column 3) times the eligible inpatient days of care provided Medical Assistance patients (column 2).

Column 5. Provides for entering the routine service costs applicable to Medical Assistance patients by providers using the COMBINATION METHOD of apportioning costs. The amount is determined by multiplying the average cost per diem of general care units (column 3) times the eligible inpatient days of care provided Medical Assistance patients (column 2).

Lines 2—6. Special care units.

These lines provide for the apportionment of inpatient routine service cost of special care units to the Medical Assistance Program. Under the DEPARTMENTAL METHOD, reimbursement is determined on the basis of an average cost per diem for each special care unit. Under the COMBINATION METHOD, reimbursement is determined on an aggregate average cost per diem for all special care units.

Column 1. Enter the total days of service for each special care unit on lines 2 through 5. Enter the sum total days for all such units on line 6. This total must agree with the number of days entered in Section I, line 6, column 2.

Column 2. Enter the total inpatient days of service provided Medical Assistance patients, for each special care unit, on lines 2 through 5. Enter the sum total Medical Assistance days for all such units on line 6. This total must agree with the number of days entered in Section I, line 6, column 4.

Column 3. Enter the average cost per diem brought forward from Schedule C:

Providers using the DEPARTMENTAL METHOD will bring forward the average cost per diem from Schedule C, page 8, column 8, lines 4 through 7, and enter such amounts on the appropriate line (2 through 5) applicable to each specified special care unit.

Providers using the COMBINATION METHOD will bring forward the average cost per diem from Schedule C, page 8, column 8, line 8, and enter that amount on line 6.

Column 4. Provides for entering the routine service cost of special care units applicable to Medical Assistance patients by users of the DEPARTMENTAL METHOD of apportioning costs. The amount is determined by multiplying the average cost per diem for each special care unit (column 3) times the eligible special care unit days of care provided Medical Assistance patients (column 2).

Column 5. Provides for entering the routine service cost of special care units applicable to Medical Assistance patients by users of the COMBINATION METHOD of apportioning costs. The amount is determined by multiplying the aggregate average cost per diem for all special care units (column 3, line 6) times the sum total of eligible special care unit days of care provided Medical Assistance patients (column 2, line 6).

Line 7. Ancillary services.

Line 7 provides for entering the ancillary service costs apportioned to care provided Medical Assistance patients. The ancillary service costs are apportioned on Schedule C, page 8, and brought forward to page 2, line 7, column 4 (DEPARTMENTAL), or column 5 (COMBINATION).

Line 8. Reimbursable cost—Medical Assistance Program.

Column 4. The sum of the figures in column 4 (line 1, general care units cost; lines 2-5, special care units cost; and line 7, ancillary services cost) is entered on line 8, column 4, and is the reimbursable cost applicable to Medical Assistance patients as determined by providers using the DEPARTMENTAL METHOD of cost apportionment.

Column 5. The sum of the figures in column 5 (line 1, general care units cost; line 6, special care units cost; and line 7, ancillary service cost) is entered on line 8, column 4, and is the reimbursable cost applicable to Medical Assistance patients as determined by providers using the COMBINATION METHOD of cost apportionment.

Procedures and methods for cost finding, and for determining reimbursable costs applicable to services provided Medical Assistance patients, are incorporated in the forms provided.

In the preparation of this report under the DEPARTMENTAL METHOD of cost apportionment, costs attributable to nonrevenue-producing centers (general service cost centers) are allocated, by the use of step-down method procedures, to all other cost centers served. DEPARTMENTAL METHOD providers must use Work-sheets B and B-1 which provide for allocating the costs of the general service cost centers by the use of stepdown procedures. Schedules B and B-1 are not applicable to providers having more than 99 beds.

In the preparation of this report under the COMBINATION METHOD of cost apportionment, costs are allocated by the use of simplified cost finding. Simplified cost finding provides for combining the costs of general service cost centers having a common basis of allocation. The total costs of each combined group of centers are allocated in one process. The allocation bases to be used and the cost centers which are to be combined for allocation are not optional but are identified and provided for. COMBINATION METHOD providers must use Schedules B and B-1 which provide for allocating the costs of the general service cost center by the use of the simplified cost finding method. Worksheets B and B-1 are not applicable to providers having less than 100 beds.

Page 3. Schedule A—Reclassification and adjustment of trial balance of expenses

This schedule provides for the preparation of the trial balance of expense accounts from the provider’s accounting books and records. It also provides for the necessary reclassifications and adjustments to specific accounts. The accounts, or cost centers, are listed on this schedule in a manner which facilitates the combination of the various groups of cost centers for purposes of simplified cost finding under the COMBINATION METHOD. This schedule is also to be completed by providers required to use the DEPARTMENTAL METHOD.

Columns 1, 2 and 3—Direct expenses per books. The expenses listed in these columns should be in accordance with the provider’s accounting books and records. List on the appropriate lines in columns 1, 2 and 3, the total expenses incurred during the reporting period. The expenses must be detailed between salaries (column 1) and all other expenses (column 2). The sum of columns 1 and 2 must equal column 3. Any needed reclassifications and adjustments should be recorded in columns 4 and 6, as appropriate.

Column 4—Reclassifications. Enter in this column any reclassifications to the total expenses in column 3 which are needed to effect proper cost allocation.

Page 5. Schedule A-2, is provided to show the details of reclassification adjustments to the Administrative and General Expenses per books, line 12, column 3 of Schedule A.

On Schedule A-2, lines 2 through 10, the total of the employe health and welfare expenses listed are deducted from line 1, Total Administrative and General Expenses. Total Employe Health and Welfare Expenses, line 10, may then be reclassified on Schedule A for allocation on the basis of ‘‘gross salaries.’’ Providers may use the blank, lower section of page 5, or prepare additional schedules as necessary, to reclassify any expenses which are not specifically provided for.

Expenses pertaining to buildings, fixtures, and movable equipment, must be allocated on the same basis as the respective depreciation expense. Such expenses include insurance, rent, interest on funds borrowed to purchase buildings and equipment, and property taxes. Interest on funds borrowed for the payment of operating expenses must be allocated with Administrative and General Expenses.

Providers using the COMBINATION METHOD are required to reclassify cost between Central Services and Supply, line 15, and Cost of Medical Supplies Sold, line 29; similarly, costs related to drugs charged to patients which are included on line 16. Pharmacy, must be reclassified and included with like costs on line 22, Cost of Drugs Charged to Patients. The expenses in each cost center should be separately reclassified on the basis of the total amount of ‘‘costed’’ or priced requisitions applicable to each cost center. When costing the requisitions, a factor should be added to give effect to the direct salaries and expenses of the respective cost centers.

Where the provider’s routine accounting procedures include inter-departmental charges for various overhead costs, and the charges are based on appropriate statistics and records, reclassifications of the costs to the general service cost centers listed on Schedule A are not necessary.

Column 5—Trial balance reclassified. Adjust the amounts entered in column 3 by the amounts entered in column 4, increase or (decrease), and extend the net balances to column 5.

Column 6—Adjustments to expenses. Where the provider’s operating costs include amounts not related to patient care, specifically not reimbursable under the program, or flowing from the provision of luxury items or services (that is, those items or services substantially in excess of or more expensive than those generally considered necessary for the provision of needed health services), such amounts will not be allowable.

Schedule A-1 is provided for listing the increases and (decreases) of the trial balance of expense and summarizing the total adjustments in column 6 of Schedule A. The adjustments should include costs and expenses for supplies and services which are not covered under the program, which are specifically unallowable as being not related to patient care, that are not appropriate, or that are out of line with other facilities in the same area, similar in size, scope of service, utilization, and other relevant factors. Such costs include, but are not limited to, costs of memberships in organizations not related to patient care or the efficient operation of the facility; expenses related to social activities, parties, and entertainment; similar costs and expenses contrary to applicable State and Federal laws and regulations.

The adjustments should include all income which is deductible from operating expenses, and revenue which is a return of expense rather than income. For example, income from patients for telephone and television services should be used to reduce expense since the expense related to these services are included in total expenses, and payment has already been received in these amounts by the provider.

The descriptions set forth on the various lines of Schedule A-1 indicate the more common items affecting allowable costs, or that result in costs incurred for objectives other than patient care, and requiring adjustments. The provider should indicate by the letter ‘‘A’’ when the cost has been determined and forms the basis for adjustment. Where costs are not determinable, the notation ‘‘B’’ should be made to indicate that the amount received for the service is the basis for the adjustment. Other examples of specific transactions for which adjustments would be indicated are:

A provider may arrange to process billings and collect the proceeds on behalf of a specialist, such as a therapist, and charge a fee for the services. Administrative and General Expenses, on line 12 of Schedule A, must be reduced by the amount of such fees received;

Expenses incurred in fund raising activities related to the solicitation of donations, contributions, and similar appeals are not reimbursable under the Medical Assistance Program and must be eliminated from allowable costs;

Where depreciation expense computed in accordance with the principles for cost reimbursement differs from the depreciation expense per the provider’s books (and reported on Schedule A, lines 1 and 2) the amount of the difference must be shown on the indicated lines of this Schedule A-1.

The preparer should make sure that the amounts on this schedule are correctly summarized and carried forward to the proper line in column 6 of Schedule A.

Column 7—Reclassified adjusted expenses. Adjust the amounts in column 5 by the amounts in column 6, increase or (decrease), and extend the net balances to column 7. On line 44, Total Expenses, column 7 must equal column 5 plus or minus column 6.

Providers using the COMBINATION METHOD (having less than 100 beds) should transfer the costs in column 7, on lines marked with an asterisk (*), to Schedules B and B-1 as indicated.

Providers using the DEPARTMENTAL METHOD (having more than 99 beds) should transfer the individual amounts in column 7 to Worksheet B, column 1, as appropriate.

Line 8—Nursing administration and service.

Providers that do not charge nursing costs directly to the various patient care cost centers must allocate, on the appropriate cost finding schedule (or worksheet), the total nursing administration and nursing service cost. Providers that charge the cost of nursing service directly to the various patient care cost centers will allocate from this line the cost of nursing administration only.

Lines 33, 34 and 35.

These lines should be appropriately labeled to indicate the purpose for which they are being used.

Line 44—Total expenses.

These total expenses are the sums of the amounts on lines 5, 6, 7, 11, 19, 20, 21, 22, 30, 31, 32, 33, 34, 35, 36, 37, 41, 42 and 43.

Page 6. Schedule B Cost Allocation—General Service Costs.

Page 7. Schedule B-1 Cost Allocation—Statistical Basis.

Schedules B and B-1 provide for cost finding under the COMBINATION METHOD of cost apportionment. This method provides for allocating the costs of the general service cost centers, lines 1-19 of Schedule A, directly to the revenue producing and nonreimbursable cost centers on Schedule B. Schedule B-1 provides for the statistics necessary to allocate the general service costs to the revenue producing and nonreimbursable cost centers on Schedule B.

The statistical bases and applicable cost centers in the allocation of costs are identified and provided for on Schedule B-1.

The following procedures, numbered (1)—(17), will serve as a guide in the process of completing these schedules:

(1) Enter on Schedule B, columns 2-7 line A, and on Schedule B-1, columns 2-7, line 16, the following general service costs to be allocated. These costs are obtained from page 3, Schedule A, as follows:

(2) On Schedule B, column 1, line A, enter the total of columns 2-7, line A.

(3) On Schedule B, column 1, lines 1-14, enter the direct costs of the revenue producing and nonreimbursable cost centers which are obtained from page 3, Schedule A, as follows:

(4) On Schedule B, line 15, enter the total of column 1 (line A plus lines 1-14). This total must equal the amount on Schedule A, column 7, line 44.

(5) On Schedule B-1, columns 2-5, enter on lines 1-14 the portion of the statistical base over which the expenses of the general service cost centers are to be allocated. The statistical base to be used in each column is identified in the column heading and is to reflect only those statistics applicable to the revenue producing and nonreimbursable cost centers. Do not include any general service cost center statistics. Enter on line 15 of columns 2-5, the sum of lines 1-14.

(6) On Schedule B-1, columns 2-5, line 17, determine the ‘‘Unit Cost Multiplier’’ by dividing the amount of ‘‘General Service Costs,’’ line 16, by the statistics on line 15.

(7) On Schedule B-1 multiply the appropriate unit cost multipliers computed in step 6 by the individual cost center statistics in columns 2-5. Enter the resulting amounts in the appropriate columns and corresponding lines of Schedule B.

(8) On Schedule B, columns 2-5, enter on line 15 the sum of the amounts computed on lines 1-14. Do not include in these totals, the amounts entered on line A. For each column, the amount on line 15 must equal the amount on line A.

(9) On Schedule B, in column 6, enter on each of lines 1-14 the sum of the amounts in columns 1-5.

(10) On Schedule B, column 6, line 15, enter the total of lines 1-14. This total plus the amount in column 7, line A, must equal the amount in column 1, line 15.

(11) Transfer the amounts on Schedule B, column 6, lines 1-15, to Schedule B-1, column 7, lines 1-15.

(12) On Schedule B-1, column 7, line 17, determine the ‘‘Unit Cost Multiplier’’ by dividing the amount in line 16 by the amount in line 15.

(13) On Schedule B-1, multiply the ‘‘Unit Cost Multiplier,’’ computed in step 12, by the individual cost center amounts in column 7. Enter the resulting amounts on Schedule B, column 7, lines 1-14. Upon completing the extensions, the total of the amounts computed should be added to verify that the total agrees with the amount in column 7, line A. Enter on line 15, column 7, the verified totals of lines 1-14.

(14) On Schedule B, column 8, lines 1-14, enter the sum of columns 6 and 7.

(15) On Schedule B, column 8, line 11a, enter the subtotal of lines 1-11. The costs on these lines must be further distributed to the various patient care departments on Schedules C and C-1.

(16) On Schedule B, column 8, line 15, enter the total of lines 11a-14. The amount on line 15, column 8, must equal the amount in column 1, line 15.

(17) The amounts entered on Schedule B, column 8, lines 1-11a, are transferred to the applicable lines on Schedule C, column 2, lines 1-23.

Page 6. Worksheet B Cost Apportionment—General Services.

Page 7. Worksheet B-1 Cost Apportionment—Statistical Basis.

Worksheets B and B-1 provide for cost finding under the DEPARTMENTAL METHOD of cost apportionment, which incorporates stepdown procedures for the departmental distribution of costs on logical bases to all other departments receiving the services involved.

Enter on Worksheet B, column 1, the expenses for apportionment forwarded from page 3, Schedule A, each amount in column 7, on lines 1 through 44. Enter on Worksheet B-1, on the first line of the column for each department to be apportioned, the total of the statistical basis for apportionment. The individual statistics should be entered on each appropriate departmental line. The individual statistics entered should be added to verify that the sum agrees with the total entered on the first line of the column. Enter on line 40 of each column, the verified totals of lines 2-39. On line 41 of each column, enter the total costs to be apportioned, brought forward from Worksheet B.

The ‘‘Unit Cost Multiplier,’’ to be entered on line 42, is determined by dividing the total statistical data, line 40, into the total costs to be apportioned, line 41. This ‘‘Unit Cost Multiplier’’ is the factor used for multiplying the statistical data recorded on the line of each applicable departmental cost center.

Worksheet B provides for the distribution of departmental costs by the use of the ‘‘Unit Cost Multiplier’’ applied to each line of statistical data on Worksheet B-1. The product of each extension is entered directly on Worksheet B. Upon completing the extensions for each department column, the line items should be added to verify that the total apportioned agrees with the total expenses of the department.

All the stepped down costs are eventually apportioned to the various patient care and other cost centers. The amounts in columns 4 through 18, for each line (17 through 39) are totaled in the last column (19) on Worksheet B. On Worksheet B, column 19, Line 35a, enter the subtotal of lines 17-35. The costs on these lines must be further distributed to the various patient care departments on Schedules C and C-1. On Worksheet B, column 19, line 40, enter the total of lines 35a-39. The amount on line 40, column 19, must equal the amount in column 1, line 40. The amounts entered on Worksheet B, column 19, lines 17-35a are transferred to the applicable lines on Schedule C, column 1, lines 1-23.

Page 8. Schedule C Departmental Distribution of Patient Care Costs.

Page 9. Schedule C-1 Departmental Distribution of Patient Care Charges.

The allowable costs brought forward for distribution to the various classifi- cations of patient care are entered on Schedule C, column 1, (DEPARTMENTAL METHOD) or column 2 (COMBINATION METHOD). The basis to be used for the distribution is the ratio of charges to charges applied to cost. Percentage ratios for apportionment are developed on Schedule C-1: The total gross charges in each patient care center is related to the gross charges, in that center, for charges to outpatients, hospital inpatients, and ‘‘other’’ patient charges as specified. The ratios developed on Schedule C-1 are applied on Schedule C to apportion the allowable costs in column 1 (DEPARTMENTAL METHOD), or column 2 (COMBINATION METHOD), to the respective patient classification: outpatients, hospital inpatients and ‘‘other’’ patients as specified.

The following procedures, numbered (1)—(4), will serve as a guide in completing Schedule C-1:

(1) Enter in column 1 on the appropriate lines, above the dotted rules, the total gross charges applicable to all patient services.

(2) Enter in columns 2 through 4 on the appropriate lines, the portion of the total gross charges in column 1 that is applicable to each patient care classification. The sum of the charges entered in columns 2 through 4 must equal the total charges entered in column 1.

(3) Divide the charges entered in each column, 2 through 4 respectively, by the total charges entered in column 1. Enter the resulting percentages below the dotted rule in each of the patient care classifications.

(4) For each line, the total of the percentages in columns 2 through 4 must equal 100 percent.

The percentage ratios developed in the foregoing procedures provide the base for the distribution of the costs of the revenue producing cost centers to the various patient care departments or classifications. Following are the procedures in the apportionment of the allowable costs entered on Schedule C, column 1 (DEPARTMENTAL METHOD) or column 2 (COMBINATION METHOD), to the patient classifications in column 3—Outpatient Costs, column 4—Hospital Inpatient Costs, and column 5—Other Inpatient Costs as specified:

(1) Multiply the total expenses in column 1 (or column 2) by each of the percentages developed on Schedule C-1. Enter the resulting amounts in the related columns and lines on Schedule C.

(2) After the total patient care costs of each cost center have been distributed enter the totals on lines 3, 8, 22 and 23, as appropriate. The amounts entered in columns 3, 4 and 5, must equal the amounts entered in column 1, or column 2, as applicable.

Column 6. Total billed hospital inpatient charges. On Schedule C, column 6, lines 1 through 23, list on each line for the service centers indicated, the gross billed charges for hospital inpatient services for all patients of the provider for the period, brought forward from Schedule C-1, column 3, lines 1 through 23.

Column 7. Medical Assistance hospital inpatient charges. On Schedule C, column 7, list on each line for the service centers indicated, the relevant gross billed charges for covered Medical Assistance Program inpatient services. The amounts listed must be after the exclusion of the patient resources considered in determining the amount of the Medical Assistance payment for the patients’ care. These charges must be supported by summaries and auditable detail records, kept available for examination and verification, of the eligibility of patients and approvals for services and charges. Do not include any charges for inpatients’ Medicare deductibles or coinsurance paid by Medical Assistance.

Column 8. Average cost per diem—Inpatient routine services.

GENERAL CARE UNITS, (DEPARTMENTAL METHOD). Divide the total costs in column 4, line 3, by the total inpatient days from page 2, Section II, column 1, line 1. Enter the resulting average cost per diem on Schedule C, column 8, line 3.

SPECIAL CARE UNITS. (DEPARTMENTAL METHOD). Divide the total costs in column 4, lines 4, 5, 6 and 7—separately, by the total related patient days from page 2, Section II, column 1, lines 2, 3, 4 and 5—separately. Enter the resulting average cost per diem (for each special care unit) on Schedule C, column 8, lines 4, 5, 6, and 7, respectively. (COMBINATION METHOD) Divide the total costs in column 5, line 8, by the total patient days for all special care units from page 2, Section II, column 1, line 6. Enter the resulting average cost per diem (for the aggregate of all special care units) on Schedule C, column 8, line 8.

Column 8. Ratio of medical assistance charges—Ancillary services.

(DEPARTMENTAL METHOD). The cost of ancillary services is apportioned to the Medical Assistance Program on the basis of the ratio of covered charges, for ancillary services provided under the Program, applied to the total costs of the ancillary services. The ratio is determined by dividing the covered inpatient charges in column 7 by the total inpatient charges for ancillary services in column 6, on lines 9 through 21. Enter the resulting percentage ratio on the applicable lines, 9 through 21, in column 8. Multiply the hospital inpatient ancillary costs in column 4 by each of the ratios entered in column 8. Enter the resulting amounts on the related lines, 9 through 21, of column 9 Schedule C. Enter on line 22, column 9, the sum of lines 9 through 21. (COMBINATION METHOD) The ratio of covered Medical Assistance inpatient charges for all ancillary services to total patient charges for such services is applied to the total cost of all ancillary services. The ratio is determined by dividing the covered inpatient charges in Schedule C, column 7, line 22, by the total inpatient charges for ancillary services in column 6, line 22. Enter the resulting percentage ratio in column 8, line 22. Multiply the hospital inpatient ancillary costs in column 4, line 22, by the ratio entered in column 8, line 22. Enter the resulting cost of ancillary services apportioned to the Program on Schedule C, column 10, line 22.

Page 10. Schedule D—Balance Sheet.

Schedules of the assets, liabilities, and principal accounts comprising the provider’s organization are required. Items making up the various special purpose or temporary funds should be included with the current (general) fund. Reconcile the current surplus balance by identifying the changes where indicated, or on a separate schedule if additional space is required. The amount shown for ‘‘net income (loss) for period’’ should be the same as that entered on Statement of Income and Expense, page 11, line 37; explain any differences.

Page 11. Statement of Income and Expense.

This statement providing the summary of income or (loss) is required for the period covered. Information for listing the operating expenses in the ‘‘natural classification’’ may not be directly at hand from the provider’s records. The data can be readily assembled by scheduling the expenses, in the natural classification sequence, by each cost center. The resulting summary can then be transferred to the statement in the natural classification required. The total of the operating expenses, line 18, should agree with the trial balance of expenses on page 3, column 3, line 44.

Financial Report to the Commonwealth of Pennsylvania, Remembursable Cost of Hospital Services under the Medical Assistance Program.

History

• Authority: The provisions of this Chapter 521 issued under sections 6 and 403 of The Fiscal Code (72 P.
• Source: The provisions of this Chapter 521 adopted November 2, 1973, 3 Pa.

Part III State Tax Equalization Board

Chapter 601 General Provisions

61 Pa. Code § 601.1 Definitions

The following words and terms, when used in this part, have the following meanings, unless the context clearly indicates otherwise: Act—The act of June 27, 1947 (P. L. 1046, No. 447) (72 P. S. § § 4656.1—4656.17). Board—The State Tax Equalization Board of this Commonwealth.

History

• Authority: The provisions of this Chapter 601 issued under the act of June 27, 1947 (P.
• Source: The provisions of this Chapter adopted August 6, 1969, unless otherwise noted.

61 Pa. Code § 601.2 Purpose and scope.

(a) The purpose of the Board is to convert aggregate taxable assessments in each school district which are determined by Statewide dissimilar procedures into aggregate market values based on Statewide uniform procedures.

(b) The General Assembly of the Commonwealth, in its efforts to provide equal basic educational opportunities for children throughout this Commonwealth, established the Board in 1947 for the following reasons:

(1) The growing need to reflect unequal local financial abilities of school districts in distributing school subsidies.

(2) The failure of local assessed valuations to provide such an index on account of the Statewide lack of assessment uniformity.

(3) The growing trend of the Commonwealth to assume more responsibility for financing the public school system.

History

• Authority: The provisions of this Chapter 601 issued under the act of June 27, 1947 (P.
• Source: The provisions of this Chapter adopted August 6, 1969, unless otherwise noted.

61 Pa. Code § 601.3 Applicability of general provisions.

Under 1 Pa. Code § 31.1 (relating to scope of part), 1 Pa. Code Part II (relating to general rules of administrative practice and procedure), are applicable to the activities of and proceedings before the Board.

The provisions of this § 601.3 adopted February 7, 1975, effective February 8, 1975, 5 Pa.B. 249.

History

• Authority: The provisions of this Chapter 601 issued under the act of June 27, 1947 (P.
• Source: The provisions of this Chapter adopted August 6, 1969, unless otherwise noted.

Chapter 603 Market Value Procedures

61 Pa. Code § 603.1 Definition and purpose of assessment-sales ratios.

The aggregate market value approach is commonly termed sales ratio studies. The purpose is to ascertain the average percentage ratios of masses of assessed valuations to masses of bona fide selling prices or properties transferred. These average assessment-sales ratios are then used to convert aggregate assessments into aggregate market values.

The State Tax Equalization Board, in determining the common level ratio, uses a methodology known as the aggregate market value or sales ratio studies approach. In re Armco, Inc., 515 A.2d 326 (Pa. Cmwlth. 1986); appeal denied 533 A.2d 714 (Pa. 1987).

61 Pa. Code § 603.11 Inventory forms.

Before aggregate taxable assessments are converted into aggregate market values, property inventories by school districts and municipalities shall be ascertained. The Board provides special inventory forms for the various counties to submit control data. These forms list the municipalities or portions thereof, making up the respective school districts. The Board will tabulate property inventories by school districts and by municipalities, despite differences in boundary lines.

61 Pa. Code § 603.12 Taxable real property certification.

The county assessment board shall certify to the Board the total taxable real property assessments by school district. Reference should be made to Chapter 609 (relating to duties and responsibilities of county officials).

61 Pa. Code § 603.21 Field followup.

The Board will not accept certifications of taxable real property inventories of county assessment boards without field followup. The Board field staff reconciles each submitted inventory certification. These reconciliations shall consist of analyses of assessment records in the various county court houses and discussions with assessing officials. The following two types of reconciliations are conducted:

(1) The first type of inventory reconciliation shall consist of analyzing and tabulating taxable real property assessments by use of property. These classifications shall include residential, industrial, commercial, agricultural, vacant lots, land, mineral resources, and the like. The sum of the various use-class assessments in each school district and municipality shall agree with the total certified by the county assessment board. The reasons for any discrepancies shall be ascertained and necessary adjustments made. This reconciliation shall verify the county assessment board certification, and shall provide aggregate assessment inventories classified by use of property. This classification of inventories by use is fundamental in the subsequent conversion to aggregate market value.

(2) The second type of inventory reconciliation shall consist of comparing each property assessment of the current year with that of the previous year. This comparison shall reveal the amount of change by class of property, the reason for the change, and whether the change affects market value. This reconciliation shall verify the county assessment board certification, update the classified inventory, and ascertain those properties going on and off the tax assessment rolls.

61 Pa. Code § 603.31 Market value conversion indexes.

(a) The basic data used in determining the market value conversion indexes are real property transfers reported monthly by the various counties. Reference should be made to Chapter 609 (relating to duties and responsibilities of county officials).

(b) The conversion indexes may not include transfers in which selling prices are not bona fide, such as any of the following sales:

(1) Between relatives.

(2) Between corporations and affiliates.

(3) Sales involving special reservations or agreements.

(4) Transfers motivated by special need or speculation.

(5) Transfers with personal property involved in the consideration.

(6) Sales involving charitable, religious, or governmental organizations.

(7) Forced sales.

(8) Other transfers with circumstances that knowingly would distort selling prices.

(c) In other transfers, selling prices may be bona fide, but reported assessments may not be comparable for assessment-sales ratios purposes. For example, the property sold may be a portion of a larger tract, but the reported assessment includes the entire tract; or the sale may include a newly constructed building not yet assessed when reported. Such transfers will be rejected or the comparable assessments ascertained.

(d) Besides facts reported by counties and staff investigators, other precautions will be taken by the Board to eliminate questionable transfers. Non bona fide selling prices and noncomparable assessments tend to result in extreme assessment-sales ratios. Consequently, transfers with extremely low or high ratios of assessments to selling prices will be rejected. This policy is based on periodic studies and operates on the premise that the particular extreme ratio transfers would have been rejected anyway had the facts been reported or ascertainable.

(e) There is another policy used relative to selling prices which tends to promote conservatism and realism in Board market values. Periodically, selling prices will be compared with market values on the same properties, as appraised by independent appraisers when available.

(f) In recent years, the comparisons of this section show that long-range concepts of worth of professional appraisers tend to be more conservative than current short-range selling prices. Consequently the Board, uniformly statewide, will discount its aggregate sales values of properties in arriving at aggregate market values for school subsidy purposes.

The State Tax Equalization Board, as part of its method to determine the common level ratio, develops market value conversion indexes using data from transfers of property in which there are bona fide selling prices. In re Armco, Inc., 515 A.2d 326 (1986); appeal denied 533 A.2d 714 (Pa. 1987).

61 Pa. Code § 603.41 Personnel and independent data.

(a) Independent appraisal data or other relevant information whenever available shall be collected and considered.

(b) In particular problem areas where property transfers may be inadequate selected personnel shall obtain appraisal samples of properties to supplement sales samples. By necessity, these supplemental studies shall be conducted within limits of available funds and personnel.

61 Pa. Code § 603.51 Computation procedure.

(a) If the aggregate inventories of taxable real property in terms of assessments by use type of property, and the respective converting assessment-sales ratios is ascertained, the final conversion phase shall be converting aggregate assessments into aggregate market values. The mechanics of this final phase is illustrated by the following hypothetical example:

(b) It should be noted that in the residential classification in subsection (a), sales indicate on an average, dwellings are assessed at 1/3 of bona fide selling prices. Thus, if the $10,000,00 aggregate residential assessments represent 33 1/3% of aggregate market value, aggregate market value is $30,000,000.

(c) To further guarantee conservatism and realism, the total aggregate sales value in subsection (a) is subjected to a Statewide uniform discount in determining aggregate market value.

Chapter 605 Hearing and Appeal Procedures

61 Pa. Code § 605.1 Who may file objections to Board findings.

A school district aggrieved by Board findings may file objections and will be granted a hearing.

61 Pa. Code § 605.2 Time of objections.

Objections to Board findings shall be filed on or before October 1.

61 Pa. Code § 605.3 Type of hearings.

The Board will conduct informal and formal hearings as set forth in this chapter.

61 Pa. Code § 605.11 Requests or order for informal hearing.

A school district not having filed formal objections may request an informal hearing. If formal objections have been filed, the Board may request an informal hearing. A school district that has filed formal objections may refuse the informal hearing and proceed directly to a formal hearing.

61 Pa. Code § 605.12 Description of and representation in informal hearings.

Informal hearings shall consist of open discussions between representatives of school districts and the Board. School officials or legal counsel may represent school districts.

61 Pa. Code § 605.13 Evidence and questioning.

School districts may present exhibits and ask reasonable questions relevant to the market value in question. The Board will attempt to answer the questions. Districts may offer evidence as may tend to prove error or unreasonableness on the part of the Board.

61 Pa. Code § 605.14 Record.

No stenographic record may be made of informal proceedings.

61 Pa. Code § 605.15 Decisions.

Following informal hearings, the Board will make its decision adjusting or sustaining the market values. The decision may not affect the right of a school district to a subsequent formal hearing.

61 Pa. Code § 605.21 Procedure generally.

If a school district elects to formally file objections to the findings and conclusions of the Board under section 13 of the act (72 P. S. § 4656.13), the objections shall be filed under oath, in writing, in the office of the State Tax Equalization Board, Post Office Box 1294, Harrisburg, Pennsylvania 17108, on or before October 1 and not thereafter, except upon cause shown and in the discretion of the Board, of the year in which the certification was made in compliance with sections 7(3) and 12 of the act (72 P. S. § § 4656.7(3) and 4656.12).

61 Pa. Code § 605.22 Statement of objections.

(a) If a school district elects to formally file objections, the statement of objections shall be filed in duplicate and contain the following information in the following order:

(1) The name and mailing address of the school district and county in which it is located.

(2) A detailed statement of the objections.

(3) A summary of the facts upon which the school district bases each objection.

(b) The statement of objections shall be signed by the president or the secretary of the board of the school district filing the objections.

61 Pa. Code § 605.23 Schedule of hearing.

Upon receipt of the statement of objections, properly prepared and filed, the Board will schedule a hearing and notify the school district as to the time and place of the hearing.

61 Pa. Code § 605.31 Evidence and record generally.

Formal hearings will be conducted by the Board under reasonable, but not strict rules of evidence. Testimony will be taken under oath and a stenographic record will be made of the entire proceedings.

61 Pa. Code § 605.32 Briefs.

Briefs may be submitted either prior to or within the reasonable time after hearing as may be determined by the Board.

61 Pa. Code § 605.33 Representation.

School districts may be represented by school officials or by legal counsel.

61 Pa. Code § 605.34 Burden.

The burden of going forward with the evidence is upon the Board by statute. School districts may present evidence, but are not obligated to do so.

61 Pa. Code § 605.35 Examination of witnesses.

Examination of witnesses by members of the Board may occur at any time during any stage of the proceedings for the purpose of clarifying or explaining any point.

61 Pa. Code § 605.36 Examination of Board members.

Board members may, at the request of school districts or counsel, subject themselves to examination, in which case school officials shall be expected to subject themselves to examination, notwithstanding that they may have elected not to present other evidence at the hearing.

61 Pa. Code § 605.37 Cross-examination.

School districts and the Board will each be afforded opportunities for reasonable cross-examination.

61 Pa. Code § 605.38 Recall of witnesses.

Witnesses may be recalled by school districts or the Board on any point that the Board may believe to have been insufficiently covered.

61 Pa. Code § 605.39 Costs.

The costs of taking the stenographic record will be borne by the Board. Transcripts of the record may be obtained upon the request and at the expense of the school district.

61 Pa. Code § 605.40 Adjudications.

Findings of fact and conclusions of the Board, based on formal hearing, will be made in writing and copies of the same sent to the school district and its legal counsel.

61 Pa. Code § 605.41 Rehearing.

Rehearing may be granted for the purpose of receiving additional evidence, but only in the discretion of the Board and upon request. The same rule applies to continuances after commencement of hearings.

61 Pa. Code § 605.51 Generally.

School districts may appeal Board decisions to the Court of Common Pleas of Dauphin County on the issue of whether the decision is arbitrary, capricious and an abuse of discretion. The appeal shall be restricted to school districts wherein the increase in market value exceeds 10% over the previous year, excluding additional properties theretofore not included on the county assessment rolls.

Chapter 607 Project 70 Procedures for Requesting in Lieu of Tax Payments

61 Pa. Code § 607.1 Purpose.

If Project 70 property is acquired by this Commonwealth it reduces the tax base of the particular political subdivision or school district. To compensate for this loss the General Assembly of the Commonwealth has provided for in lieu of tax payments. Local government requests for such in lieu of tax payments shall be initiated through the Board and thus to the Department of Environmental Resources Waters of the Commonwealth for determining the actual in lieu of tax payments, as provided in section 19 of the act (72 P. S. § 3946.19).

History

• Authority: The provisions of this Chapter 607 issued under the Project 70 Land Acquisition and Borrowing Act (72 P.
• Source: The provisions of this Chapter 607 adopted August 6, 1969, unless otherwise noted.

61 Pa. Code § 607.2 Definitions

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Act—The act of June 22, 1964 (P. L. 131, No. 8) (72 P. S. § § 3946.1—3946.22). Project 70 Land Acquisition and Borrowing Act—The act of June 22, 1964 (P. L. 131, No. 8) (72 P. S. § § 3946.1—3946.22).

History

• Authority: The provisions of this Chapter 607 issued under the Project 70 Land Acquisition and Borrowing Act (72 P.
• Source: The provisions of this Chapter 607 adopted August 6, 1969, unless otherwise noted.

61 Pa. Code § 607.11 Submission of resolution of taxing body.

(a) Each local taxing body shall request the required Project 70 market value certifications by submitting to the State Tax Equalization Board, Box 1294, Harrisburg, Pennsylvania 17108, in duplicate, the resolution of the taxing body affirming such request.

(b) This resolution shall include the following information:

(1) The name of the local taxing body making the request, such as the board of county commissioners, township commissioners, township supervisors, school directors, city, borough or town council.

(2) The date, grantor, identification, location, acres and county assessed valuation of each parcel of property acquired by the Commonwealth.

(3) The year of the county tax assessment rolls in which the acquired property was first removed from the tax rolls.

(4) The county assessed valuation of the remaining taxable real estate base of the political subdivision or school district making the request.

(5) The real property tax millage rate of the taxing body for the year property was removed from the tax rolls.

(c) It is important that the information for each parcel of acquired property as contained in the resolution of the local taxing body agree with the information in the files of the Department of Environmental Resources, the Game Commission, and the Fish and Boat Commission of the Commonwealth. Otherwise, unnecessary delays shall occur in expediting the request of the local taxing body.

History

• Authority: The provisions of this Chapter 607 issued under the Project 70 Land Acquisition and Borrowing Act (72 P.
• Source: The provisions of this Chapter 607 adopted August 6, 1969, unless otherwise noted.

Chapter 609 Duties and Responsibilities of County Officials

61 Pa. Code § 609.1 Scope and applicability.

(a) Boards of county commissioners, county assessment boards and recorders of deeds shall have specific responsibilities for submitting basic information.

(b) The Board will have authority and power to examine all county and city assessment records and subpoena State and local officials if necessary for securing information, as provided under sections 7(7) and 8 of the act (72 P. S. § § 4656.7(7) and 4656.8).

61 Pa. Code § 609.11 Responsibility.

(a) Properties that are proper and legal for inclusion in Board market values shall be largely the responsibility of the boards of county commissioners and county assessment boards. The Boards will be governed by county inventory certifications as to what properties are included in its market values, subject to Board field reconciliations discussed in Chapter 603 (relating to market value procedures).

(b) If a county inventory certification includes certain industrial machinery, and Board survey shows this property being used for real property tax purposes, then, the Board will include this property in its market values. A question as to whether machinery is taxable real property shall be between the property owner and local assessing officials, not the Board. If the assessing officials remove the machinery from the real property tax assessment rolls, the Board will remove the same from its market values.

61 Pa. Code § 609.21 Dual responsibility.

(a) The power and duty to gather real property transfers is vested upon the Board as provided in section 7(2) of the act (72 P. S. § 4656.7(2)).

(b) County commissioners, county assessment boards and recorders of deeds shall compile and report real estate transfers as provided in section 9(a) of the act (72 P. S. § 4656.9(a)).

Part V State Lotteries

Chapter 801 General Provisions

61 Pa. Code § 801.1 Definitions.

The following words and terms, when used in this part, have the following meanings, unless the context clearly indicates otherwise: Act or Law—The State Lottery Law (72 P. S. § § 3761-1—3761-15). Agent—A person who has been licensed to sell lottery tickets under the act. Bank—Signifies and includes banks, banking associations and trust companies organized under the authority of the Commonwealth or the United States whose principal place of business is within this Commonwealth. Bureau—The Pennsylvania State Lottery created to administer and operate the lottery by order of the Executive Board. Department—The Department of Revenue of the Commonwealth. Director—The Executive Director of the Bureau who is also the secretary and executive officer of the Commission. Division—The Division of State Lottery created by the act. Lottery or Pennsylvania State Lottery or State Lottery—The lottery established and operated under the law. Main bank—The principal office of a bank. Person—An individual, association, corporation, club, trust, estate, society, company, joint stock company, receiver, trustee, assignee, referee or other person acting in a fiduciary capacity, whether appointed by a court or otherwise and other combinations of individuals. The term includes departments, commissions, agencies and instrumentalities of the Commonwealth, including counties and municipalities and agencies and instrumentalities thereof. Secretary—The Secretary of Revenue of the Commonwealth. Ticket—The lottery ticket issued by the State lottery for sale to the general public.

The provisions of this § 801.1 amended through July 18, 1986, effective July 19, 1986, 16 Pa.B. 2648. Immediately preceding text appears at serial page (99674).

History

• Source: The provisions of this § 801.

61 Pa. Code § 801.2 Scope.

The rules in this part are established by the Secretary for the operation of the lottery and other matters pertinent to its administration such as, but not limited to, frequency of drawing, price of tickets, selection of winners, structure of prizes, licensing of agents, participation of banks, payment of prizes, and control and distribution of lottery tickets.

History

• Source: The provisions of this § 801.

61 Pa. Code § 801.3 Responsibility of the Bureau.

The Bureau of State Lotteries shall specifically administer and supervise the operation of the lottery. It shall be responsible for the distribution, sale, control and overall operation of the lottery.

History

• Source: The provisions of this § 801.

61 Pa. Code § 801.4 Licensing of agents and appointing of banks.

The Secretary will license qualified agents to sell lottery tickets pursuant to the provisions of this part. The State Treasurer shall appoint participating banks as safekeeping facilities for lottery tickets. At the termination of each selling period, banks shall accept unsold tickets and funds for maintaining records for the accounting of the proceeds that they receive.

History

• Source: The provisions of this § 801.

61 Pa. Code § 801.5 Amount and frequency of sale.

Weekly lottery tickets shall be sold at the price of $.50 per ticket. Other types of lotteries may be initiated at amounts and frequencies different than those set forth in this chapter, at the discretion of the Secretary.

History

• Source: The provisions of this § 801.

61 Pa. Code § 801.6 Erroneous or mutilated tickets.

Lottery tickets made out in error or mutilated in any way shall be voided by the agent. Credit for such tickets may be issued only at the point of original sale. The lottery number and the lottery security control number and the lottery drawing date shall all be legible in order to obtain a credit. Unless a mutilated lottery ticket is proven to the satisfaction of the director to be genuine, no credit shall be issued. However, a holder of a mutilated lottery ticket may win a prize as long as that ticket is identified as a valid ticket and the lottery number, the lottery security control number, and the lottery drawing date are all legible.

History

• Source: The provisions of this § 801.

61 Pa. Code § 801.7 Other laws inapplicable.

No other law providing any penalty or disability for the sale of lottery tickets or shares or any acts done in connection with a lottery shall apply to the sale of tickets or shares or acts performed pursuant to the act.

History

• Source: The provisions of this § 801.

Chapter 805 Licenses

61 Pa. Code § 805.1 Application.

Any person interested in obtaining a license as an agent for the sale of lottery tickets shall first file an application for Lottery Sales Agent’s License with the Bureau on application forms provided by the Bureau.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.2 Eligibility for license.

(a) No license as an agent to sell lottery tickets or shares shall be issued to any person to engage in business exclusively as a lottery sales agent. Before issuing such license, the Secretary will consider such factors as the following:

(1) The financial responsibility and security of the person and his business or activity.

(2) The honesty and integrity of the applicant.

(3) The accessibility of his place of business or activity to the public.

(4) The sufficiency of existing licenses to serve the public convenience.

(5) The volume of expected sales.

(6) The veracity of the information supplied in the application for Lottery Sales Agent’s License.

(7) The indebtedness of the applicant to the Commonwealth or local government, if any.

(b) No person under the age of 21 shall be licensed as an agent.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.3 Residency requirement.

Licenses shall be issued only to any of the following:

(1) Residents of this Commonwealth.

(2) Corporations incorporated in this Commonwealth, or authorized to do business in this Commonwealth.

(3) Partnerships in which at least one of the partners resides in this Commonwealth.

(4) Unincorporated businesses or other entities which are authorized to do business in this Commonwealth.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.4 Issuance of license.

(a) The Secretary will, in accordance with the act and the regulations of this part, license as agents to sell lottery tickets such persons as in his opinion will best serve the public convenience and promote the sale of tickets consistent with the experience, character, and general fitness of the applicant. The Secretary may also, in his discretion, suspend or revoke or refuse to renew a license.

(b) An agent’s license shall remain in full force and effect until such termination date as is indicated upon said license, unless the license is previously terminated by the Secretary in accordance with the provisions as set forth in this part. The Secretary may extend the initial or any subsequent licensing period in his discretion. The license processing fee for such license shall be $13 per year. Part of the license processing fee shall be set aside for a loss fund to cover a lottery agent, who may sustain a loss of unsold lottery tickets in the event of burglary, robbery, fire or other similar occurrence. The Bureau may establish internal cleaning procedures pursuant thereto with the approval of the Secretary.

The provisions of this § 805.4 amended through February 6, 1976, effective February 7, 1976, 6 Pa.B. 230.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.5 License to be displayed.

Every licensed agent shall prominently display his license or a copy thereof in an area visible to the general public. In addition, the authorized lottery agent decal shall be mounted on a prominent place or window of the premises of the agent. The agent shall maintain and display all promotional material in conjunction with ticket sales in accordance with instructions issued by the Director. The agent shall make available at all times during normal business hours current lottery tickets for sale to the public.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.6 Display of identification card.

The Bureau will issue to each licensed agent a wallet size agent identification card which shall be displayed by him when picking up lottery tickets from or returning such lottery tickets to authorized banks. No bank shall issue any lottery tickets unless the agent, or his designee as specified in this part, presents the identification card.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.7 Temporary licenses.

Pending final determination of any criteria under this chapter, the Secretary may issue a temporary license upon such terms and conditions as he may deem necessary, desirable, or proper to effectuate the provisions of the act.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.8 Conditions for licensing.

Upon issuance of a license, the agent shall agree to the following conditions:

(1) The agent shall agree and be bound by and comply with the provisions of act and any rules, regulations and instructions promulgated pursuant to such act by the Bureau.

(2) The agent shall agree to make available for sale to the public valid lottery tickets during normal business hours.

(3) The agent shall agree to maintain authorized displays, notices, drop boxes and other material used in conjunction with lottery ticket sales in accordance with instructions issued by the Bureau.

(4) The agent shall agree that all lottery tickets accepted from the Bureau of State Lotteries or its distributor or safekeeping depositories, are deemed to have been purchased by the agent at the price established by the Bureau, less the appropriate commission discount, if any, unless unsold tick- ets are returned to the authorized distributor or safekeeping depository on or before the settlement date. The agent shall agree to be responsible for lost or missing tickets or loose tickets not returned in sequential order.

(5) The agent shall agree to maintain current and accurate records of all operations in conjunction with lottery ticket sales in conformity with the provisions of this part.

(6) The agent shall agree to make available to representatives of the Bureau upon their request, for inspection and audit, those records he is required to maintain.

(7) The agent shall agree that the license issued to him may be revoked, suspended or its renewal rejected for any or all of the following reasons, but not necessarily limited to such reasons:

(i) Whenever the agent knowingly uses false or misleading information in obtaining the license.

(ii) Whenever the agent violates any of the provisions of the act or the provisions of this part.

(iii) Whenever it is determined by the Secretary that the agent fails to meet minimum sales or volume requirements considering the marketing locale of the agent.

(8) It shall be agreed by the agent that he shall hold the Bureau and the Commonwealth harmless from any liability arising in connection with operating and conducting lottery ticket sales.

(9) The agent shall agree to provide, upon request of the Secretary, a certificate of insurance running to the Bureau or Commonwealth with respect to any liability which may arise as a result of his activities as a licensee for the sale of lottery tickets.

(10) The agent shall agree that, in his capacity as a licensee to sell lottery tickets, he is not acting on behalf of the Bureau or the Commonwealth as an agent, officer, or employe thereof, but is acting in the capacity of an independent contractor, and, as such, shall further agree that any contractual or tortious liability he may incur in connection therewith shall be his sole responsibility.

(11) The agent understands that the license issued to him shall be issued and renewed on an annual basis unless such licensing period shall be extended or changed at the discretion of the Secretary. It is further understood and agreed by the agent that he shall not conduct any business or hold himself out as a lottery sales agent unless a renewal license is timely granted.

The provisions of this § 805.8 amended March 9, 1973, effective March 10, 1973, 3 Pa.B. 449.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.9 Bonding of agents.

The Bureau may require a surety bond from any licensed agent in such amount as it may be determined consistent with its conclusion of the financial stability of such agent, so as to avoid any monetary loss to this Commonwealth because of the activities of an agent in the sale of lottery tickets. The requirement for bonding may be requested of any person who may become a licensed agent which may also include a financial statement with respect to the financial character of the person who is a sales agent. In lieu of any surety bond which the Bureau may require, it may also seek any other guarantee or surety consistent with the provisions of the act including a blanket bond.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.10 Compensation.

(a) All licensed agents shall be entitled to a commission of 5.0% of the price of each ticket sold by them. The Secretary, in his discretion, may also establish an agent’s incentive award or bonus for those agents selling winning lottery tickets.

(b) No licensed agent or employe of a licensed agent shall request, demand, or accept gratuities or similar compensation other than as specifically authorized in subsection (a) in exchange for the performance of duties authorized pursuant to the Lottery agent’s license.

The provisions of this § 805.10 amended through August 14, 1981, effective August 15, 1981, 11 Pa.B. 2856. Immediately preceding text appears at serial page (45971).

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.11 Nontransferability of license.

A lottery license issued pursuant to this part shall not be transferable. If the business to which a license is issued or the ownership substantially changes, the Secretary reserves the right to terminate the lottery license. The Secretary shall be notified in writing at least ten days prior to any proposed business change or change in ownership thereof. A substantial change in ownership un- der this part shall mean a transfer of 50% or more of the equity of any business licensed pursuant to this part. If the business to which a license is issued changes its business location, such license shall terminate as of the date of the change and a new application for agent’s license shall be filed and acted upon by the Secretary. Every such change of business location shall be reported in writing to the Secretary at least ten days prior to such change.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.12 Access of agent records.

Each licensed agent shall grant access to its books and records, together with any and all papers and information requested for the purpose of the annual auditing of licensees and at such other times as deemed appropriate by the Bureau.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.13 Location of sales and purchase.

The sale of lottery tickets shall be made only pursuant to a license of a lottery agent at a specific location named therein or at such other locations as the Secretary may determine which are consistent with the provisions of the act.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.14 Inspection of licensed premises.

All licensed agents shall allow inspections of their premises at any time upon request of authorized inspectors of the Bureau to determine whether such agents are complying with the provisions of the act and the regulations of the Bureau. Such inspections shall be made with or without notice to such agent during the normal business hours of the agent.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.15 Special licenses.

The Secretary may, upon proper application, license special lottery agents. A special license may be issued subject to such special conditions or limitations as the Secretary in his discretion may deem prudent and determines to be consonant with the dignity of the Commonwealth, the general welfare of the people, and the dignity and integrity of the State lottery. These limitations or conditions may include, but are not limited to the following:

(1) The length of the licensure period.

(2) The hours or days of sale.

(3) The location of sale.

(4) The specific persons who may sell lottery tickets.

(5) Specific sporting, charitable, social, or other special events where lottery tickets may be sold or the Reserve Ticket Plan as provided in this part. Agents holding special lottery licenses shall be subject to all rules and regulations of the Secretary not inconsistent with this section.

The provisions of this § 805.15 amended December 7, 1973, effective December 8, 1973, 3 Pa.B. 2792.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.16 Sales by Bureau directly.

The Bureau may itself sell lottery tickets at any branch office it establishes in this Commonwealth.

History

• Source: The provisions of this § 805.

61 Pa. Code § 805.17 Revocation of license.

(a) The license of the agent may be suspended, revoked or its renewal rejected for any one, or any combination, of the following reasons:

(1) Whenever the application of the agent for a license contains false or misleading information.

(2) Whenever the agent violates any of the provisions of the act or the rules, regulations and instructions of the Secretary.

(3) Whenever the average weekly sale of tickets of an agent is below the minimum established by the Secretary.

(4) Whenever the business address of the agent is changed.

(5) Whenever an agent commits an act which seriously impairs his reputation for honesty and integrity.

(6) Whenever the agent does not display lottery point-of-sale material in a manner which is readily seen by and available to the public.

(7) Whenever the agent does not make purchase of lottery tickets convenient and readily accessible to the public.

(8) Whenever the agent has been convicted of a crime involving a moral turpitude.

(9) Whenever the agent has engaged in bookmaking or other form of illegal gambling.

(10) Whenever the agent has been found guilty of any fraud or misrepresentation in any connection.

(11) Whenever the Secretary finds that the experience, character, and general fitness of the agent are such that his participation as a lottery sales agent is inconsistent with the public interest, convenience and necessity, or for any other reason within the discretion of the Secretary.

(12) Whenever the agent is indebted to the Commonwealth or local government.

(b) Upon termination of the license of an agent for any reason, the agent shall appear at his assigned bank on a date designated by the Bureau for the purpose of rendering his final lottery accounting, surrender his agent’s license and other lottery property, and the bank shall thereupon complete the termination portion of the identification certificate. In such case, the bank shall deliver one copy thereof to the Bureau. Upon the failure of any agent to settle his account on or before the designated date, the bank shall immediately notify the Bureau which will at once take steps to impose such penalties and to exercise such enforcement powers as may be provided for by law.

The provisions of this § 805.17 amended December 12, 1980, effective December 13, 1980, 10 Pa.B. 4666. Immediately preceding text appears at serial page (45974).

The holder of a lottery license has a legitimate protected property right and is entitled to due process protection. Lee v. Department of Revenue, 492 A.2d 451 (Pa. Cmwlth. 1985); appeal denied 538 A.2d 878 (Pa. 1988).

History

• Source: The provisions of this § 805.

Chapter 807 Deposit of Lottery Funds by Agents and Lottery Accounts

61 Pa. Code § 807.1 Deposit of funds.

All lottery sales agents shall deposit to the credit of a specified State lottery fund in a designated bank all monies received by such agents from the sale of lottery tickets less the amount, if any, retained as compensation for the sale of the tickets or credit for the direct payment of prizes.

The provisions of this § 807.1 amended February 21, 1975, effective February 22, 1975, 5 Pa.B. 333.

History

• Source: The provisions of this § 807.

61 Pa. Code § 807.2 Filing reports of transactions.

All lottery sales agents shall file with the Bureau, or its designated agents, reports of their receipts and transactions in the sale of lottery tickets in such form and containing such information as it may require. In this connection, agents shall refer to procedures and instructions to authorized agents, made available to agents by the Bureau.

History

• Source: The provisions of this § 807.

61 Pa. Code § 807.3 Agents responsible for tickets.

All tickets accepted by an agent from the State lottery or its authorized representatives shall be deemed to have been purchased by the agent, unless returned to the bank from which they were obtained within the time specified, and the purchase price shall be paid to the State lottery, less the appropriate commission discount, if any. The agent shall be responsible for lost or missing tickets or loose tickets not returned in sequential order.

This section cited in 61 Pa. Code § 809.11 (relating to tickets unaccounted for).

History

• Source: The provisions of this § 807.

61 Pa. Code § 807.4 Lottery related functions.

The Bureau may make arrangements for any person to perform functions, activities or services in connection with the operation of the lottery as it may deem advisable pursuant to the act and this part and such functions, activities or services shall constitute lawful functions, activities, and services of such person. The bank, as a safekeeping facility, shall provide the Bureau with a weekly statement of all transactions made during the immediately preceding week. The Bureau will pay the bank a fee for the prescribed services performed.

History

• Source: The provisions of this § 807.

Chapter 811 Prizes

61 Pa. Code § 811.1 Notification.

At the conclusion of each weekly lottery, every agent shall cause the winning number to be posted in a prominent place in full view at the business location of the agent. In addition, the number chosen for entry into the final aspect of the millionaire drawing shall be so posted by all agents.

The provisions of this § 811.1 amended February 21, 1975, effective February 22, 1975, 5 Pa.B. 333.

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.11 Place of claiming.

(a) Cash prizes shall be claimed at an authorized claim center except the $15 Instant Pay prize which may be claimed from a licensed lottery agent. Winning tickets qualifying their holders as entrants into the millionaire drawing shall claim these tickets to enter these drawings.

(b) The Director, subject to approval of the Secretary, shall designate claim centers for the lottery program and advertise their locations.

The provisions of this § 811.11 amended February 21, 1975, effective February 22, 1975, 5 Pa.B. 333.

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.12 Claim form.

The claimant shall fill out the claim form which may be obtained from the claim center and present the completed form together with the winning ticket to a claim center. The Director may, in his discretion, require a verification on the claim form that the person claiming a prize is not an officer or employe of the Department or a person prohibited from claiming a prize.

This section cited in 61 Pa. Code § 819.231 (relating to procedure for claiming and payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.13 Winning number list.

The Bureau will provide the claim centers and lottery agents with a list of winning numbers for the 52 previous weeks.

This section cited in 61 Pa. Code § 819.231 (relating to procedure for claiming and payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.14 Claim center verification.

The claim center shall verify the claim, and if acceptable, deliver one copy of the claim form to the claimant. The claim center shall forward the winning ticket and a copy of the claim form to the Bureau for validation. Upon validation by the Bureau, a check shall be forwarded to the claimant in payment of the amount due. In the event that the claim is not validated, the claim shall be denied and the claimant shall be promptly notified.

This section cited in 61 Pa. Code § 819.231 (relating to procedure for claiming and payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.15 Ownership of lottery tickets.

Until such time as a name is imprinted or placed upon the rear portion of the lottery ticket in the area designated for name, a lottery ticket shall be owned by the physical possessor of the ticket. When a name is placed on the rear of the ticket in the designated place, the person whose name appears in that area shall be the owner of the ticket and shall be entitled to a prize attributable thereto. Notwithstanding a name submitted on a claim form, the Bureau shall make payment to the name appearing on the back of the ticket in the space designated therefor. However, if more than one name appears on the rear of the lottery ticket, one of those persons whose name appears thereon may be designated to receive payment. This may be done by indicating the name to which payment is to be made by an indication on the claim form and by the signature on the claim form of other persons whose names appear on the rear of the ticket. The person appearing for payment shall be the same as that which appears on the rear portion of the lottery ticket in the space designated.

This section cited in 61 Pa. Code § 819.231 (relating to procedure for claiming and payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.16 Prizes payable after death of prize winner.

Prizes or portions thereof will remain payable at the time of death of a prize winner. Upon payment as provided in this section, the Commonwealth will be absolved of further liability. Under no circumstances will the payment of prizes be accelerated before their normal date of tender or payment because of the death of a prize winner.

(1) Prizes or portions thereof not payable by an annuity contract will be payable to a designated beneficiary which the deceased prize winner may appoint by will. If a deceased winner of a prize not payable by an annuity contract fails to designate a party specifically or by residuary clause or fails to exercise a power of appointment in his will, then payment will be made directly to those parties who would succeed to the assets of the deceased prize winner under 20 Pa.C.S. Chapter 21 (relating to intestate succession).

(2) Prizes or portions thereof payable by an annuity contract will be payable to the party designated as a beneficiary on the latest valid beneficiary statement on file with the Commonwealth. If a winner of a prize or portion thereof payable by an annuity contract dies before completing a valid beneficiary statement or does not have a valid beneficiary statement on file with the Commonwealth at the time of death, then the prize or portion thereof will be payable according to paragraph (1).

The provisions of this § 811.16 amended through May 6, 1983, effective May 7, 1983, 13 Pa.B. 1581. Immediately preceding text appears at serial page (79720).

This section cited in 61 Pa. Code § 815.49 (relating to procedure for claiming and payment of prizes); 61 Pa. Code § 815.239 (relating to procedure for claiming and payment of prizes); 61 Pa. Code § 816.111 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 819.231 (relating to procedure for claiming and payment of prizes); 61 Pa. Code § 870.11 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 871.13 (relating to procedures for claiming and payment of Powerball prizes); 61 Pa. Code § 871.22 (relating to changes to Powerball); 61 Pa. Code § 872.11 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 873.9 (relating to determination of prize winners); 61 Pa. Code § 873.12 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 874.11 (relating to procedures for claiming and payment of prizes); and 61 Pa. Code § 875.11 (relating to procedures for claiming and payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.17 Unclaimed prize money.

Unclaimed prize money on a winning lottery ticket or share will be retained by the Secretary for payment to the person entitled thereto for 1 year after the drawing in which the prize was won. If no claim is made within that period, the prize money shall be paid into the State Lottery Fund and used for purposes as otherwise provided in this part so that no less than 40% of the lottery revenues are used for the payment of lottery prizes.

This section cited in 61 Pa. Code § 819.231 (relating to procedure for claiming and payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.21 Information to be furnished by winning ticket holder.

Each claimant shall fill out a winner claim form and shall supply his name, address and social security number or other identifying number and his winning ticket.

This section cited in 61 Pa. Code § 811.28 (relating to instant payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.22 Requirement of additional information.

The Director, at his discretion, may require additional information to be supplied by a claimant.

This section cited in 61 Pa. Code § 811.28 (relating to instant payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.23 Time of payment of prizes.

Payment of prizes shall be awarded as soon as reasonably possible after the claim has been filed, verified and the claimant has been identified to the satisfaction of the Director.

This section cited in 61 Pa. Code § 811.28 (relating to instant payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.24 Place of payment.

Payment of prizes shall be made to the claimant at one address that the claimant makes available to the Bureau in the claim form.

This section cited in 61 Pa. Code § 811.28 (relating to instant payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.25 Manner of payment.

Payment of prizes shall be made by a check or draft.

This section cited in 61 Pa. Code § 811.28 (relating to instant payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.26 Discharge of State liability upon payment.

The Commonwealth and its agents, officers and employes, the Department and its Secretary and Director, the Bureau and its agents, officers and employes shall be discharged of liability upon payment of a prize to the holder of a winning lottery ticket.

This section cited in 61 Pa. Code § 811.28 (relating to instant payment of prizes); 61 Pa. Code § 815.49 (relating to procedure for claiming and payment of prizes); 61 Pa. Code § 815.239 (relating to procedure for claiming and payment of prizes); 61 Pa. Code § 816.111 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 819.231 (relating to procedure for claiming and payment of prizes); 61 Pa. Code § 870.11 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 871.13 (relating to procedures for claiming and payment of Powerball prizes); 61 Pa. Code § 872.11 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 873.12 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 874.11 (relating to procedures for claiming and payment of prizes); and 61 Pa. Code § 875.11 (relating to procedures for claiming and payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.27 Payment of prizes to persons under 18 years of age.

(a) If the person entitled to a prize on a winning ticket is under the age of 18 years, and the prize is $10,000 or less, the Bureau will make payment of the prize as the court may direct, to the minor, guardian or other person under 20 Pa.C.S. Chapter 51 (relating to minors).

(b) If the person entitled to a prize on a winning ticket is under the age of 18 years, and the prize exceeds $10,000, the Bureau will make payment of the prize to the person as shall have been validly appointed a guardian of the estate of the minor child as provided by appropriate court order under 20 Pa.C.S. Chapter 51.

The provisions of this § 811.27 amended December 14, 1984, effective December 15, 1984, 14 Pa.B. 4526. Immediately preceding text appears at serial page (91067).

This section cited in 61 Pa. Code § 811.28 (relating to instant payment of prizes); 61 Pa. Code § 815.49 (relating to procedure for claiming and payment of prizes); 61 Pa. Code § 815.239 (relating to procedure for claiming and payment of prizes); 61 Pa. Code § 816.111 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 819.231 (relating to procedure for claiming and payment of prizes); 61 Pa. Code § 870.11 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 871.13 (relating to procedures for claiming and payment of Powerball prizes); 61 Pa. Code § 871.22 (relating to changes to Powerball); 61 Pa. Code § 872.11 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 873.12 (relating to procedures for claiming and payment of prizes); 61 Pa. Code § 874.11 (relating to procedures for claiming and payment of prizes); and 61 Pa. Code § 875.11 (relating to procedures for claiming and payment of prizes).

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.28 Instant payment of prizes.

The provisions of § § 811.21—811.27 (relating to payment of prize money) notwithstanding, prizes may be instantly paid in cash in the discretion of the Secretary, by a licensed agent directly to the prize winner upon presentation of identification and of a valid winning lottery ticket properly completed on the reverse side.

The provisions of this § 811.28 adopted February 21, 1975, effective February 22, 1975, 5 Pa.B. 333.

History

• Source: The provisions of this § 811.

61 Pa. Code § 811.41 Promotional prizes.

(a) Independently of, or concurrently with, the operation of the weekly lottery, the Secretary may, in his discretion, establish special drawings in order to award promotional prizes or their pecuniary value, such as vacation trips, automobiles, or other tangible items in addition to, or in lieu of, cash prizes. Cash prizes shall be determined by the Secretary; the value of the tangible items offered shall be considered only as a guide to the amount of the cash prize and not the determining factor, so as not to detract from the marketing and promotional value of the tangible items awarded to the winners. The nature and number of prizes will be determined as the case may be. Separate numbers may be imprinted on current lottery tickets or regularly imprinted tickets may be utilized to determine promotional prize winners. The drawing for the promotional prizes may be held independently of the regular prize drawings or may be incorporated therein. A winner of a regular weekly lottery drawing may also be entitled to a promotional prize if the appropriate number applicable thereto is also selected. The drawing for the promotional prize shall be held at times to be determined by the Secretary and shall be conducted in the same manner as that now provided for the selection of winning numbers in existing weekly lottery drawings. In view of the temporary nature and indeterminate frequency of promotional prize lotteries, a press announcement and normal advertising media will be utilized to inform the public. The Secretary may also establish incentive awards for lottery agents and persons selling winning tickets for promotional prizes, and may also, in his discretion, discontinue such awards without prior notice.

(b) Notwithstanding the provisions of subsection (a), the Secretary may, in his discretion, award in lieu equivalent cash prizes to the prize winners of tangible items, in those instances where deemed appropriate.

The provisions of this § 811.41 adopted August 31, 1973, effective September 1, 1973, 3 Pa.B. 1841; amended through October 21, 1977, effective October 22, 1977, 7 Pa.B. 3130.

Jurisdiction

Where the Commonwealth or one of its agencies are only incidentally involved with no interest in the outcome, the Commonwealth Court does not have exclusive jurisdiction. In this case, the lottery merely holds the proceeds to which the litigants seek, and upon resolution of the matter, will disburse the proceeds to the entitled party. Therefore, because the lottery is a mere disinterested party, jurisdiction is proper in this district court. Livingston v. Unis, 22 D & C 4th 32 (1994).

Nature of Lottery

Only where the lottery uses its profits for public projects does the lottery act as a government. Therefore, the doctrine of custodia legis is inapplicable and the lottery is not immune from attachment. Livingston v. Unis, 22 D & C 4th 32 (1994).

This section cited in 61 Pa. Code § 876.9 (relating to iLottery terms and conditions); 61 Pa. Code § 876.14a (relating to withdrawals from a lottery account); and 61 Pa. Code § 876.17 (relating to iLottery promotional prizes).

History

• Source: The provisions of this § 811.

Chapter 813 Disposition of Funds from Sale of Tickets or Shares

61 Pa. Code § 813.1 Monies received.

All monies received from the operation of the State lottery shall be deposited in the State Lottery Fund which is created by the act. Such monies shall be used to the extent necessary for the payment of lottery prizes but the amount so used shall not be less than 40% of the amount of which tickets or shares have been sold. All payments of lottery prizes and for expenses of operation of the lottery shall be made as provided by law. All monies remaining after payment of prizes and operating expenses shall be transferred to the general fund through June 30, 1972, after which date they shall remain in the State Lottery Fund and shall be allocated for the exclusive purpose of providing property tax relief for the elderly for taxes paid in 1971 and thereafter pursuant to the provisions of the Senior Citizens Property Tax or Rent Rebate Act of March 11, 1971 (P. L. 104, No. 3) (72 P. S. § § 4751-1—4751-12). In the event sufficient funds are not available from the lottery receipts to meet the requirements of such act, additional funds to fulfill this obligation shall be appropriated from the general fund for this purpose.

61 Pa. Code § 813.2 Appropriation of monies.

The monies in the State Lottery Fund shall be appropriated only as follows:

(1) For the payment of prizes to the holders of winning lottery tickets or shares.

(2) For the expenses of the division in its operation of the lottery.

(3) For property tax relief for the elderly as provided under section 12 of the act (72 P. S. § 3761.12).

(4) For transfer to the general fund through June 30, 1972, and for the repayment to the general fund of the amount appropriated to the fund pursuant to section 16 of the act (72 P. S. § 3761-1 note). All transfer of monies to the general fund through June 30, 1972, shall be treated on a fiscal year basis so that all ticket sale revenues and the payment of prizes and operating expenses from the State Lottery Fund shall be made during the 1971-72 fiscal year to the general fund on a monthly transfer basis. A final transfer of the entire balance of the State Lottery Fund to the general fund shall be made as of the close of business on June 30, 1972.

Chapter 816 Cash 5

61 Pa. Code § 816.101 Creation.

Under the act and this part a game is created, called Cash 5, which will commence at the discretion of the Secretary, and will continue until the Secretary publicly announces a termination date.

The provisions of this § 816.101 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.102 Purpose.

The purpose of the Cash 5 game is to determine winners from ticket holders matching five numbers from 1 through 39, or a designated combination thereof, with the five winning numbers randomly drawn once a week or as determined and publicly announced by the Secretary. The object of the game is for a player to have selected five numbers in a single play on a ticket which match two, three, four or five winning numbers drawn in the game drawing for which the ticket is participating. Correctly matching the five winning numbers drawn, or a designated combination thereof, and meeting the other validation criteria, entitles the ticket holder to a prize identified in § 816.108 (relating to determination of prizewinners).

The provisions of this § 816.102 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.103 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Apparent winning ticket—A standard game ticket bearing a winning play which has not been validated by the Lottery. Bet slip—A card used in marking a player’s bet containing one or more grids. Drawing—The process of selecting winning numbers which determine the number of winners for each prize level of the game. Game grid—The area of the bet slip which contains 39 squares numbered 1 through 39. A game grid is lettered and, when used to purchase a ticket, must be marked by the player to select the numbers to play and the amount to be played. On-line retailer or retailer—A person licensed to sell Lottery tickets who has been approved and authorized by the Lottery to sell Cash 5 tickets. Quick pick—The random selection through a Lottery terminal of five different numbers from 1 through 39 which appear on a ticket and are played by a player in the Cash 5 game. Standard game ticket or ticket—A Cash 5 ticket, produced by an on-line retailer in an authorized manner, containing a letter prefix followed by five selected numbers from 1 through 39, a drawing date, the amount bet and validation number data. Each set of 5 numbers constitutes a play of which there may be one or more plays on a ticket. Winning numbers—Five numbers, from 1 through 39, randomly selected at a Cash 5 drawing and subsequently verified by the Lottery, which shall be used to determine the winning plays contained on standard game tickets. Winnings pool—The amount allocated from Cash 5 gross sales for a particular Cash 5 game drawing for the purpose of paying prizes in a particular Cash 5 game drawing. The term does not include money brought forward from a previous Cash 5 game drawing.

The provisions of this § 816.103 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

This section cited in 61 Pa. Code § 816.104 (relating to ticket sales retailers).

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.104 Ticket sales retailers.

(a) Cash 5 game ticket sales may only be made through on-line retailers as defined in § 816.103 (relating to definitions).

(b) The Lottery may terminate sales by a retailer without prior notice if a retailer violates the act or this part, becomes delinquent in payment of proceeds due the Lottery, or fails to handle Lottery funds in the prescribed manner, or if the retailer fails to follow the contract or an addendum thereto, this part or procedures established governing the sale of Cash 5 tickets; or if the Lottery deems it to be in the best interests of the Commonwealth.

The provisions of this § 816.104 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.105 Ticket price.

The price of each Cash 5 ticket is $1 per game play which ticket shall contain one or more game plays.

The provisions of this § 816.105 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.106 Cash 5 bet slip and ticket characteristics and restrictions.

(a) The player shall select five numbered squares in a game grid on a bet slip or request number selection by quick pick. Bet slips shall be available at no cost to the purchaser. The minimum entry is $1. For $1, play game grid A, for $2, play game grids A and B, for $3, play game grids A, B and C, for $4, play game grids A, B, C and D, for $5, play game grids A, B, C, D and E. Game grids shall be selected in alphabetical order in accordance with the instructions printed on the bet slip. A bet slip has no pecuniary or prize value and does not constitute evidence of the purchase of a ticket or of numbers selected.

(b) To purchase a Cash 5 ticket, a player shall, in addition to the purchase price, submit the completed bet slip, or request number selection by quick pick, to an on-line retailer to have issued a standard game ticket. The ticket shall contain the five number selections played in each game grid identified by a letter as described in subsection (a), the drawing date, the amount bet and the validation number data. This standard game ticket shall be the only valid proof of the bet placed, and the only valid receipt for claiming a prize. The standard game ticket shall only be valid for the drawing date printed on the ticket.

(c) If bet slips are unavailable, plays may also be given to an authorized retailer in groups of five number selections for each game grid for each $1 wagered. The selections shall be manually entered into the computer terminal by the retailer.

(d) A Cash 5 ticket may not be canceled or voided once printed by the Lottery terminal, even if the ticket is printed in error.

(e) It is the sole responsibility of the ticket purchaser or holder to verify the accuracy and condition of data printed on the standard game ticket. The placing of bets is done at the player’s own risk through the on-line retailer who is acting on behalf of the player in entering the play or plays.

The provisions of this § 816.106 amended under section 303 of the State Lottery Law (72 P. S. § 3761-303).

The provisions of this § 816.106 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951; corrected March 20, 1992, effective March 7, 1992, 22 Pa.B. 1260; amended November 8, 2002, effective November 9, 2002, 32 Pa.B. 5516. Immediately preceding text appears at serial pages (249937) to (249938).

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.107 Time, place and manner of conducting drawing.

(a) Time of drawing. A Cash 5 drawing will be held once a week or as determined and publicly announced by the Secretary.

(b) Place of drawing. A Cash 5 drawing will be conducted by the Lottery at a location designated by the Secretary.

(c) Manner of conducting drawings. The Lottery will draw at random, five numbers between 1 and 39, with the aid of mechanical drawing equipment, which will be known as the winning numbers. The validity of a drawing will be solely determined by the Lottery.

The provisions of this § 816.107 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.108 Determination of prize winners.

(a) Prizes are determined on a parimutuel and fixed prize basis. The number of plays in a category entitled to claim a prize will be determined by the Lottery. Prizes awarded will be determined as follows:

(b) Prize money allocated to the fourth prize category will be deducted from the total winnings pool before allocation of moneys to the remaining prize categories.

(c) Parimutuel prize money allocated to the first prize category will be paid on a parimutuel basis, divided equally by the number of plays on standard game tickets determined by the Lottery to be entitled to claim a first prize.

(d) Prize money allocated to the second prize category will be paid on a parimutuel basis, divided equally by the number of plays on standard game tickets determined by the Lottery to be entitled to claim a second prize.

(e) Prize money allocated to the third prize category will be paid on a parimutuel basis, divided equally by the number of plays on standard game tickets determined by the Lottery to be entitled to claim a third prize.

(f) If, in a Cash 5 game drawing, there are no plays on standard game tickets which qualify for the first, second, third or fourth prize category, the parimutuel prize money allocated to the particular prize category will be reallocated and added to the amount allocated for the first prize category money in the next Cash 5 game drawing; and the resultant amount will be divided as in subsection (c).

(g) On winning Cash 5 plays, prizes will be paid as follows:

(1) Individual ticket prize payments will be paid entirely in cash.

(2) If more than one winning first prize play is determined, each, upon meeting the requirements of § § 816.110 and 816.111 (relating to ticket validation requirements; and procedures for claiming and payment of prizes), is entitled to a prorated payment share of the total first prize.

(3) If more than one winning second prize play is determined, each, upon meeting the requirements of § § 816.110 and 816.111, is entitled to a prorated payment share of the total second prize.

(4) If more than one winning third prize play is determined, each, upon meeting the requirements of § § 816.110 and 816.111, is entitled to a prorated payment share of the total third prize.

(5) Two winning numbers on a single play will be awarded a fixed prize of $1.

(h) A winning Cash 5 play may win in only one prize category per single lettered game grid in connection with the winning numbers drawn, and is entitled only to the highest prize won by those numbers.

(i) For purpose of calculation of a prize to be paid with respect to a standard game, the calculation will be rounded down so that prizes can be paid in multiples of 50¢.

(j) The number of prize categories and the allocation of prize money among the prize categories may be changed at the discretion of the Secretary and the change will be announced by public notice.

(k) Retailer incentive and marketing promotion programs may be implemented at the discretion of the Secretary. Funds for the programs will be drawn from the Lottery Fund.

The provisions of this § 816.108 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951; amended April 30, 1993, effective May 1, 1993, 23 Pa.B. 2121. Immediately preceding text appears at serial pages (168347) to (168349).

This section cited in 61 Pa. Code § 816.108 (relating to winnings pool).

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.109 Ticket responsibility.

(a) A Cash 5 ticket is a bearer document until signed. A Cash 5 prize claim is deemed to be submitted by the person whose name appears on the ticket or in the case of a ticket not completed with name and address, by the person holding the ticket.

(b) The Commonwealth will not be responsible for lost or stolen Cash 5 tickets.

(c) The purchaser of the Cash 5 ticket has the sole responsibility for checking the accuracy and condition of the data printed on the ticket at the time of the purchase.

(d) The Commonwealth will not be responsible for Cash 5 tickets redeemed in error by a player from an on-line retailer.

The provisions of this § 816.109 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.110 Ticket validation requirements.

(a) Valid tickets. To be a valid Cash 5 ticket and entitled to a prize, the following conditions shall be met:

(1) The ticket validation number shall be present in its entirety and shall correspond, using the computer validation file, to the selected numbers printed on the ticket for the date printed on the ticket.

(2) The ticket shall be intact.

(3) The ticket may not be mutilated, altered, reconstituted or tampered with.

(4) The ticket may not be counterfeit or an exact duplicate of another winning ticket.

(5) The ticket shall have been issued by the Lottery through an on-line retailer in an authorized manner.

(6) The ticket may not have been stolen.

(7) The ticket shall be validated in accordance with § 816.111 (relating to procedures for claiming and payment of prizes).

(8) The player selected or quick pick numbers on the ticket shall be in individual groups of five numbers each associated with a single letter, A, B, C, D or E, and the five numbers and the associated letter shall constitute a single play.

(9) The ticket data shall have been recorded on the central computer system prior to the drawing and the ticket data shall match the computer record in every respect.

(10) The ticket shall be signed and presented to the Lottery or its authorized representative as set forth in § 816.111 and validated at Lottery headquarters.

(11) The player selected or quick pick numbers, the validation number data and the drawing date of the winning ticket shall appear on the official file of winning plays; and a ticket with that exact data may not have been previously paid.

(12) The ticket may not be misregistered, defectively printed or printed or produced in error to an extent that it cannot, in the sole opinion of the Lottery, be processed by the Lottery.

(13) The ticket shall pass other confidential security checks of the Lottery.

(14) By submitting a Cash 5 ticket for validation, the player agrees to abide by this chapter as determined by the Director.

(15) There may not be another breach of this chapter in relation to the ticket which, in the opinion of the Director, justifies disqualification.

(b) Invalid or defective tickets; disputes. A ticket not passing the validation checks in subsection (a) will be considered invalid and will not be paid.

(1) In cases of doubt, the determination of the Secretary is final and binding. The Secretary may replace an invalid ticket with a ticket of equivalent sale price from a current Lottery game.

(2) If a defective ticket is purchased or if the Secretary determines to adjust an error, the sole and exclusive remedy will be the replacement of the defective or erroneous ticket with a ticket of equivalent sale price from a current Lottery game.

(3) If a ticket is not paid by the Lottery and a dispute occurs as to whether the ticket is a valid winning ticket, the Lottery may replace the ticket as provided in paragraph (2). This is the sole and exclusive remedy of the holder of the ticket.

The provisions of this § 816.110 amended under section 303 of the State Lottery Law (72 P. S. § 3761-303).

The provisions of this § 816.110 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951; amended November 8, 2002, effective November 9, 2002, 32 Pa.B. 5516. Immediately preceding text appears at serial pages (249941) to (249942).

This section cited in 61 Pa. Code § 816.108 (relating to determination of prize winners); and 61 Pa. Code § 816.111 (relating to procedures for claiming and payment of prizes).

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.111 Procedures for claiming and payment of prizes.

(a) A prize shall be claimed only through an on-line retailer beginning on the day following the drawing.

(b) An on-line retailer is authorized and required to make payment of a prize of $2,500 or less, if the ticket is presented within a designated time period as announced by the Secretary, on the total winning Cash 5 ticket plays, if the retailer has sufficient funds available for payment.

(c) The holder of an apparent winning ticket containing one or more winning plays representing total prizes of $2,500 or less will be paid by participating on-line retailers as provided in subsection (b), if the ticket validation requirements in § 816.110 (relating to ticket validation requirements) have been met, a proper validation pay ticket has been issued by the retailer’s computer terminal and other procedures have been complied with as outlined in the Retailer Operating Procedure for Pennsylvania Lottery Numbers Games and addendums thereof.

(d) The holder of an apparent winning ticket containing one or more winning plays representing total prizes in excess of $2,500, with the exception of the first prize category, shall first validate the apparent winning ticket at a participating on-line retailer to receive a validation ticket and then present the winning ticket and validation ticket to an authorized claim center—on-line retailer—under Chapter 811 (relating to prizes).

(e) The holder of an apparent winning ticket containing one or more winning plays representing a First Prize Category prize shall first validate the apparent winning ticket at a participating on-line retailer to receive a validation ticket and then present, in person, the apparent winning ticket and validation ticket to Lottery Headquarters or a Lottery Area Office under Chapter 811.

(f) If a single ticket contains two or more winning plays other than the first prize, the prize amounts will be added together and will be paid in accordance with the prize payment limits in subsection (c), (d) or (e).

(g) The payment of a prize to a person under 18 years of age and to a person who dies before receiving any or all of a particular prize will be paid under § § 811.16 and 811.27 (relating to prizes payable after death of prize winner; and payment of prizes to persons under 18 years of age).

(h) The Commonwealth will be discharged of liability after payment of prizes as provided in § 811.26 (relating to discharge of State liability upon payment).

The provisions of this § 816.111 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

This section cited in 61 Pa. Code § 816.108 (relating to determination of prize winners); and 61 Pa. Code § 816.110 (relating to ticket validation requirements).

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.112 Winnings pool.

(a) Fifty percent of Cash 5 gross sales for a Cash 5 game drawing will be reserved for prizes and allocated to the winnings pool for payment of prizes as enumerated in § 816.108 (relating to determination of prize winners).

(b) If the Cash 5 game is terminated for any cause, prize monies remaining undistributed will be paid out of the State Lottery Fund and used for purposes otherwise provided for by law.

(c) If the prize pool for a drawing is not sufficient to fund an announced minimum first prize, the prize pool will be increased as necessary from funds authorized for the payment of prizes.

The provisions of this § 816.112 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.113 Unclaimed prize money.

Prize money on a winning Cash 5 game play may be retained by the Secretary for payment to the person entitled to it. If no claim is made on a winning play as determined by the Secretary within 1 year of the drawing date on the ticket, the right to claim prize money terminates, and the prize money will be paid into the State Lottery Fund and used for purposes otherwise provided for by statute, so that at least 40% of Lottery sale revenues will be used for payment of prizes.

The provisions of this § 816.113 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.114 Withholding.

Federal withholding taxes will be withheld by the Lottery for prize payments in amounts required in accordance with applicable provisions of law.

The provisions of this § 816.114 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.115 Purchase and prize restrictions.

A Cash 5 ticket may not be purchased by, and a prize will not be paid to, an officer or employe of a Lottery professional services contractor or subcontractor, or to a spouse, child, brother, sister or parent residing in the same household of the contractor who is involved in the operation of the on-line lottery games system or its associated drawings.

The provisions of this § 816.115 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.116 Governing law.

(a) In purchasing a ticket, the purchaser agrees to comply with and abide by applicable laws, this part, instructions, conditions and final decisions of the Secretary, and procedures established by the Director for the conduct of the Cash 5 game.

(b) If a name and address is contained on the ticket, the person so named will, for all purposes, be considered to be the owner of the ticket. Number selections or other information appearing on the ticket will be deemed to be made or given exclusively by the owner.

(c) Decisions made by the Director or the Secretary, including the declaration of prizes and the payment thereof in their interpretation of this part, are final and binding on players and persons making a claim in respect thereof.

The provisions of this § 816.116 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

61 Pa. Code § 816.117 Probability of winning.

The following table sets forth the probability of winning and distribution of the winnings pool:

The provisions of this § 816.117 adopted March 6, 1992, effective March 7, 1992, 22 Pa.B. 951.

History

• Authority: The provisions of this § 816.
• Source: The provisions of this § 816.

Chapter 819 Instant Lottery Games.

61 Pa. Code § 819.201 Purpose.

This chapter establishes procedures for the creation of instant lottery games, sales of tickets, validation of winners, payment of prizes and compensation of retailers for instant lottery games conducted by the Pennsylvania State Lottery.

The provisions of this § 819.201 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.202 Governing law.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Bar code—The symbology on the ticket containing certain encrypted validation and accounting data used for identifying winning and losing tickets, in a position as published under § 819.203 (relating to notice of instant game rules). Bonus area—The area on a ticket which, when the coating is removed, reveals one or more bonus play symbols. Bonus play symbol—A character found in the bonus area on an instant lottery ticket which is identified by an accompanying caption. NTS number—The sequential number that identifies tickets within a pack. Pack—A number of instant lottery tickets bound together bearing a common pack number. Pack number—A numeric serial number used for accounting and control purposes which appears on each instant lottery ticket. Play area—The area on a ticket which, when the coating is removed, reveals one or more play symbols. Play symbol—A character found in the play area on an instant lottery ticket which is identified by an accompanying caption. Prize—The item or money that can be won as specified by the notice for each instant lottery game as published under § 819.203. Standards on file—Lottery specifications for the printing and production of an instant lottery game. Validation number—A unique serial number found on the ticket used for identifying winning and losing tickets, printed according to lottery standards on file. Winning ticket—An instant lottery ticket which has been validated and qualifies for a prize.

The provisions of this § 819.202 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.203 Notice of instant game rules.

Prior to the commencement of an instant lottery game, the Department will publish a notice in the Pennsylvania Bulletin containing, at a minimum, the following information about the instant lottery game:

(1) The name of the instant lottery game.

(2) The purchase price of an instant lottery ticket for that game.

(3) The play symbols and associated captions that will be used on the tickets printed for that game.

(4) The odds of that game and the prizes which can be won.

(5) The approximate number of tickets printed for the game.

(6) The number and description of prizes available to be awarded under that game.

(7) The existence of a finalist, grand prize, second chance or other offering, if applicable, and the procedure for the conduct of same, if applicable.

(8) The existence of retailer bonus programs, if any, and the rules for determining awards under the programs.

(9) Other information necessary for the conduct of the instant game.

The provisions of this § 819.203 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

This section cited in 61 Pa. Code § 819.202 (relating to definitions); 61 Pa. Code § 819.204 (relating to price); 61 Pa. Code § 819.211 (relating to determination of prize winning tickets); 61 Pa. Code § 819.213 (relating to ticket validation and requirements); and 61 Pa. Code § 819.222 (relating to retailer bonuses and incentives).

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.204 Price.

The purchase price of instant lottery tickets will be prescribed by the Secretary in conformance with the law. The purchase price for each instant ticket shall be published in the notice provided by § 819.203 (relating to notice of instant game rules).

The provisions of this § 819.204 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.205 Governing law.

Instant lottery games conducted by the Lottery will be governed by this chapter and the law. In purchasing a ticket, the customer agrees to comply with and abide by state statutes, this chapter, final decisions of the Secretary and procedures established by the Secretary for the conduct of the instant lottery games. Revenues generated by instant lottery games shall be apportioned as provided by law.

The provisions of this § 819.205 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.211 Determination of prize winning tickets.

(a) Instant lottery game prize winning tickets will be determined under this part and specific game notifications published in the Pennsylvania Bulletin under § 819.203 (relating to notice of instant game rules).

(b) A prize shall be paid only if the ticket meets the criteria established in § 819.213 (relating to ticket validation and requirements).

The provisions of this § 819.211 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.212 Ticket responsibility.

(a) An instant lottery game ticket is a bearer document.

(b) The Lottery is not responsible for a lost or stolen instant lottery game ticket.

(c) The Lottery is not responsible for a ticket redeemed by a player in error.

(d) A prize shall be claimed within 1 year of the announced end of the instant lottery game for which the ticket was issued.

The provisions of this § 819.212 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.213 Ticket validation and requirements.

(a) To be a valid instant lottery game ticket, the presented ticket shall meet the following conditions:

(1) A play symbol shall appear in each play area of the ticket in accordance with standards on file.

(2) Each play symbol shall be captioned, and each play symbol and caption shall agree with the play symbols and captions published in the Pennsylvania Bulletin under § 819.203 (relating to notice of instant game rules).

(3) Each play symbol and caption shall be printed according to Lottery standards on file.

(4) The ticket shall be intact.

(5) The ticket may not be mutilated, altered, unreadable, reconstituted or tampered with.

(6) The ticket may not be counterfeit in whole or in part.

(7) The ticket shall have been issued by the Lottery in an authorized manner.

(8) The ticket may not have been stolen.

(9) The play symbol, pack number and validation number shall be complete, shall be legible, shall be right-side-up, may not be reversed and shall appear on the ticket according to Lottery standards on file.

(10) The ticket shall be complete, not blank or partially blank, may not have a hole punched through it, may not be miscut, shall have the designated play symbol and caption in the play area, shall have exactly one validation number and exactly one pack number printed according to Lottery standards on file.

(11) The validation number of the ticket shall appear on the Lottery’s official file of validation numbers of winning tickets, and a ticket with that validation number may not have been previously paid.

(12) The ticket may not be misregistered, defective or produced in error.

(13) The printing on the ticket may not be irregular.

(14) The ticket shall pass additional confidential validation tests of the Lottery and shall be present on the Lottery’s validation file.

(b) A ticket not passing all validation checks in subsection (a) is not a valid instant lottery game ticket, is void, ineligible for a prize, and will not be paid. In cases of doubt, the Secretary will determine whether an instant Lottery ticket is valid under this section. The determination will be final and binding.

The provisions of this § 819.213 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

This section cited in 61 Pa. Code § 819.211 (relating to determination of prize winning tickets).

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.214 Defective tickets and disputes.

(a) The Secretary may permit the replacement of a ticket that has been determined to be invalid with an unplayed ticket or tickets of equivalent sale price from a current lottery game. If a defective ticket is purchased, the only liability of the Lottery will be the replacement of the defective ticket with another unplayed Pennsylvania instant lottery game ticket or tickets of equivalent sale price from a current Pennsylvania lottery game.

(b) If a ticket is not paid by the Lottery and a dispute occurs as to whether the ticket is a winning ticket, the Secretary may permit the replacement of the ticket as provided under subsection (a). This is the exclusive remedy to the holder of the ticket.

The provisions of this § 819.214 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.221 Retailers’ compensation.

The Lottery will compensate retailers who sell instant lottery game tickets. Compensation will be paid at a 5% rate for each ticket sold which compensation shall be deducted by the retailer from monies collected upon settlement.

The provisions of this § 819.221 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.222 Retailer bonuses and incentive.

(a) The Lottery may pay bonuses to retailers selling validated winning instant Lottery game tickets. The amount of the bonuses, if any, will be specified in the notice published in the Pennsylvania Bulletin under § 819.203 (relating to notice of instant game rules).

(b) The Lottery may conduct a separate Retailer Incentive Program for retailers who sell instant Lottery tickets. Notice of the Program will be announced to retailers through normal methods of communication.

The provisions of this § 819.222 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.223 Retailer conduct.

(a) A retailer shall sell a pack of tickets in ascending NTS sequence.

(b) A retailer is prohibited from exchanging a pack of tickets with another retailer.

(c) A retailer is prohibited from playing or selling a ticket using a method other than fair chance or a method that is contrary to the principle that every ticket has an equal and random chance of winning.

The provisions of this § 819.223 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.231 Procedure for claiming and payment of prizes.

(a) A prize shall be claimed through licensed lottery sales retailers.

(b) A prize shall be claimed within 1 year of the announced close of the instant lottery game.

(c) A lottery sales retailer is required to perform a validation process on all instant prize levels by entering certain data elements from the ticket through the terminal, or by using onsite bar code units provided by the Lottery and make immediate payment of authorized prizes up to and including $100.

(d) Other prizes shall be claimed at the lottery sales retailer. The retailer shall complete proper validation steps as outlined in the Pennsylvania Lottery Retailers Operating Procedure Manual and under § § 811.11—811.17 (relating to procedure for claiming prizes).

(e) The payment of a prize to a person who dies before receiving a particular prize or to a person 17 years of age or younger shall be paid according to § § 811.16 and 811.27 (relating to prizes payable after death of a prize winner; and payment of prizes to persons under 18 years of age).

(f) The Commonwealth is discharged from liability upon the payment of a prize under § 811.26 (relating to discharge of State liability upon payment).

The provisions of this § 819.231 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.232 Unclaimed prize money.

Unclaimed prize money on winning instant lottery game tickets will be retained by the Secretary for payment to the persons entitled thereto for 1 year from the announced close of the instant lottery game. If no claim is made within 1 year of the announced close of the instant lottery game conducted by the State Lottery under this chapter, the right of a ticket holder to claim the prize represented by that ticket, if any, shall expire and the prize money will be paid into the State Lottery Fund and used for purposes otherwise provided for by statute.

The provisions of this § 819.232 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.233 Withholding.

Federal withholding taxes will be withheld by the Lottery for prize payments as required by statute.

The provisions of this § 819.233 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.234 Finalist, grand prize, second chance or other offering procedures.

The notice published under § 819.203 (relating to notice of instant game rules) will state whether that instant lottery game will have a finalist, grand prize, second chance or other offering. An offering conducted pursuant to an instant lottery game will be governed by this section.

The provisions of this § 819.234 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.235 Purchase and prize restrictions.

An instant lottery game ticket may not be purchased by and a prize may not be paid to an officer or employe of a contractor, subcontractor or to a spouse, child, brother, sister or parent residing in the same household of a contractor or subcontractor who is involved in the production, distribution or the operation of systems for the validation or accounting of instant lottery games.

The provisions of this § 819.235 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.241 Termination of the game.

The Secretary may announce a termination date, after which no tickets from an instant lottery game may be sold, and a date by which eligible tickets for that instant lottery game can be included into a finalist, grand prize, second chance or other offering if that instant lottery game was participating in an offering under § 819.234 (relating to finalist, grand prize, second chance or other offering procedures). The announcement will be disseminated through media used to advertise or promote instant lottery games or through normal communications methods.

The provisions of this § 819.241 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

61 Pa. Code § 819.251 Applicability.

This chapter applies only to Pennsylvania instant lottery games initiated after the effective date of this chapter.

The provisions of this § 819.251 adopted December 17, 1993, effective December 18, 1993, 23 Pa.B. 5916.

History

• Source: The provisions of this § 819.

Chapter 870 Super 6 Lotto

61 Pa. Code § 870.1 Creation.

Under the act and this part, there is created a numbers game, called Super 6 Lotto, which will commence at the discretion of the Secretary, and will continue until the Secretary publicly announces a suspension or termination date.

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.2 Purpose.

(a) The purpose of the Super 6 Lotto Game is to determine winners from ticket holders matching six numbers from 1 through 69, or a designated combination thereof, within a single play, with the six winning numbers to be randomly drawn. Drawings will be conducted twice a week or as determined and publicly announced by the Secretary.

(b) The object of the game is for a player to select in a single play on a ticket six numbers that match the six winning numbers drawn for the game in which the ticket is participating. Correctly matching the six winning numbers drawn, or a designated combination thereof, and meeting other validation criteria, entitles the ticket holder to a prize identified in § 870.8 (relating to determination of prize winners).

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.3 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Apparent winning ticket—A ticket bearing winning numbers which has not been validated by the Lottery. Cash option—A method of payment that the player selects at the time of purchase of a Super 6 Lotto ticket to receive a pari-mutuel share of the prize money allocated to the first prize category as a cash payment, if the player is a holder of a winning ticket for that category. Drawing—The process of selecting winning numbers that determine the number of winners for each prize category of the game. Game section—The area of the Super 6 Lotto bet slip that contains five sections of 69 squares each numbered 1 through 69. Each section is lettered either A, D, G, J or M, and when used to purchase a ticket, corresponds to the numbers selected and the numbers that are quick picked and printed on the ticket. On-line retailer or retailer—A person who is properly authorized by the Lottery to sell tickets. Quick pick—The random selection through a Lottery terminal of six different numbers from 1 through 69 that appear on a ticket and are played by a player in the Super 6 Lotto Game. Super 6 Lotto bet slip—A card having a game section used by a player to play the game. Ticket—A Super 6 Lotto ticket, produced by a licensed retailer in an authorized manner, containing a letter prefix followed by six selected numbers from 1 through 69 and followed by two additional sets of six numbers from 1 through 69 each preceded by a letter prefix quick picked as bonus selections, a drawing date, the amount bet, cash option selection, if applicable, and validation number data. Each set of six numbers constitutes a play, of which there may be three or more, in multiples of three up to fifteen on a ticket. Winning numbers—Six numbers, from 1 through 69, selected at a Super 6 Lotto drawing and which have been subsequently validated by the Lottery, which shall be used to determine the winning Super 6 Lotto plays on tickets. Winnings pool—The amount allocated from Super 6 Lotto gross sales for a particular Super 6 Lotto Game drawing for the purpose of paying prizes in a particular Super 6 Lotto drawing. Money brought forward is allocated to the first prize category as provided in § 870.8(f) (relating to determination of prize winners).

The provisions of this § 870.3 amended under section 303 of the State Lottery Law (72 P.S. § 3761-303).

The provisions of this § 870.3 amended November 8, 2002, effective November 9, 2002, 32 Pa.B. 5516. Immediately preceding text appears at serial page (246858).

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.4 Ticket sales retailers.

(a) Super 6 Lotto Game ticket sales may only be made through licensed retailers the Director will appoint and contract with as provided in § 815.42 (relating to ticket sales agents).

(b) The Lottery may terminate sales by a retailer without prior notice to the retailer if the retailer becomes delinquent in payment of proceeds due the Lottery, or fails to handle Lottery funds in the prescribed manner, or if the retailer fails to follow the contract or an addendum thereof, this part or procedures established governing the sale of tickets or if the Lottery deems it to be in the best interest of the Commonwealth.

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.5 Ticket price.

Tickets may be purchased for $1 per ticket, which ticket shall consist of three individual game plays, one of which, at the owner’s option can be the numbers selected by the player; the remaining two number plays are quick pick selections. Additional tickets may, at the discretion of the player, be purchased in increments of three individual game plays per $1 wagered.

The provisions of this § 870.5 amended under section 303 of the State Lottery Law (72 P. S. § 3761-303).

The provisions of this § 870.5 amended November 8, 2002, effective November 9, 2002, 32 Pa.B. 5516. Immediately preceding text appears at serial page (246859).

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.6 Super 6 Lotto bet slip and ticket characteristics and

(a) The player shall select, or request selection by computer, six numbered squares, in one or more of the game sections on a Super 6 Lotto bet slip. Super 6 Lotto bet slips shall be available at no cost to the player. The minimum entry is $1. For $1, play game A; for $2, play games A and D; for $3, play games A, D and G; for $4, play games A, D, G and J; for $5, play games A, D, G, J and M. Game sections shall be selected in alphabetical order in accordance with the instructions printed on the Super 6 Lotto bet slip. A Super 6 Lotto bet slip has no pecuniary or prize value and does not constitute evidence of the purchase of a ticket or the numbers selected.

(b) To purchase a ticket, players shall, in addition to the purchase price, submit the completed Super 6 Lotto bet slip, or request number selection, either by quick pick or manual terminal entry, to an on-line retailer to have issued a ticket. The ticket shall contain three six number selections, two of which will be quick pick selections, in each game section, (for each $1 wagered) identified by a letter, the drawing date, amount bet, cash option selection if applicable, and validation number data. This ticket shall be the only valid proof of the bet placed, and the only valid receipt for claiming a prize. The ticket shall only be valid for the drawing date printed on the ticket.

(c) If Super 6 Lotto bet slips are unavailable, number selections may be given to an on-line retailer in groups of six number selections, one for each game section, for each $1 wagered. The selections shall be manually entered into the computer terminal by the retailer.

(d) A Super 6 Lotto ticket may not be canceled or voided once printed by the Lottery terminal, even if the ticket is printed in error.

(e) It is the sole responsibility of the ticket holder to verify the accuracy and condition of data printed on the ticket. The placing of bets is done at the player’s own risk through the on-line retailer who is acting on behalf of the player in entering the play or plays.

The provisions of this § 870.6 amended under section 303 of the State Lottery Law (72 P. S. § 3761-303).

The provisions of this § 870.6 amended November 8, 2002, effective November 9, 2002, 32 Pa.B. 5516. Immediately preceding text appears at serial pages (246859) to (246860).

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.7 Time, place and manner of conducting drawing.

(a) Time of drawing. A Super 6 Lotto drawing will be held twice a week or as determined and publicly announced by the Secretary.

(b) Place of drawing. A Super 6 Lotto drawing will be conducted in the Harrisburg area unless the Secretary directs that a drawing or part of the drawing procedure be conducted at some other location.

(c) Manner of conducting drawings. The Lottery will draw at random, six numbers from a set of balls numbered from 1 through 69, with the aid of mechanical drawing equipment. The validity of a drawing will be solely determined by the Lottery.

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.8 Determination of prize winners.

(a) The pari-mutuel prize to be awarded to an owner of an apparent winning ticket will be determined as follows:

(b) Prize money allocated to the first prize category will be paid on a pari-mutuel basis, divided equally by the number of plays on tickets determined by the Lottery to be entitled to claim a first prize.

(c) Prize money allocated to the second prize category will be paid on a pari-mutuel basis, divided equally by the number of plays on tickets determined by the Lottery to be entitled to claim a second prize.

(d) Prize money allocated to the third prize category will be paid on a pari-mutuel basis, divided equally by the number of plays on tickets determined by the Lottery to be entitled to claim a third prize.

(e) Prize money allocated to the fourth prize category will be paid on a pari-mutuel basis, divided equally by the number of plays on tickets determined by the Lottery to be entitled to claim a fourth prize.

(f) If, in a Super 6 Lotto drawing, there are no plays on tickets which qualify for a particular prize category, the pari-mutuel prize money allocated to the particular prize category will be reallocated and added to the amount allocated for the first prize category money in the next Super 6 Lotto drawing.

(g) Super 6 Lotto prizes will be paid as follows:

(1) Individual ticket prize payments will be paid entirely in cash with the exception of the first prize category.

(2) Prizes payable to the first prize category winners will be paid either by an initial cash payment plus equal annual payments over a specified term of 25 years or a one-time cash payment if the owner selected the cash option at the time of purchase.

(3) If more than one winning first prize play is determined, each, upon meeting the requirements of § § 870.10 and 870.11 (relating to ticket validation requirements; and procedures for claiming and payment of prizes), is entitled to a prorated payment share of the total first prize category.

(4) For first prize category payments, the total one-time cash payment for the first prize category will be in an amount which is the greater of either the cash available in the winnings pool for the first prize category or the announced cash option amount; or, if the annuity option is selected at the time of purchase, the total of the initial and annual payments over the term for the first prize will be the greater of either the announced annuity jackpot or the annuity that could be purchased with the cash available in the winnings pool for the first prize category. The minimum jackpot will be at least $500,000. The annuity will be paid in an initial cash payment plus equal annual payments over a specified term of 25 years. If more than one winning play is determined, each is entitled to a prorated share of the total first prize category as provided in paragraph (3).

(5) For first prize category payments, the Secretary may elect to make payment entirely as a one-time cash payment, if public notice is given in accordance with subsection (j). This one-time cash payment shall be the amount equal to the greater of either the cash available in the winnings pool for the first prize category or the announced cash option jackpot.

(h) A winning Super 6 Lotto play is entitled only to the highest prize won by those numbers.

(i) For purpose of calculating a Super 6 Lotto prize, the amount to be paid will be rounded down to the nearest 50¢.

(j) The number of prize categories, the allocation of prize money among the prize categories and the annuity term may be changed at the discretion of the Secretary and the change will be announced by public notice. The changes will only apply prospectively to Super 6 Lotto drawings as of the date specified in the public notice. (See 34 Pa.B. 273 (January 10, 2004).)

(k) Retailer incentive and marketing promotion programs, including the use of unfunded free tickets, may be implemented at the discretion of the Secretary. Funds for the programs, if needed, will be drawn from the Lottery fund.

The provisions of this § 870.8 amended under section 303 of the State Lottery Law (72 P. S. § 3761-303).

The provisions of this § 870.8 amended November 8, 2002, effective November 9, 2002, 32 Pa.B. 5516. Immediately preceding text appears at serial page (246860) to (246862).

This section cited in 61 Pa. Code § 870.2 (relating to purpose); 61 Pa. Code § 870.3 (relating to definitions); and 61 Pa. Code § 870.12 (relating to pari-mutuel prize pool).

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.9 Ticket responsibility.

(a) A ticket is a bearer document deemed to be owned by the person holding the ticket, except that if a name is contained on the ticket, the person so named will, for all purposes, be considered the owner of the ticket.

(b) The Commonwealth will not be responsible for lost or stolen tickets.

(c) The purchaser of the ticket has the sole responsibility for checking the accuracy and condition of the data printed on the ticket.

(d) The Commonwealth will not be responsible for tickets redeemed in error by a player from an on-line retailer.

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.10 Ticket validation requirements.

(a) Valid tickets. To be a valid ticket, the following conditions shall be met:

(1) The ticket validation number shall be present in its entirety and shall correspond, using the computer validation file, to the selected numbers printed on the ticket for the date printed on the ticket.

(2) The ticket shall be intact.

(3) The ticket may not be mutilated, altered, reconstituted or tampered with.

(4) The ticket may not be counterfeit or an exact duplicate of a winning ticket.

(5) The ticket shall have been issued by the Lottery through a licensed retailer.

(6) The ticket may not have been stolen.

(7) The ticket shall be validated in accordance with § 870.11 (relating to procedures for claiming and payment of prizes).

(8) The player-selected or computer-selected numbers on the ticket shall be in individual groups of six numbers each associated with a single letter, A, B, C, D, E, F, G, H, I, J, K, L, M, N or O and the six numbers, and the associated letter shall constitute a single game play.

(9) The ticket data shall have been recorded on the Lottery’s central computer system prior to the drawing and the ticket data shall match this computer record in every respect.

(10) The player selected or computer selected numbers, cash option selection, if applicable, the validation number data and the drawing date of an apparent winning ticket shall appear on the official file of winning tickets; and a ticket with that exact data may not have been previously paid.

(11) The ticket may not be misregistered, defectively printed, or printed or produced in error to an extent that it cannot be processed by the Lottery.

(12) The ticket shall pass other confidential security checks of the Lottery.

(13) By submitting a ticket for validation, the player agrees to abide by this chapter as determined by the Secretary.

(14) There may not be another breach of this part in relation to the ticket which, in the opinion of the Secretary, justifies disqualification.

(b) Invalid or defective tickets/disputes. A ticket not passing the validation checks in subsection (a) will be considered invalid and will not be paid.

(1) In cases of doubt, the determination of the Secretary is final and binding. The Secretary may replace an invalid ticket with a ticket of equivalent sale price from a current Lottery game.

(2) If a defective ticket is purchased or if the Secretary determines to adjust an error, the sole and exclusive remedy will be the replacement of the defective or erroneous ticket with a ticket of equivalent sale price from a current Lottery game.

(3) If a ticket is not paid by the Lottery and a dispute occurs as to whether the ticket is a winning ticket, the Lottery may replace the ticket as provided in paragraph (2). This is the sole and exclusive remedy of the holder of the ticket.

The provisions of this § 870.10 amended under section 303 of the State Lottery Law (72 P. S. § 3761-303).

The provisions of this § 870.10 amended November 8, 2002, effective November 9, 2002, 32 Pa.B. 5516. Immediately preceding text appears at serial pages (246862) to (246863).

This section cited in 61 Pa. Code § 870.8 (relating to determination of prize winners); and 61 Pa. Code § 870.11 (relating to procedures for claiming and payment of prizes).

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.11 Procedures for claiming and payment of prizes.

(a) A prize shall be claimed only through a licensed on-line retailer beginning on the day following the drawing.

(b) An on-line retailer is authorized and required to make payment of a prize of $2,500 or less, if the ticket is presented within a designated time period as announced by the Secretary, on an individual winning ticket, if the retailer has sufficient funds available for payment.

(c) The holder of an apparent winning ticket containing a single lettered game play selection representing a prize of $2,500 or less will be paid by participating on-line retailers as provided in subsection (b), if the ticket validation requirements in § 870.10 (relating to ticket validation requirements) have been met, a proper validation pay ticket has been issued by the retailer’s computer ter minal and other procedures have been complied with as outlined in the Retailer Operating Procedure for Pennsylvania Lottery Numbers Games and addendum’s thereto.

(d) The holder of an apparent winning ticket containing a single game play selection representing a prize in excess of $2,500, with the exception of the First Prize Category, shall first validate the apparent winning ticket at a participating on-line retailer to receive a validation ticket and then present the winning ticket and validation ticket to an authorized claim center—on-line retailer—under Chapter 811 (relating to prizes).

(e) The holder of an apparent winning ticket containing a single game play selection representing a First Prize Category prize shall first validate the apparent winning ticket at a participating on-line retailer to receive a validation ticket and then present, in person, the apparent winning ticket and validation ticket to Lottery Headquarters or a Lottery Area Office under Chapter 811.

(f) The payment of a prize to a person who dies before receiving any or all of a particular prize and to a person under 18 years of age will be paid under § § 811.16 and 811.27 (relating to prizes payable after death of prize winner; and payment of prizes to persons under 18 years of age).

(g) The Commonwealth will be discharged of liability after payment of prizes as provided in § 811.26 (relating to discharge of State liability upon payment).

This section cited in 61 Pa. Code § 870.8 (relating to determination of prize winners); and 61 Pa. Code § 870.10 (relating to ticket validation requirements).

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.12 Pari-mutuel prize pool.

(a) Fifty-two percent of Super 6 Lotto gross sales for a Super 6 Lotto drawing will be reserved for prizes and allocated to the winnings pool for payment of prizes as enumerated in § 870.8 (relating to determination of prize winners).

(b) If the Super 6 Lotto is terminated for any cause, prize monies remaining undistributed will be paid out of the State Lottery Fund and used for purposes otherwise provided for by law.

(c) If the prize pool for a drawing is not sufficient to fund an announced minimum first prize, the prize pool will be increased as necessary from funds authorized for the payment of prizes.

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.13 Unclaimed prize money.

Prize money on a winning Super 6 Lotto play may be retained by the Secretary for payment to the person entitled to it. If within 1 year of the drawing date on the ticket, no claim is made on a winning play, as determined by the Secretary, the right to claim prize money terminates, and the prize money will be paid into the State Lottery Fund and used for purposes otherwise provided for by statute.

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.14 Withholding.

Federal withholding taxes will be withheld by the Lottery for prize payments in amounts required in accordance with applicable provisions of law.

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.15 Purchase and prize restrictions.

A ticket may not be purchased by, and a prize will not be paid to, an officer or employe of the Lottery professional services contractor or subcontractor, or to a spouse, child, brother, sister or parent residing in the same household of the contractor who is involved in the operation of the on-line lottery games system or its associated drawings.

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.16 Governing law.

(a) In purchasing a ticket, the purchaser agrees to comply with and abide by applicable laws, this part, instructions, conditions and final decisions of the Secretary, and procedures established by the Director for the conduct of the Super 6 Lotto.

(b) Decisions made by the Director or the Secretary including the declaration of prizes and the payment thereof in interpretation of this part are final and binding on players and persons making a claim in respect thereof.

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

61 Pa. Code § 870.17 Probability of winning.

History

• Authority: The provisions of this Chapter 870 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 870 adopted August 14, 1998, effective August 15, 1998, 28 Pa.

Chapter 871 Powerball

61 Pa. Code § 871.1 Creation.

Under the act and this part, there is created a numbers game, called Powerball, which will commence at the discretion of the Secretary, and will continue until the Secretary publicly announces a suspension or termination date.

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.2 Game description and purpose.

(a) Powerball is a five out of 49 plus one out of 42 on-line lottery game which pays the grand prize on an annuitized, parimutuel basis. Except as provided in this chapter, all other prizes are paid on a set cash basis.

(b) The purpose of the Powerball game is to determine winners from ticket holders matching five numbers from 1 through 49, and matching the separately drawn Powerball number, or a designated combination thereof, within a single play, with the five winning numbers and the Powerball number to be randomly drawn. Drawings will be conducted twice a week or as publicly announced by the Secretary.

(c) The object of the game is for a player to select, in a single play on a ticket, five numbers and the Powerball number that match the numbers and the Powerball number drawn for the game in which the ticket is participating. Correctly matching the six winning numbers consisting of the five numbers drawn plus the Powerball number drawn, and meeting other validation criteria, entitles the ticket holder to the grand prize identified in § 871.8 (relating to expected prize payout percentages).

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.3 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Apparent winning ticket—A ticket which has not been validated by the Lottery. Basic play—Each set of six numbers consisting of five numbers from 1 through 49 and the Powerball number on a ticket purchased without the selection of any promotion, representing a single entry for a Powerball drawing and designated by a letter from A to E on a Powerball ticket. Cash election—A method of payment that the player selects, within 60 days of the date the Lottery determines the player is entitled to the Powerball grand prize, to receive a parimutuel share of the prize money allocated to the grand prize category as a one-time, lump-sum cash payment rather than as an annuity. Drawing—The process of selecting winning numbers that determines the winners for each prize category of the game. First set numbers—The first group of numbers, from 1 through 49, appearing in the top grid of a Powerball game panel. Grand prize winnings pool—An amount constituting 29.1942% of gross sales from all participating states for a particular Powerball game drawing for the purpose of paying winning grand prizes in that drawing. The grand prize winnings pool includes prize money allocated to the grand prize category from prior Powerball game drawings in which there were no winning grand prize tickets. A portion of this pool is used to fund prize reserve accounts until those accounts achieve maximum balances. Gross sales—The total amount of sales from all participating states for a particular Powerball game drawing for the purpose of determining the grand prize winnings pool and the set prize winnings pool in that drawing. MUSL—The Multi-State Lottery Association. MUSL Board—The governing body of the MUSL which is comprised of the chief executive officer of each party lottery. MUSL Powerball Product Group—The group of lotteries that have joined together to offer the Powerball lottery game under the terms of the MUSL agreement and MUSL Powerball Product Group rules. On-line retailer—A person who is properly licensed and authorized by the Lottery to sell Powerball tickets. Panel or game panel—One of five areas of the Powerball bet slip that contains two number grids. The upper grids (first set numbers) contain 49 squares, each numbered 1 through 49 and the lower grids (second set numbers) contain 42 squares, each numbered 1 through 42. Each panel is lettered either A, B, C, D or E, and when used to purchase a ticket, corresponds to the numbers selected and printed on the ticket adjacent to that letter. Party lottery—A State lottery or lottery of a political subdivision or entity which has joined the MUSL and, in the context of the Powerball Group Rules, which has joined in selling the Powerball game. Powerball bet slip—A card having five game panels labeled A through E, used by a player to select numbers to play the game. Powerball number or second set number—The number selected from the second group of numbers, from 1 through 42, appearing in the lower grid of a Powerball game panel. Promotion—A method used by the Lottery to aid in the sale of its products; for example, an option a player may exercise by purchase to increase the prize paid on a winning ticket or to increase the chance of winning a prize. Quick pick—The random selection by the Lottery’s computer system of five numbers from 1 through 49 and a Powerball number from 1 through 42 that appear on a ticket in the Powerball game. Second set numbers—The second group of numbers, from 1 through 42, appearing in the lower grid of a Powerball game panel. Set prize tiers—All prizes except the grand prize that are advertised to be paid by a single lump-sum payment and, except in instances outlined in this chapter, will be equal to the prize amount established by the MUSL Board for the prize level. Set prize winnings pool—An amount constituting 20.8058% of gross sales for the current drawing and any monies carried forward from previous draws. Terminal—A device which is authorized by the Lottery to function in an on-line, interactive mode with the Lottery’s computer system, for the purpose of issuing lottery tickets and entering, receiving and processing lottery transactions, including making purchases, validating tickets and transmitting reports. Ticket—A Powerball ticket, produced by an on-line terminal from a licensed on-line retailer in an authorized manner, containing a letter prefix followed by five selected numbers from 1 through 49 and a single selected Powerball number from 1 through 42 for each basic play, ticket validation number data, drawing date, amount bet and any applicable promotion exercised by the player. Each set of five numbers and the Powerball number constitutes a basic play of which there may be one or more, up to five on a ticket. Winning numbers—Six numbers, the first five numbers from 1 through 49, and the Powerball number from 1 through 42, selected at a Powerball drawing and subsequently validated by the MUSL, which shall be used to determine the winning Powerball plays. Winnings pool—Constitutes 50% of each prize drawing period gross sales. A portion of the pool is contributed to the grand prize winnings pool. The remainder constitutes the set prize winnings pool. Moneys carried forward from previous draws are combined with the pool as directed in the MUSL rules.

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.4 Ticket sales retailers.

(a) Powerball game ticket sales may only be made through licensed on-line retailers the Director will appoint and contract with as provided in § 815.42 (relating to ticket sales agents).

(b) The Lottery may terminate sales by a retailer without prior notice to the retailer if the retailer becomes delinquent in payment of proceeds due the Lottery, fails to handle Lottery funds in the prescribed manner, if the retailer breaches the contract or an addendum thereof, this part or procedures established governing the sale of tickets or if the Lottery deems it to be in the best interest of the Commonwealth.

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.5 Ticket price.

A Powerball ticket shall cost $1 per play. The power play option may be exercised, at the discretion of the player, for an additional $1 per play.

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.6 Powerball bet slip and ticket characteristics and restrictions.

(a) For each basic play the player shall select, or request quick pick selection by the computer, five numbers and a single Powerball number, in one or more of the game panels on a Powerball bet slip. Powerball bet slips shall be available at no cost to the player. The minimum entry is $1. For $1, play game A; for $2, play games A and B; for $3, play games A, B and C; for $4, play games A, B, C and D; for $5, play games A, B, C, D and E. Players are also given the option to select a promotion verbally or on the bet slip at the time of purchase for an additional $1 for each play. Game panels shall be played in alphabetical order in accordance with the instructions printed on the Powerball bet slip. A Powerball bet slip has no pecuniary or prize value and does not constitute evidence of the purchase of a ticket or the numbers selected.

(b) To purchase a ticket, players shall, in addition to the purchase price, submit a completed Powerball bet slip, or request number selections either by quick pick or manual terminal entry to an on-line retailer to have a ticket issued. The ticket shall contain five selected numbers and a single selected Powerball number for each play, ticket validation number data, drawing date, amount bet and any applicable promotion exercised by the player. This ticket shall be the only valid receipt for claiming a prize. The ticket shall only be valid for the drawing date or dates printed on the ticket. Retailers are not permitted to allow the attachment of any remote devices to a lottery terminal to enter plays except as otherwise provided in the MUSL rules.

(c) If Powerball bet slips are unavailable, number selections may be given to an on-line retailer in groups of five number selections and one Powerball number selection per game section for each $1 wagered as a basic play. The retailer shall manually enter the selections into the computer terminal.

(d) A Powerball ticket may not be canceled or voided once printed by the Lottery terminal, even if the ticket is printed in error.

(e) It shall be the sole responsibility of the player to verify the accuracy of the game play or plays and other data printed on the ticket. The placing of plays is done at the player’s own risk through the on-line retailer who is acting on behalf of the player in entering the play or plays.

(f) A player may select numbers for up to 26 drawings, specifically the next drawing and the 25 subsequent drawings.

(g) A ticket may not be issued for a drawing after the specified sales cut-off time prior to the drawing, as announced by the Secretary or a designee.

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.7 Time, place and manner of conducting drawing.

(a) Time of drawing. A Powerball drawing will be held twice a week or as publicly announced by the Secretary.

(b) Place of drawing. A Powerball drawing will be conducted in a location selected by the MUSL in West Des Moines, Iowa, or other location selected by the MUSL for promotional or other reasons.

(c) Manner of conducting drawings. The MUSL will draw at random five numbers from a set of balls numbered 1 through 49 and one Powerball number from a set of balls numbered 1 through 42 with the aid of mechanical drawing equipment. All drawings will be observed by security personnel and independent auditors and the validity of a drawing will be solely determined by the MUSL.

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.8 Expected prize payout percentages.

(a) Determination of expected prize payout percentages is as follows:

• Indicates a set prize.

** Fifty percent of Powerball gross sales are allocated to the winnings pool for the payment of prizes.

(b) Prize money allocated to the grand prize category will be paid on a parimutuel basis, divided equally by the number of plays determined by the MUSL to be the winners of the grand prize.

(c) The number of plays determined by the MUSL to be winners of the second through ninth prize categories will be paid as set cash prizes, except as provided in paragraphs (1) and (2).

(1) If the total of the set prizes awarded in a Powerball drawing exceeds the set prize pool which is 20.8058% of gross sales, the amount needed to fund the set prizes shall be drawn from the following sources in the following order:

(i) The amount allocated to the set prize tiers and carried forward from previous draws, if any.

(ii) An amount from the MUSL set prize reserve account, if available, not to exceed $25,000,000 per Powerball drawing.

(2) If the sources set forth in paragraph (1) are depleted and there still are not sufficient funds to pay the set prizes for a particular Powerball drawing, the highest set prize shall become a parimutuel prize. If the amount of the highest set prize, when paid as a parimutuel prize, is less than or equal to the next highest set prize and there are still not sufficient funds to pay the remaining set prizes, the next highest set prize shall become a parimutuel prize. If necessary, and under the same test conditions set forth in the preceding sentence, each succeeding set prize level shall be converted to a parimutuel prize, in order, until all set prizes become parimutuel. If all set prizes are converted to parimu-tuel prizes, the money available from the funding sources listed in paragraph (1) shall be divided among the winning plays in proportion to their respective prize percentages.

(3) If all, or any portion of the set prize pool is not awarded in the current Powerball drawing, that portion of the set prize pool shall be carried forward to subsequent Powerball drawings.

This section cited in 61 Pa. Code § 871.2 (relating to game description and purpose); 61 Pa. Code § 871.10 (relating to funding of guaranteed prizes); 61 Pa. Code § 871.20 (relating to power play promotion); and 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.9 Powerball prize payments.

(a) Individual ticket prize payments will be paid entirely in cash with the exception of the grand prize category.

(b) A grand prize shall be paid by an annuity except that a player may elect to receive the grand prize in a single cash payment provided the cash election is made by the player within 60 days of the date the Lottery determines that a grand prize winning ticket has been sold and that a player is entitled to the prize.

(1) An election to receive the grand prize by annuity or cash made by the player after the player becomes entitled to the prize is final and cannot be revoked, withdrawn or otherwise changed.

(2) Shares of the grand prize shall be determined by dividing the cash available in the grand prize pool equally among all winners of the grand prize. A winner who elected cash payment shall be paid the share in a single cash payment.

(3) The annuitized prize shall be determined by multiplying a winner’s share of the grand prize by the MUSL annuity factor.

(c) The MUSL annuity factor is determined by the best total securities price obtained through a competitive bid of qualified, preapproved brokers made after it is determined that the prize is to be paid as an annuity prize or after the expiration of 60 days of the date that the player becomes entitled to the prize.

(d) Neither the MUSL nor the Lottery shall be responsible or liable for changes in the advertised or estimated annuity prize from the time the drawing occurs and the date that the player makes the election regarding method of prize payment.

(e) All annuitized prizes shall be paid in 25 annual payments with the initial payment being made in cash, to be followed by 24 equal payments funded by the annuity. The initial payment of an annuitized prize may be made by the Lottery upon validation of the winning ticket.

(f) If the individual shares of the cash held to fund an annuity is less than $250,000, the MUSL Powerball Product Group, in its sole discretion, may elect to pay the winners their share of the cash held in the grand prize pool as a lump sum.

(g) If more than one winning ticket for the grand prize is determined, upon meeting the requirements of § § 871.12 and 871.13 (relating to ticket validation requirements; and procedures for claiming and payment of Powerball prizes), each is entitled to a prorated payment share of the total grand prize category.

(h) A winning Powerball play is entitled only to the highest prize won by those numbers.

(i) The number of prize categories, the allocation of prize money among the prize categories and the annuity term may be changed at the discretion of the MUSL and the change will be announced by public notice. These changes will only apply prospectively to Powerball drawings as of the date specified in the public notice.

(j) Retailer incentive and marketing promotion programs, including the use of funded free tickets, may be implemented at the discretion of the Secretary. Funds for the programs, if needed, will be drawn from the Lottery fund.

(k) If the grand prize is not won in a drawing, the prize money allocated for the grand prize shall roll over and be added to the grand prize pool for the following drawing.

(l) Prize claims shall be submitted within 1 year of the drawing date.

(m) Annuitized payment of the grand prize or a share of the grand prize may be rounded to facilitate the purchase of an appropriate funding mechanism. Breakage on an annuitized grand prize win shall be added to the first cash payment to the winner or winners. Prizes other than the grand prize, which under this chapter may become single-payment, parimutuel prizes, may be rounded down so that prizes can be paid in multiples of whole dollars. Breakage resulting from rounding these prizes shall be carried forward to the prize pool for the next drawing.

This section cited in 61 Pa. Code § 871.13 (relating to procedures for claiming and payment of Powerball prizes); and 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.10 Funding of guaranteed prizes.

The MUSL Powerball Product Group may offer guaranteed minimum grand prize amounts or minimum increases in the grand prize amount between drawings or make other changes in the allocation of prize money where the MUSL Powerball Product Group finds that it would be in the best interest of the game. If a minimum grand prize amount or a minimum increase in the grand prize amount between drawings is offered by the Product Group, the grand prize shares shall be determined as follows:

(1) If there are multiple grand prize winners during a single drawing, each selecting the annuitized option prize, then a winner’s share of the guaranteed annuitized grand prize shall be determined by dividing the guaranteed annuitized grand prize by the number of winners.

(2) If there are multiple grand prize winners during a single drawing and at least one of the grand prize winners has elected the annuitized option prize, the best bid submitted by the MUSL’s preapproved qualified brokers shall determine the cash pool needed to fund the guaranteed annuitized grand prize.

(3) If no winner of the grand prize during a single drawing has elected the annuitized option prize, the amount of cash in the grand prize pool shall be an amount equal to the guaranteed annuitized amount divided by the average annuity factor of the most recent three best quotes provided by the MUSL’s preapproved qualified brokers submitting quotes.

(4) Quotes will not be used which are more than 2 weeks old, and if less than three quotes are submitted, the MUSL shall use the average of all quotes submitted.

(5) Changes in the allocation of prize money shall be designed to retain approximately the same prize allocation percentages, over a year’s time, as set forth in § 871.8 (relating to expected prize payout percentages). Minimum guaranteed prizes or increases may be waived if the alternate funding mechanism as set forth in § 871.8 becomes necessary.

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.11 Ticket responsibility.

(a) A ticket is a bearer document deemed to be owned by the person holding the ticket, except that if a signature is contained on the ticket, the person so named will, for all purposes, be considered the owner of the ticket.

(b) The Commonwealth will not be responsible for lost or stolen tickets.

(c) The purchaser of the ticket has the sole responsibility for checking the accuracy and condition of the data printed on the ticket.

(d) The Commonwealth will not be responsible for tickets redeemed in error.

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.12 Ticket validation requirements.

(a) Valid tickets. To be a valid ticket, the following conditions shall be met:

(1) The ticket validation number shall be present in its entirety and shall correspond, using the computer validation file, to the selected numbers printed on the ticket for the date printed on the ticket.

(2) The ticket shall be intact.

(3) The ticket may not be mutilated, altered, reconstituted or tampered with.

(4) The ticket may not be counterfeit or an exact duplicate of a winning ticket.

(5) The ticket shall have been issued by the Lottery through a licensed on-line retailer.

(6) The ticket may not have been stolen.

(7) The ticket shall be validated in accordance with § 871.13 (relating to procedures for claiming and payment of Powerball prizes).

(8) The player-selected or computer-selected numbers on the ticket shall be in individual groups of five first set numbers and one second set number each associated with a single letter, A, B, C, D or E. The numbers and the associated letter shall constitute a single play.

(9) The ticket data shall have been recorded on the Lottery’s central computer system prior to the drawing and the ticket data shall match this computer record in every respect.

(10) The player-selected or computer-selected numbers, promotion selection, if applicable, the validation number data and the drawing date of an apparent winning ticket shall appear on the official file of the winning tickets; and a ticket with that exact data may not have been previously paid.

(11) The ticket may not be misregistered, defectively printed or printed or produced in error.

(12) The ticket shall pass other confidential security checks of the Lottery.

(13) By submitting a ticket for validation, the player agrees to abide by this chapter.

(14) There may not be another violation of this part in relation to the ticket.

(b) Invalid or defective tickets—disputes. A ticket not passing the validation checks in subsection (a) will be considered invalid and will not be paid.

(1) In cases of doubt, the determination of the Secretary is final and binding. The Secretary may replace an invalid ticket with a ticket of equivalent sale price from a current Lottery game.

(2) If a defective ticket is purchased or if the Secretary determines to adjust an error, the sole and exclusive remedy will be the replacement of the defective or erroneous ticket with a ticket of equivalent sale price from a current Lottery game.

(3) If a ticket is not paid by the Lottery and a dispute occurs as to whether the ticket is a winning ticket, the Lottery may replace the ticket as provided in paragraph (2). This is the sole and exclusive remedy of the holder of the ticket.

This section cited in 61 Pa. Code § 871.9 (relating to Powerball prize payments); 61 Pa. Code § 871.13 (relating to procedures for claiming and payment of Powerball prizes); and 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.13 Procedures for claiming and payment of Powerball prizes.

(a) Pennsylvania Powerball prizes shall be claimed only through a licensed on-line Pennsylvania Lottery retailer beginning on the day following the drawing. The Lottery is not authorized to accept claims or pay prizes for Powerball tickets purchased in other jurisdictions.

(b) An on-line retailer is authorized and required to make payment of a prize of $2,500 or less on an individual Powerball winning ticket, if the ticket is presented within a designated time period as announced by the Secretary and if the retailer has sufficient funds available for payment.

(c) The holder of an apparent winning Powerball ticket containing one or more winning lettered play selections representing combined prizes of $2,500 or less will be paid by participating on-line retailers as provided in subsection (b), if the ticket validation requirements in § 871.12 (relating to ticket validation requirements) have been met, a proper validation pay ticket has been issued by the retailer’s computer terminal and other retailer procedures have been met.

(d) The holder of an apparent winning Powerball ticket containing one or more winning lettered play selections representing combined prizes in excess of $2,500, with the exception of the grand prize category, shall first validate the apparent winning ticket at the participating Pennsylvania Lottery on-line retailer to receive a validation receipt, complete a claim form and display appropriate identification and then surrender the winning ticket and the original claim form to the retailer for transmittal to Lottery Headquarters for payment under Chapter 811 (relating to prizes).

(e) The holder of an apparent winning Powerball ticket containing one or more winning lettered play selections representing a grand prize category prize shall present, in person, the apparent winning ticket to the Pennsylvania Lottery Headquarters for validation under Chapter 811.

(f) In the event of the death of a Powerball grand prize winner and upon petition of the estate of the prize winner, the MUSL Powerball Product Group may accelerate payment of all remaining proceeds from the winning ticket to the estate of the winner by transferring to the estate the securities or cash, or both, being held to satisfy the prize requirements, or paying the estate the present value of the remaining payments of the winner’s prize. The valuation of the securities and determination of the present value of the accelerated lottery payments shall be at the sole discretion of the MUSL Powerball Group. The payment of a set prize to a person who dies before receiving any or all of a particular prize and to a person under 18 years of age will be paid under § § 811.16 and 811.27 (relating to prizes payable after death of prize winner; and payment of prizes to persons under 18 years of age).

(g) The Commonwealth will be discharged of liability after payment of prizes as provided in § 811.26 (relating to discharge of State liability upon payment).

(h) The Lottery may delay payment of the prize pending a final determination by the Secretary if a dispute occurs, or it appears likely that a dispute may occur, regarding the prize; if there is any question regarding the identity of the claimant; if there is any question regarding the validity of the ticket presented for payment; or if the claim is subject to any setoff for delinquent debts owed by the claimant under Pennsylvania statute. The Lottery may delay payment of a grand prize pending a claimant election of payment method as provided under § 871.9(b) (relating to Powerball prize payments). The Lottery may delay payment of a grand prize for up to 15 days as permitted by the MUSL rules.

This section cited in 61 Pa. Code § 871.9 (relating to Powerball prize payments); 61 Pa. Code § 871.12 (relating to ticket validation requirements); and 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.14 Parimutuel prize pool.

(a) The prize pool for all prize categories shall consist of 50% of each drawing period’s sales after the prize reserve accounts are funded to the amounts set by the MUSL Powerball Product Group. Any amount remaining in the prize pool at the end of the game shall be carried forward to a replacement game or expended in a manner as directed by the MUSL Powerball Product Group in accordance with State law.

(b) An amount equal to up to 2% of a party lottery’s sales shall be deducted from a party lottery’s grand prize pool and placed in trust in one or more prize reserve accounts until the party lottery’s share of the prize reserve accounts reaches the amounts designated by the MUSL Powerball Product Group. Once the party lottery’s share of the prize reserve accounts exceeds the designated amounts, the excess shall become part of the grand prize pool. The MUSL Powerball Product Group, with the approval of the Finance and Audit Committee, may establish a maximum balance for the prize reserve accounts. The shares of a party lottery may be adjusted with refunds to the party lottery from the prize reserve accounts as may be needed to maintain the approved maximum balance and shares of the party lotteries. Any amount remaining in a prize reserve account at the end of this game shall be carried forward to a replacement prize reserve account or expended in a manner as directed by the MUSL Powerball Product Group in accordance with State law.

(c) If the prize pool for a drawing is not sufficient to fund an announced minimum grand prize, the prize pool will be increased as necessary in accordance with MUSL rules.

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.15 Unclaimed prize money.

Prize money on a winning Powerball play may be retained by the Secretary for payment to the person entitled to it. If within 1 year of the drawing date on the ticket, no claim is made on a winning play, as determined by the Secretary, the right to claim prize money terminates. For set prizes, the prize money will be paid into the State Lottery Fund and used for purposes otherwise provided for by statute. Unclaimed grand prize funds will be distributed among all MUSL Lotteries in proportion to each lottery’s sales for the grand prize drawing.

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.16 Withholding.

Federal withholding taxes will be withheld by the Lottery for the prize payments in amounts required in accordance with applicable provisions of law.

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.17 Purchase and prize restrictions.

(a) A Powerball ticket may not be purchased in this Commonwealth by, and a prize will not be paid to, an officer or employee of the Pennsylvania Lottery or any of the Lottery’s professional services contractors or subcontractors who are involved in the operation of the on-line lottery games system or its associated drawings, or to a spouse, child, brother, sister or parent residing in the same household as these individuals.

(b) In addition to the individuals identified in subsection (a), the following persons are not eligible to purchase a Powerball ticket and are ineligible to be paid a prize for a Powerball ticket:

(1) An employee, officer or director of the MUSL.

(2) A person under contract with the MUSL to conduct a financial or security audit of the MUSL.

(3) An employee, partner, shareholder or owner of an independent accounting firm under contract with the MUSL to observe drawings and site operations.

(4) A relative living in the same household of a person described in paragraph (1), (2) or (3).

(c) Except as provided in subsection (b), the individuals identified in subsection (a) are not prohibited from purchasing a ticket or winning a prize from a MUSL member lottery other than the Pennsylvania Lottery.

(d) A Lottery retailer authorized to sell lottery tickets for on-line games, or an employee of a retailer may not request, demand or accept gratuities or additional compensation from any person, or agent thereof, in exchange for the purchase of Powerball lottery tickets. A retailer authorized to sell lottery tickets for on-line games shall make Powerball lottery tickets available for sale to the public during the hours that sale of Powerball tickets are authorized to be sold and that business is open to the public. A retailer may only sell Powerball lottery tickets on the premises described in the retailer’s contract, except as specially authorized in writing by the Director. No transaction, or any part thereof, of Powerball lottery tickets may be made at the general corporate office of a retailer unless that office is open to the public and has contracted with the Lottery as a separate Lottery retailer. A Lottery retailer authorized to sell lottery tickets for on-line games may not enter into any special agreement with a person, group of persons or agent thereof, for the purchase of over $500 of Powerball lottery tickets for any one drawing. A retailer shall immediately report to the Lottery an attempt made by a person, or group of persons or an agent thereof, to purchase more than 50% of the number combinations for Powerball for any one drawing. A retailer shall obtain the name and address of any person purchasing more than $5,000 in Powerball lottery tickets for any one drawing and report the information to the Lottery before the sale. A person may not purchase a ticket or combination of tickets and a lottery retailer may not directly or knowingly sell a ticket or combination of tickets to any person which would guarantee the purchaser a grand prize win.

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.18 Governing law.

(a) In purchasing a ticket, the purchaser agrees to comply with and abide by applicable laws, this part, instructions, conditions, final decisions of the Secretary and procedures established by the Director or by the MUSL for the conduct of Powerball.

(b) Decisions made by the Secretary or the MUSL, including the declaration of prizes and the payment thereof or interpretation of this part are final and binding on players and persons making a claim in respect thereof.

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.19 Probability of winning.

The probability of winning is as follows:

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.20 Power play promotion.

(a) The power play promotion shall be available in association with the Powerball game and will continue until the Secretary publicly announces a suspension or termination thereof. The power play promotion will be conducted in accordance with the Powerball rules except that players may purchase the power play option for the chance to multiply set prizes won as a result of a Powerball drawing by a number ranging from 1 to 5. The Powerball grand prize will not be eligible for multiplication under the power play promotion.

(b) At the time of purchasing a Powerball ticket from an on-line Lottery retailer, a player may choose the power play option for one additional $1 per play for each play on the Powerball ticket. If a player chooses the power play promotion feature for any play on a ticket, every play on that ticket must participate in the promotion.

(c) At the time of each Powerball drawing, the MUSL shall conduct a power play drawing under the supervision of security and an independent auditor which shall result in the selection of the power play number from among the following series of numbers: 1, 1, 2, 2, 3, 3, 4, 4, 5, 5, 5 and 5.

(d) Powerball tickets that contain the power play option and one or more plays eligible for Powerball set prizes (but not the grand prize) identified in § 871.8(a) (relating to expected prize payout percentages) shall be entitled to a total set prize calculated by multiplying each Powerball set prize by the power play number.

(e) The prize pool for power play set prizes shall consist of up to 48.5% of power play sales after Powerball prize reserve accounts are funded to the amounts set by the MUSL. The prize pool percentage allocated to power play set prizes shall be carried forward to subsequent power play drawings if all or a portion of the percentage is not required to pay the set prizes for the current power play drawing.

(f) An additional 1.5% of power play sales may be collected and placed in prize reserve accounts until the prize reserve accounts meet the amounts designated by the MUSL. Any amount remaining in prize reserve accounts at the end of the power play promotion shall be carried forward to a replacement prize reserve account or expended in a manner as directed by the MUSL Powerball Product Group in accordance with State law.

(g) If, with respect to a single Powerball drawing and associated power play drawing, the total of the Powerball set prizes without the power play option and the Powerball set prizes multiplied by the power play number exceeds the percentage of the prize pools allocated to the set prizes, the amount needed to fund those combined set prizes shall be drawn from the following sources in the following order:

(1) The amount allocated to the set prizes and carried forward from previous Powerball drawings and power play drawings, if any.

(2) An amount from the Powerball set prize reserve account, if available, not to exceed $25,000,000 per drawing.

(h) If the sources set forth in subsection (g) are depleted and there still are not sufficient funds to pay the set prizes for a particular Powerball drawing and associated power play drawing, the highest set prize, including the multiplied set prize, shall become a parimutuel prize. If the amount of the highest set prize, when paid as a parimutuel prize, is less than or equal to the next highest set prize and there are still not sufficient funds to pay the remaining prizes, the next highest set prize, including the multiplied set prize, shall become a parimutuel prize. If necessary under the same test set forth in the preceding sentence, each succeeding set prize level shall be converted to a parimutuel prize, in order, until all set prizes become parimutuel. If all set prizes are converted to parimutuel prizes, the money available from the funding sources listed in subsection (g) shall be divided among the winning plays in proportion to their respective prize percentages.

(i) Power play set prizes which become parimutuel may be rounded down so that they can be paid in multiples of whole dollars. Funds remaining after rounding shall be carried forward to the prize pool for the next power play drawing.

(j) Except as otherwise provided, all power play set prizes shall be paid in single, lump-sum payments determined by multiplying the Powerball set prize by the number selected in the power play drawing as follows:

(k) When the Powerball set prizes become parimutuel, the Powerball set prize amounts will be less than the amount shown and the power play set prizes shall be a multiple of the new Powerball set prize amount.

(l) The odds of various power play numbers being selected in a power play drawing are:

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.21 Future changes to Powerball.

(a) The MUSL reserves the right to modify the Powerball game in order to address changes in player participation or population of member states. If the MUSL decides to make a change, it will be publicly announced by the Secretary at least 30 days before the change takes effect.

(b) The Secretary will publish notice of the change in the Pennsylvania Bulletin and the change will be codified in § 871.22 (relating to changes to Powerball).

The provisions of this § 871.21 amended under section 303 of the State Lottery Law (72 P.S. § 3761-303).

The provisions of this § 871.21 amended November 8, 2002, effective November 9, 2002, 32 Pa.B. 5516. Immediately preceding text appears at serial page (290163).

This section cited in 61 Pa. Code § 871.22 (relating to changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

61 Pa. Code § 871.22 Changes to Powerball.

Any change to the Powerball regulations, announced by the Secretary by way of a notice published in the Pennsylvania Bulletin, will be codified as a new paragraph in this section.

(1) Changes effective for Powerball tickets sold on or after October 6, 2002:

(i) Section 871.2(a) and (b) (relating to game description and purpose); § 871.3 (relating to definitions) definition of ‘‘basic play,’’ ‘‘first set numbers,’’ ‘‘panel or game panel,’’ ‘‘quick pick,’’ ‘‘ticket’’ and ‘‘winning numbers;’’ § 871.7(c) (relating to time, place and manner of conducting drawing). Powerball is a five out of 53 plus one out of 42 on-line game. The first set of numbers are selected from 1 through 53.

(ii) Section 871.9(e) (relating to Powerball prize payments). All annuitized prizes shall be paid in 30 annual payments with the initial payment being made in cash, to be followed by 29 equal annual payments funded by the annuity. The initial payment of an annuitized prize may be made by the Lottery upon validation of the winning ticket.

(iii) Section 871.15 (relating to unclaimed prize money). Unclaimed grand prize and new bonus prize funds will be distributed among all MUSL Lotteries in proportion to each lottery’s sales for the grand prize drawing.

(iv) Section 871.19 (relating to probability of winning). The probability of winning is a follows:

(v) Section 871.20(a), (c), (j) and (l) (relating to power play promotion). A player may purchase the power play option for the chance to multiply set prizes won as a result of the Powerball drawing by a number ranging from 2 to 5. The power play number will be selected from among the following series of numbers: 2, 2, 2, 3, 3, 3, 4, 4, 4, 5, 5, 5, 5, 5 and 5. Except as otherwise provided, all power play set prizes shall be paid in single, lump-sum payments determined by multiplying the Powerball set prize by the number selected in the power play drawing as follows:

The odds of various power play numbers being selected in a power play drawing are:

(vi) New bonus prize.

(A) When the Powerball jackpot is projected to reach a new high annuitized level, the amount of the jackpot prize will be limited, by rule, to increases for each draw of no more than $25 million (annuitized). The prize money collected in excess of the advertised jackpot amount, if any, will be placed into a bonus prize pool and will accumulate until there is a grand prize winner. When there is a grand prize winner, the bonus prize pool will be divided equally among all winners of the second prize. This bonus prize will be paid in one cash lump sum. If there are no second prize winners, the prize pool shall be divided equally among the winners in the next lower prize tier with winners.

(B) There may be times when the second prize will be increased from its current set amount of $100,000 to a higher amount. In those cases, the second prize may be increased to $1 million or more. The actual amount of the prize will depend upon the cash available in the new bonus prize pool and the number of prize winners as set forth in clause (A). The trigger jackpot level will naturally increase over time as the new high annuitized jackpot amount continues to climb.

(C) The new bonus prize is in addition to any power play prizes that may be won. The new bonus prize is awarded independent of the power play option, and is not multiplied by the power play multiplier. A bonus prize winner who also played the power play option will win the original set prize amounts; the amount paid under the power play multiplier option; and the new bonus prize (if effective).

(2) Changes effective for Powerball tickets sold on or after August 28, 2005:

(i) Section 871.2(a) and (b); § 871.3 definition of ‘‘basic play,’’ ‘‘first set numbers,’’ ‘‘panel or game,’’ ‘‘quick pick,’’ ‘‘ticket’’ and ‘‘winning number’’; § 871.7(c). Powerball is a five out of 55 plus one out of 42 on-line game. The first set of numbers are selected from 1 through 55.

(ii) Section 871.9(e). Annuitized prizes shall be paid in 30 graduated payments, an initial followed by 29 annual graduated payments increasing each year at a rate determined by the MUSL Powerball Product Group. This rate, once determined, will not change over the life of the payments. The 30 payments will equal 100% of the annuitized prize. Prize payments may be rounded down to the nearest $1,000.

For example:

If the MUSL Powerball Product Group arrived at a 4% rate of increase for a $30 million annuitized jackpot the payment schedule would be as follows:

(iii) Section 871.8(a) (relating to expected prize payout percentages). Determination of expected prize payout percentages is as follows:

(iv) Section 871.19. The probability of winning is as follows:

(v) Section 871.20(a), (c), (j) and (l). A player may purchase the power play option for the chance to multiply set prizes won as a result of the Powerball drawing by a number ranging from 2 to 5. The power play number will be selected from among the following series of numbers: 2, 2, 2, 2, 3, 3, 3, 3, 4, 4, 4, 4, 5, 5, 5 and 5. Except as otherwise provided, power play set prizes shall be paid in single, lump-sum payments determined by multiplying the Powerball set prize by the number selected in the power play drawing as follows:

The odds of various power play numbers being selected in a power play drawing are:

(3) Changes effective for Powerball tickets sold on or after January 4, 2009:

(i) Section 871.2(a) (relating to game description and purpose). Powerball is a five out of 59 plus one out of 39 on-line lottery game which pays the grand prize on an annuitized, parimutuel basis. Except as provided in this chapter, all other prizes are paid on a set cash basis.

(ii) Section 871.2(b). The purpose of the Powerball game is to determine winners from ticket holders matching five numbers from 1 through 59, and matching the separately drawn Powerball number, or a designated combination thereof, within a single play, with the five winning numbers and the Powerball number to be randomly drawn. Drawings will be conducted twice a week or as publicly announced by the Secretary.

(iii) Section 871.3 (relating to definitions). Basic play—Each set of six numbers consisting of five numbers from 1 through 59 and the Powerball number on a ticket purchased without the selection of any promotion, representing a single entry for a Powerball drawing and designated by a letter from A to E on a Powerball ticket. First set numbers—The first group of numbers, from 1 through 59, appearing in the top grid of a Powerball game panel. Grand prize winnings pool—An amount constituting 32.5288% of gross sales from all participating States for a particular Powerball game drawing for the purpose of paying winning grand prizes in that drawing. The grand prize winnings pool includes prize money allocated to the grand prize category from prior Powerball game drawings in which there were no winning grand prize tickets. A portion of this pool is used to fund prize reserve accounts until those accounts achieve maximum balances. Panel or game panel—One of five areas of the Powerball bet slip that contains two number grids. The upper grids (first set numbers) contain 59 squares, each numbered 1 through 59 and the lower grids (second set numbers) contain 39 squares, each numbered 1 through 39. Each panel is lettered either A, B, C, D or E, and when used to purchase a ticket, corresponds to the numbers selected and printed on the ticket adjacent to that letter. Powerball number or second set number—The number selected from the second group of numbers, from 1 through 39, appearing in the lower grid of a Powerball game panel. Quick pick—The random selection by the Lottery’s computer system of five numbers from 1 through 59 and a Powerball number from 1 through 39 that appear on a ticket in the Powerball game. Second set numbers—The second group of numbers, from 1 through 39, appearing in the lower grid of a Powerball game panel. Set prize winnings pool—An amount constituting 17.4712% of gross sales for the current drawing and any moneys carried forward from previous draws. Ticket—A Powerball ticket, produced by an on-line terminal from a licensed on-line retailer in an authorized manner, containing a letter prefix followed by five selected numbers from 1 through 59 and a single selected Powerball number from 1 through 39 for each basic play, ticket validation number data, drawing date, amount bet and any applicable promotion exercised by the player. Each set of five numbers and the Powerball number constitutes a basic play of which there may be one or more, up to five on a ticket. Winning numbers—Six numbers, the first five numbers from 1 through 59, and the Powerball number from 1 through 39, selected at a Powerball drawing and subsequently validated by the MUSL, which shall be used to determine the winning Powerball plays.

(Editor’s Note: This is a partial listing of the definitions applicable to Powerball. See § 871.3 (relating to definitions) for additional definitions.)

(iv) Section 871.7(c) (relating to time, place and manner of conducting drawing). Manner of conducting drawing. The MUSL will draw at random five numbers from a set of balls numbered 1 through 59 and one Powerball number from a set of balls numbered 1 through 39 with the aid of mechanical drawing equipment. The drawings will be observed by security personnel and independent auditors and the validity of a drawing will be solely determined by the MUSL.

(v) Section 871.8(a) (relating to expected prize payout percentages). Determination of expected prize payout percentages is as follows:

• Indicates a set prize.

** Fifty percent of Powerball gross sales are allocated to the winnings pool for the payment of prizes.

(vi) Section 871.8(c)(1) (relating to expected prize payout percentages). If the total of the set prizes awarded in a Powerball drawing exceeds the set prize pool which is 17.4712% of gross sales, the amount needed to fund the set prizes shall be drawn from the following sources in the following order:

(i) The amount allocated to the set prize tiers and carried forward from previous draws, if any.

(ii) An amount from the MUSL set prize reserve account, if available, not to exceed $25,000,000 per Powerball drawing.

(vii) Section 871.19 (relating to probability of winning). The probability of winning is as follows:

(4) Changes effective for Powerball tickets sold on or after May 28, 2011:

(i) Section 871.20(a) (relating to power play promotion). The power play promotion shall be available in association with the Powerball game and will continue until the Secretary publicly announces a suspension or termination thereof. The power play promotion will be conducted in accordance with the Powerball rules except that players may purchase the power play option for the chance to multiply or increase the third through the ninth category set prizes won as a result of a Powerball drawing by a number ranging from 2 to 5. The Powerball grand prize, the second category prize and the Match 5 Bonus prizes will not be eligible for multiplication under the power play promotion. The Secretary will on occasion announce, as a special promotion, multipliers greater than 5 or a greater second category prize amount. The second category prize shall be $1,000,000 unless a higher promotional dollar amount is announced by the Secretary.

(ii) Section 871.20(d). Powerball tickets that contain the power play option and one or more plays eligible for Powerball third through ninth category prizes identified in § 871.8(a) (relating to expected prize payout percentages) shall be entitled to a total set prize calculated by multiplying each Powerball third through ninth category prize by the power play number. Powerball tickets that contain the power play option and one or more plays eligible for a Powerball second category prize shall be entitled to a prize of $1,000,000 unless a higher limited promotional dollar amount is announced by the Secretary.

(iii) Section 871.20(g). If, with respect to a single Powerball drawing and associated power play drawing, the total of the Powerball set prizes without the power play option and the Powerball set prizes increased by the power play option exceeds the percentage of the prize pools allocated to the set prizes, the amount needed to fund those combined set prizes shall be drawn from the following sources in the following order:

(1) The amount allocated to the set prizes and carried forward from previous Powerball drawings and power play drawings, if any.

(2) An amount from the Powerball set prize reserve account, if available, not to exceed $25,000,000 per drawing.

(iv) Section 871.20(h). If the sources set forth in subsection (g) are depleted and there still are not sufficient funds to pay the set prizes for a particular Powerball drawing and associated power play drawing, the highest set prize, including the prize increased by the power play option, shall become a parimutuel prize. If the amount of the highest set prize, when paid as a parimutuel prize, is less than or equal to the next highest set prize and there are still not sufficient funds to pay the remaining prizes, the next highest set prize, including the prize increased by the power play option, shall become a parimutuel prize. If necessary under the same test set forth in the preceding sentence, each succeeding set prize level shall be converted to a parimutuel prize, in order, until all set prizes become parimutuel. If all set prizes are converted to parimutuel prizes, the money available from the funding sources listed in subsection (g) shall be divided among the winning plays in proportion to their respective prize percentages.

(v) Section 871.20(j). Except as otherwise provided, all power play set prizes shall be paid in single, lump-sum payments. Power play prizes for the third through the ninth category prizes shall be determined by multiplying the Powerball set prize by the number selected in the power play drawing. The power play prize for the second category prize level shall be paid $1,000,000. Power play prize levels shall be paid as follows:

(vi) Section 871.20(k). When the Powerball set prizes become parimutuel, the Powerball set prize amounts will be less than the amount shown and the power play prizes for the third through the ninth category prizes shall be a multiple of the new Powerball set prize amount and the power play prize for the second category prize shall be reduced as announced by the MUSL Powerball Product Group.

(5) Changes effective for Powerball tickets sold on or after January 15, 2012:

(i) Section 871.2(a) (relating to game description and purpose). Powerball is a five out of 59 plus one out of 35 on-line lottery game which pays the grand prize on an annuitized, parimutuel basis. Except as provided in this chapter, all other prizes are paid on a set cash basis.

(ii) Section 871.3 (relating to definitions). Grand prize winnings pool—An amount constituting 31.9756% of gross sales from all participating states for a particular Powerball game drawing for the purpose of paying winning grand prizes in that drawing. The grand prize winnings pool includes prize money allocated to the grand prize category from prior Powerball game drawings in which there were no winning grand prize tickets. A portion of this pool is used to fund prize reserve accounts until those accounts achieve maximum balances. Panel or game panel—One of five areas of the Powerball bet slip that contains two number grids. The upper grids (first set numbers) contain 59 squares, each numbered 1 through 59 and the lower grids (second set numbers) contain 35 squares, each numbered 1 through 35. Each panel is lettered either A, B, C, D or E. Powerball number or second set number—The number selected from the second group of numbers, from 1 through 35, appearing in the lower grid of a Powerball game panel. Quick pick—The random selection by the Lottery’s computer system of five numbers from 1 through 59 and a Powerball number from 1 through 35 that appear on a ticket in the Powerball game. Second set numbers—The second group of numbers, from 1 through 35, appearing in the lower grid of a Powerball game panel. Set prize winnings pool—An amount constituting 18.0244% of gross sales for the current drawing and any monies carried forward from previous draws. Ticket—A Powerball ticket, produced by an on-line terminal from a licensed on-line retailer in an authorized manner, containing a letter prefix followed by five selected numbers from 1 through 59 and a single selected Powerball number from 1 through 35 for each basic play, ticket validation number data, drawing date, amount bet and any applicable promotion exercised by the player. Each set of five numbers and the Powerball number constitutes a basic play of which there may be one or more, up to five on a ticket. Winning numbers—Six numbers, the first five numbers from 1 through 59, and the Powerball number from 1 through 35, selected at a Powerball drawing and subsequently validated by the MUSL, which shall be used to determine the winning Powerball plays.

(Editor’s Note: This is a partial listing of the definitions applicable to Powerball. See § 871.3 (relating to definitions) for additional definitions.)

(iii) Section 871.5 (relating to ticket price). A Powerball ticket shall cost $2 per play. The power play option may be exercised, at the discretion of the player, for an additional $1 per play.

(iv) Section 871.6(a) (relating to Powerball bet slip and ticket characteristics and restrictions). For each basic play the player shall select, or request quick pick selection by the computer, five numbers and a single Powerball number, in one or more of the game panels on a Powerball bet slip. Powerball bet slips shall be available at no cost to the player. The minimum entry is $2. For $2, play one game; for $4, play two games; for $6, play three games; for $8, play four games; for $10, play five games. Players are also given the option to select a promotion verbally or on the bet slip at the time of purchase for an additional $1 for each play. Game panels shall be played in alphabetical order in accordance with the instructions printed on the Powerball bet slip. A Powerball bet slip has no pecuniary or prize value and does not constitute evidence of the purchase of a ticket or the numbers selected.

(v) Section 871.6(b). To purchase a ticket, players shall, in addition to the purchase price, submit a completed Powerball bet slip, or request number selections either by quick pick or manual terminal entry to an on-line retailer to have a ticket issued. To purchase a ticket at a Lottery self-serviceterminal that dispenses terminal-based Lottery tickets, the player shall designate the drawing date or dates for which the ticket is entered, number selections and may exercise the power play promotion for an additional $1 per play. The player may use a bet slip or the Quick Pick option at a Lottery self-service terminal that dispenses terminal-based Lottery tickets. The ticket shall contain five selected numbers and a single selected Powerball number for each play, ticket validation number data, drawing date, amount bet and any applicable promotion exercised by the player. This ticket shall be the only valid receipt for claiming a prize. The ticket shall only be valid for the drawing date or dates printed on the ticket. Retailers are not permitted to allow the attachment of any remote devices to a lottery terminal to enter plays except as otherwise provided in the MUSL rules.

(vi) Section 871.6(c). If Powerball bet slips are unavailable, number selections may be given to an on-line retailer in groups of five number selections and one Powerball number selection per game section for each $2 wagered as a basic play. The player may exercise the power play promotion for an additional $1 per play. The retailer shall manually enter the selections into the computer terminal.

(vii) Section 871.7(b) (relating to time, place and manner of conducting drawing). Place of drawing. A Powerball drawing will be conducted in a location selected by the MUSL.

(viii) Section 871.7(c). Manner of conducting drawing. The MUSL will draw at random five numbers from a set of balls numbered 1 through 59 and one Powerball number from a set of balls numbered 1 through 35 with the aid of mechanical drawing equipment. The drawings will be observed by security personnel and independent auditors and the validity of a drawing will be solely determined by the MUSL.

(viv) Section 871.8(a) (relating to expected prize payout percentages). Determination of expected prize payout percentages is as follows:

• Indicates a set prize.

** Fifty percent of Powerball gross sales are allocated to the winnings pool for the payment of prizes.

(x) Section 871.8(c)(1). If the total of the set prizes awarded in a Powerball drawing exceeds the set prize pool which is 18.0244% of gross sales, the amount needed to fund the set prizes shall be drawn from the following sources in the following order:

(i) The amount allocated to the set prize tiers and carried forward from previous draws, if any.

(ii) An amount from the MUSL set prize reserve account, if available, not to exceed $40,000,000 per Powerball drawing.

(xi) Section 871.15 (relating to unclaimed prize money). Prize money on a winning Powerball play may be retained by the Secretary for payment to the person entitled to it. If within 1 year of the drawing date on the ticket, no claim is made on a winning play, as determined by the Secretary, the right to claim prize money terminates. For set prizes, the prize money will be paid into the State Lottery Fund and used for purposes otherwise provided for by statute. Unclaimed grand prize funds will be distributed among all MUSL Lotteries in proportion to each lottery’s sales for the grand prize drawing.

(xii) Section 871.19 (relating to probability of winning). The probability of winning is as follows:

(xiii) Section 871.20(a) (relating to power play promotion). The power play promotion shall be available in association with the Powerball game and will continue until the Secretary publicly announces a suspension or termination thereof. The power play promotion will be conducted in accordance with the Powerball rules except that players may purchase the power play option to increase set prizes won as a result of a Powerball drawing. The Powerball grand prize will not be eligible for an increase under the power play promotion. The Secretary will on occasion announce, as a special promotion, higher promotional prize amounts to be won with the power play promotion.

(xiv) Section 871.20(c) is deleted in its entirety.

(xv) Section 871.20(d). Powerball tickets that contain the power play option and one or more plays eligible for Powerball second through ninth category prizes identified in § 871.8(a) (relating to expected prize payout percentages) shall be entitled to a total set prize identified in § 871.20(j) (relating to power play promotion), unless a higher limited promotional prize amount is announced by the Secretary.

(xvi) Section 871.20(e). The prize pool for power play set prizes shall consist of up to 49.96% of power play sales after Powerball prize reserve accounts are funded to the amounts set by the MUSL. The prize pool percentage allocated to power play set prizes shall be carried forward to subsequent power play drawings if all or a portion of the percentage is not required to pay the set prizes for the current power play drawing.

(xvii) Section 871.20(f). An additional 0.04% of power play sales may be collected and placed in prize reserve accounts until the prize reserve accounts meet the amounts designated by the MUSL. Any amount remaining in prize reserve accounts at the end of the power play promotion shall be carried forward to a replacement prize reserve account or expended in a manner as directed by the MUSL Powerball Product Group in accordance with State law.

(xviii) Section 871.20(g). If, with respect to a single Powerball drawing, the total of the Powerball set prizes without the power play option and the Powerball set prizes increased by the power play option exceeds the percentage of the prize pools allocated to the set prizes, the amount needed to fund those combined set prizes shall be drawn from the following sources in the following order:

(1) The amount allocated to the set prizes and carried forward from previous Powerball drawings, if any.

(2) An amount from the Powerball set prize reserve account, if available, not to exceed $40,000,000 per drawing.

(xix) Section 871.20(h). If the sources set forth in subsection (g) are depleted and there still are not sufficient funds to pay the set prizes for a particular Powerball drawing, the highest set prize, including the prize increased by the power play option, shall become a parimutuel prize. If the amount of the highest set prize, when paid as a parimutuel prize, is less than or equal to the next highest set prize and there are still not sufficient funds to pay the remaining prizes, the next highest set prize, including the prize increased by the power play option, shall become a parimutuel prize. If necessary under the same test set forth in the preceding sentence, each succeeding set prize level shall be converted to a parimutuel prize, in order, until all set prizes become parimutuel. If all set prizes are converted to parimutuel prizes, the money available from the funding sources listed in subsection (g) shall be divided among the winning plays in proportion to their respective prize percentages.

(xx) Section 871.20(j). Except as otherwise provided, all power play set prizes shall be paid in single, lump-sum payments. Power play prize levels shall be paid as follows:

(xxi) Section 871.20(k). When the Powerball set prizes become parimutuel, the Powerball set prize amounts will be less than the amount shown and the power play prizes for the second through the ninth category prizes shall be reduced as announced by the MUSL Powerball Product Group.

(xxii) Section 871.20(l) is deleted in its entirety.

(xxiii) Section 871.22(1)(vi) (relating to changes to Powerball) is deleted in its entirety.

(6) Changes effective for Powerball tickets sold on or after October 1, 2013:

(i) Section 871.3 (relating to definitions). Licensee Lottery—A State lottery or lottery of a political subdivision or entity which is not a Party Lottery but has agreed to comply with all applicable MUSL and MUSL Powerball Product Group requirements and has been authorized by the MUSL and by the MUSL Powerball Product Group to sell the Powerball game. MUSL Finance and Audit Committee—The committee established by the Multi-State Lottery Association which, among other things, establishes the reserve accounts balances.

(Editor’s Note: This is a partial listing of the definitions applicable to Powerball. See § 871.3 (relating to definitions) for additional definitions.)

(ii) Section 871.8(c) (relating to expected prize payout percentages). The number of plays determined by the MUSL to be winners of the second through ninth prize categories will be paid as set cash prizes, except as provided in paragraphs (1) through (4).

(1) Except as otherwise provided in section 871.8(c)(4), if the total of the set prizes awarded in a Powerball drawing exceeds the set prize pool which is 18.0244% of gross sales, the amount needed to fund the set prizes, including Power play prizes, shall be drawn from the following sources in the following order:

(i) The amount allocated to the set prize tiers and carried forward from previous draws, if any.

(ii) An amount from the MUSL set prize reserve account, if available, not to exceed $40,000,000 per Powerball drawing.

(2) Except as otherwise provided in section 871.8(c)(4), if the sources set forth in paragraph (1) are depleted and there still are not sufficient funds to pay the set prizes, including Power play prizes, for a particular Powerball drawing, the highest set prize shall become a parimutuel prize. If the amount of the highest set prize, when paid as a parimutuel prize, is less than or equal to the next highest set prize and there are still not sufficient funds to pay the remaining set prizes, the next highest set prize shall become a parimutuel prize. If necessary, and under the same test conditions set forth in the preceding sentence, each succeeding set prize level shall be converted to a parimutuel prize, in order, until all set prizes become parimutuel.

(3) Except for winning prizes sold by the California Lottery, if all, or any portion of the set prize pool is not awarded in the current Powerball drawing, that portion of the set prize pool shall be carried forward to subsequent Powerball drawings.

(4) By agreement with the Licensee Lotteries, the Licensee Lotteries shall independently calculate their set parimutuel prize amounts. The Party Lotteries and the Licensee Lotteries shall then agree to set the parimutuel prize amounts for all lotteries selling the game at the lesser of the independently-calculated prize amounts.

(iii) Section 871.14(b) (relating to pari-mutuel prize pool). An amount equal to up to 5% of a party lottery’s sales shall be deducted from a party lottery’s grand prize pool and placed in trust in one or more prize pool accounts and prize reserve accounts until the prize pool accounts and party lottery’s share of the prize reserve accounts reaches the amounts designated by the MUSL Powerball Product Group. The MUSL Powerball Product Group has established the following prize reserve accounts for the Powerball game: the Prize Reserve Account, which is used to guarantee the payment of valid, but unanticipated, Grand Prize claims that may result from a system error or other reason; and the Set Prize Reserve Account, which is used to fund deficiencies in low-tier prize payments, subject to the limitations of these rules. The MUSL Powerball Product Group has established the following prize pool accounts for the Powerball game; the Grand Prize pool, which is used to fund the immediate Grand Prize, the Set-Aside Account, which is used to guarantee payment of the minimum or starting Grand Prize; the Power play pool account, which is described in § 871.20 (relating to power play promotion) of these rules; and the Low-Tier Prize Pool Account, which holds the temporary balances that may result from having fewer than expected winners in the low-tier prize categories. The source of the Low-Tier Prize Pool is the Party Lottery’s weekly prize contributions less actual set prize liability. Once the prize pool accounts and the party lottery’s share of the prize reserve accounts exceeds the designated amounts, the excess shall become part of the grand prize pool. The MUSL Powerball Product Group, with the approval of the Finance and Audit Committee, may establish a maximum balance for the prize pool accounts and prize reserve accounts. The MUSL Powerball Product Group may determine to expend all or a portion of the funds in the prize pool accounts, except the Grand Prize pool account, and the prize reserve accounts for the purpose of indemnifying the Party Lotteries and Licensee Lotteries in the payment of prizes to be made by the participating lotteries, subject to the approval of the MUSL Board and for the payment of prizes or special prizes in the game, subject to the approval of the MUSL Finance and Audit Committee. The prize reserve shares of a party lottery may be adjusted with refunds to the party lottery from the prize reserve accounts as may be needed to maintain the approved maximum balance and shares of the party lotteries. Any amount remaining in the prize pool accounts or prize reserve accounts at the end of this game shall be carried forward to a replacement prize reserve account or expended in a manner as directed by the members of the MUSL Powerball Product Group in accordance with State law.

(iv) Section 871.20(e) (relating to power play promotion). The Power play prize pool for power play set prizes shall consist of up to 49.96% of power play sales. The Power play prize pool shall be carried forward to subsequent power play drawings if all or a portion of the percentage is not required to pay the power play prizes for the current power play drawing and held in the Power Play Pool Account.

(v) Section 871.20(f) (relating to power play promotion). An additional 0.04% of power play sales may be collected and placed in the power play pool account, for the purpose of paying Power Play prizes. Any amount remaining in the power play pool account at the end of the power play promotion shall be returned to all lotteries participating in the account after the end of all claim periods of all selling lotteries, carried forward to a replacement game, or expended in a manner as directed by the MUSL Powerball Product Group in accordance with State law.

(vi) Section 871.20(g) (relating to power play promotion). Except as otherwise provided in section 871.20(m), if, with respect to a single Powerball drawing, the total of the Powerball set prizes without the power play option and the Powerball set prizes increased by the power play option exceeds the percentage of the prize pools allocated to the set prizes, the amount needed to fund those combined set prizes shall be drawn from the following sources in the following order:

(1) The amount allocated to the set prizes and carried forward from previous Powerball drawings, if any.

(2) The amount allocated to the Powerball Set-Prize Reserve Account, if available in the account, not to exceed forty million dollars ($40,000,000.00) per drawing.

(vii) Section 871.20(h) (relating to power play promotion). Except as otherwise provided in section 871.20(m), if the sources set forth in subsection (g) are depleted and there still are not sufficient funds to pay the set prizes, including the power play prizes, for a particular Powerball drawing, the highest set prize, including the prize increased by the power play option, shall become a parimutuel prize. If the amount of the highest set prize, when paid as a parimutuel prize, is less than or equal to the next highest set prize and there are still not sufficient funds to pay the remaining prizes, the next highest set prize, including the prize increased by the power play option, shall become a parimutuel prize. If necessary under the same test set forth in the preceding sentence, each succeeding set prize level shall be converted to a parimutuel prize, in order, until all set prizes become parimutuel. If all set prizes are converted to parimutuel prizes, the money available from the funding sources listed in subsection (g) shall be divided among the winning plays in proportion to their respective prize percentages.

(viii) Section 871.20(m) (relating to power play promotion). By agreement with the Licensee Lotteries, the Licensee Lotteries shall independently calculate their set parimutuel prize amounts, including the power play prize amounts. The Party Lotteries and the Licensee Lotteries shall then agree to set the pari-mutuel prize amounts for all lotteries selling the game at the lesser of the independently-calculated prize amounts.

(7) Changes effective for Powerball tickets sold on or after January 19, 2014:

(i) Section 871.8(c)(4) (relating to expected prize payout percentages). By agreement between the Party Lotteries and the Licensee Lotteries, the Licensee Lotteries shall independently calculate their set parimutuel prize amounts. The Party Lotteries and the Licensee Lotteries shall then agree to set the parimutuel prize amounts for all lotteries selling the game at the lesser of the independently-calculated prize amounts.

(ii) Section 871.9(n) (relating to Powerball prize payments). The Pennsylvania Lottery may conduct promotional drawings associated with the Powerball game. Powerball game tickets will be imprinted with a unique code to be used by players to enter the promotional drawings. The promotional drawings may be held independently of or in conjunction with the regular Powerball drawings. The Secretary will announce the existence of the promotional drawings. Winners of promotional drawings will be randomly selected from the group of qualified entries. A description of the available prize(s) and the specific rules and other information necessary for the conduct of the promotional drawings will be posted to the Lottery’s publicly accessible website. A copy of the same will also be kept on file with the Lottery and will be available upon request.

(iii) Section 871.20(c) (relating to power play promotion). The MUSL shall conduct a power play drawing and will announce results during each of the regular Powerball drawings held during the power play promotion. During each power play drawing a single number (2, 3, 4 or 5) shall be randomly drawn.

(iv) Section 871.20(e) (relating to power play promotion). The power play prize pool for power play set prizes shall consist of up to 49.36% of power play sales. The power play prize pool shall be carried forward to subsequent power play drawings if all or a portion of the percentage is not required to pay the power play prizes for the current power play drawing and held in the Power Play Pool Account.

(v) Section 871.20(f) (relating to power play promotion). An additional 0.64% of power play sales may be collected and placed in the power play pool account, for the purpose of paying power play prizes. Any amount remaining in the power play pool account at the end of the power play promotion shall be returned to all lotteries participating in the account after the end of all claim periods of all selling lotteries, carried forward to a replacement game, or expended in a manner as directed by the MUSL Powerball Product Group in accordance with State law.

(vi) Section 871.20(j) (relating to power play promotion). Except as otherwise provided, all power play set prizes shall be paid in single, lump-sum payments determined by multiplying the Powerball set prize by the number selected in the power play drawing as follows:

(vii) Section 871.20 (l) (relating to power play promotion). The odds of the various power play numbers being selected in a power play drawing are:

(viii) Section 871.20 (m) (relating to power play promotion). By agreement between the Party Lotteries and the Licensee Lotteries, the Licensee Lotteries shall independently calculate their set parimutuel prize amounts, including the power play prize amounts. The Party Lotteries and the Licensee Lotteries shall then agree to set the parimutuel prize amounts for all lotteries selling the game at the lesser of the independently-calculated prize amounts.

(8) Changes effective for Powerball tickets sold on or after October 4, 2015:

(i) Section 871.2(a) (relating to game description and purpose). Powerball is a five out of 69 plus one out of 26 terminal-based lottery game which pays the grand prize on an annuitized, parimutuel basis. Except as provided in this chapter, all other prizes are paid on a set cash, single payment basis.

(ii) Section 871.2(b) (relating to game description and purpose). The purpose of the Powerball game is to determine winners from ticket holders matching five numbers from 1 through 69, and matching the separately drawn Powerball number, or a designated combination thereof, within a single play, with the five winning numbers and the Powerball number to be randomly drawn. Drawings will be conducted twice a week or as publicly announced by the Secretary.

(iii) Section 871.3 (relating to definitions). Advertised Grand Prize—The estimated annuitized Grand Prize amount as determined by the MUSL Central Office by use of the MUSL Annuity Factor and communicated through the Selling Lotteries prior to the Grand Prize drawing. The Advertised Grand Prize is not a guaranteed prize amount and the actual Grand Prize may vary from the advertised amount, except in circumstances where there is a guaranteed Grand Prize amount as described in § 871.10 (relating to funding of guaranteed prizes). Basic Play—Each set of six numbers consisting of five numbers from 1 through 69 and the Powerball number on a ticket purchased without the selection of any promotion, representing a single entry for a Powerball drawing and designated by a letter from A to E on a Powerball ticket. First set numbers—The first group of numbers from 1 through 69, appearing in the top grid of a Powerball game panel. MUSL Annuity Factor—The annuity factor as determined by the MUSL central office through a method approved by the MUSL Finance and Audit Committee and which is used as described in these rules. Panel or game panel—One of five areas on the Powerball bet slip that contains two number grids. The upper grids (first set numbers) contain 69 squares, each numbered 1 through 69, and the lower grids (second set numbers) contain 26 squares, each numbered 1 through 26. Each panel is lettered either A, B, C, D or E. Powerball number or second set number—The number selected from the second group of numbers, from 1 through 26, appearing in the lower grid of a Powerball game panel. Quick Pick—The random selection by the Lottery’s computer system of five numbers from 1 through 69 and a Powerball number from 1 through 26 that appear on a ticket in the Powerball game. Second set numbers—The second group of numbers, from 1 through 26, appearing in the lower grid of a Powerball game panel. Ticket—A Powerball ticket, produced by an on-line terminal from a licensed on-line retailer in an authorized manner, containing a letter prefix followed by five selected numbers from 1 through 69 and a single selected Powerball number from 1 through 26 for each basic play, ticket validation number data, drawing date, amount bet and any applicable promotion exercised by the player. Each set of five numbers and the Powerball number constitutes a basic play of which there may be one or more, up to ten on a ticket. Winning numbers—Six numbers, the first five numbers from 1 through 69, and the Powerball number from 1 through 26, selected at a Powerball drawing and subsequently validated by the MUSL, which shall be used to determine the winning Powerball plays.

(Editor’s Note: This is a partial listing of the definitions applicable to Powerball. See § 871.3 (relating to definitions) for additional definitions.)

(iv) Section 871.7(c) (relating to time, place and manner of conducting drawings). The MUSL will draw at random five numbers from a set of balls numbered 1 through 69 and one Powerball number from a set of balls numbered 1 through 26 with the aid of mechanical drawing equipment. The drawings will be observed by security personnel and independent auditors and the validity of a drawing will be solely determined by the MUSL.

(v) Section 871.8(a) (relating to expected prize payout percentages). Determination of expected prize payout percentages is as follows:

(vi) Section 871.8(c)(1)(iii) (relating to expected prize payout percentages). Any other amounts as agreed to by the MUSL Powerball Product Group in their sole discretion.

(vii) Section 871.9(c) (relating to Powerball prize payments). The MUSL Annuity Factor is determined through a process as approved by the MUSL Finance and Audit Committee.

(viii) Section 871.10 (relating to funding of guaranteed prizes). The MUSL Powerball Product Group may offer guaranteed minimum grand prize amounts or minimum increases in the grand prize amount between drawings or make other changes in the allocation of prize money where the MUSL Powerball Product Group finds that it would be in the best interest of the game. If a minimum grand prize amount or a minimum increase in the grand prize amount between drawings is offered by the Product Group, the grand prize shares shall be determined as follows:

(1) If there are multiple grand prize winners during a single drawing, each selecting the annuitized option prize, then a winner’s share of the guaranteed annuitized grand prize shall be determined by dividing the guaranteed annuitized grand prize by the number of winners.

(2) If there are multiple grand prize winners during a single drawing and at least one of the grand prize winners has elected the annuitized option prize, the best bid submitted by the MUSL’s preapproved qualified brokers shall determine the cash pool needed to fund the guaranteed annuitized grand prize.

(3) If no winner of the grand prize during a single drawing has elected the annuitized grand prize, the amount of cash in the grand prize pool shall be an amount equal to the guaranteed annuitized amount divided by the MUSL Annuity Factor.

(4) Section 871.10(4) is deleted in its entirety.

(5) Changes in the allocation of prize money shall be designed to retain approximately the same prize allocation percentages, over a year’s time, as set for in § 871.8 (relating to expected prize payout percentages). Minimum guaranteed prizes or increases may be waived if the alternate funding mechanism as set for in § 871.8 becomes necessary.

(6) Approval of the MUSL Powerball Product Group is required to change the guaranteed minimum Grand Prize amounts or minimum increases in the Grand Prize amount. Any reduction in the minimum increases to the Grand Prize amount shall not become effective until after a Grand Prize win following the action taken by the MUSL Powerball Product Group.

(ix) Section 871.14(b) (relating to parimutuel prize pool). An amount equal to up to 5% of a party lottery’s sales shall be deducted from a party lottery’s grand prize pool and placed in trust in one or more prize pool accounts and prize reserve accounts until the prize pool accounts and party lottery’s share of the prize reserve accounts reaches the amounts designated by the MUSL Powerball Product Group. The MUSL Powerball Product Group has established the following prize reserve accounts for the Powerball game: the Prize Reserve Account, which is used to guarantee the payment of valid, but unanticipated, Grand Prize claims that may result from a system error or other reason; and the Set Prize Reserve Account, which is used to fund deficiencies in the low-tier prize payments, subject to the limitations of these rules. The MUSL Powerball Product Group has established the following prize pool accounts for the Powerball game: the Grand Prize pool, which is used to fund the immediate Grand Prize; the Powerball Set Prize Pool, which is used to fund the Powerball Set Prize payments; and the Powerball Set-Aside Account, which is used to guarantee payments of the minimum or starting Grand Prize. The Power Play Prize Pool and Power Play Pool Account are described in § 871.20 (relating to power play promotion) of these rules. The Set Prize Pool Account holds the temporary balances that may result from having fewer than expected winners in the Powerball Set Prize (aka low-tier prize) categories. The source of the Set Prize Pool is the Party Lottery’s weekly prize contributions less actual Powerball Set Prize liability. Once the prize pool accounts and the party lottery’s share of the prize reserve accounts exceeds the designated amounts, the excess shall become part of the grand prize pool. The MUSL Powerball Product Group, with the approval of the Finance and Audit Committee, may establish a maximum balance for the prize pool accounts and prize reserve accounts. The MUSL Powerball Product Group may determine to expend all or a portion of the funds in the prize pool accounts, except the Grand Prize pool account, and the prize reserve accounts for the purpose of indemnifying the Party Lotteries and Licensee Lotteries in the payment of prizes to be made by the Selling Lotteries, subject to the approval of the MUSL Board and for the payment of prizes or special prizes in the game, subject to the approval of the MUSL Finance and Audit Committee. The prize reserve shares of a party lottery may be adjusted with refunds to the party lottery from the prize reserve accounts as may be needed to maintain the approved maximum balance and shares of the party lotteries. A Party Lottery may contribute to its share of prize reserve accounts over time, but in the event of a draw down from the reserve account, a Party Lottery is responsible for its full percentage share of the account, whether or not it has been paid in full. Any amount remaining in the prize pool accounts or prize reserve accounts at the end of this game shall be carried forward to a replacement prize reserve account or expended in a manner as directed by the members of the MUSL Powerball Product Group in accordance with State law.

(x) Section 871.19 (relating to probability of winning). The probability of winning is as follows:

(xi) Section 871.20(c) (relating to power play promotion). The MUSL shall conduct a power play drawing and will announce results during each of the regular Powerball drawings held during the power play promotion. During each power play drawing a single number (2, 3, 4, 5 or 10) shall be randomly drawn. The 10X multiplier will be available for drawings in which the initially advertised annuitized Grand Prize amount is $150,000,000 or less. The MUSL Powerball Product Group may elect to run limited promotions that modify the multiplier features.

(xii) Section 871.20(e) (relating to power play promotion). In drawings where the 10X multiplier is available, the expected power play prize pool for power play set prizes shall consist of up to 49.969% of each drawing period’s power play sales. In drawings where the 10X multiplier is not available, the expected power play prize pool for power play set prizes shall consist of up to 45.934% of each drawing period’s sales. The prize payout percentage per draw may vary. The power play prize pool shall be carried forward to subsequent power play drawings if all or a portion of the percentage is not required to pay the power play prizes for the current power play drawing and held in the Power Play Pool Account.

(xiii) Section 871.20(f) (relating to power play promotion). In drawings where the 10X multiplier is available, an additional 0.31% of power play sales may be collected and placed in the Power Play Pool Account, for the purposes of paying power play prizes. In drawings where the 10X multiplier is not available 4.066% of power play sales may be collected and placed in the Power Play Pool Account, for the purposes of paying power play prizes. Any amount remaining in the Power Play Pool Account at the end of the power play promotion shall be returned to all lotteries participating in the account after the end of all claim periods of all selling lotteries, carried forward to a replacement game, or expended in a manner as directed by the MUSL Powerball Product Group in accordance with State law.

(xiv) Section 871.20(g)(3) (relating to power play promotion). Other amounts as agreed to by the MUSL Powerball Product Group in their sole discretion.

(xv) Section 871.20(j) (relating to power play promotion). Except as otherwise provided, all power play set prizes shall be paid in single, lump-sum payments determined by multiplying the Powerball set prize by the number selected in the power play drawing as follows:

(xvi) Section 871.20(l) (relating to power play promotion). The probability of the various power play numbers being selected in a power play drawing.

(1) The probability of the various power play numbers being selected in a power play drawing when the 10X multiplier is available is:

(2) The probability of the various power play numbers being selected in a power play drawing when the 10X multiplier is not available is:

(9) Changes effective for Powerball tickets sold on or after April 9, 2020:

(i) Section 871.10 (relating to funding of guaranteed prizes). The MUSL Powerball Product Group may offer guaranteed minimum grand prize amounts or minimum increases in the grand prize amount between drawings or make other changes in the allocation of prize money where the MUSL Powerball Product Group finds that it would be in the best interest of the game. If a minimum grand prize amount or a minimum increase in the grand prize amount between drawings is offered by the Product Group, the grand prize shares shall be determined as follows:

(1) If there are multiple grand prize winners during a single drawing, each selecting the annuitized option prize, then a winner’s share of the guaranteed annuitized grand prize shall be determined by dividing the guaranteed annuitized grand prize by the number of winners.

(2) If there are multiple grand prize winners during a single drawing and at least one of the grand prize winners has elected the annuitized option prize, the best bid submitted by the MUSL’s preapproved qualified brokers shall determine the cash pool needed to fund the guaranteed annuitized grand prize.

(3) If no winner of the grand prize during a single drawing has elected the annuitized grand prize, the amount of cash in the grand prize pool shall be an amount equal to the guaranteed annuitized amount divided by the MUSL Annuity Factor.

(4) Section 871.10(4) is deleted in its entirety.

(5) Changes in the allocation of prize money shall be designed to retain approximately the same prize allocation percentages, over a year’s time, as set forth in § 871.8 (relating to expected prize payout percentages). Minimum guaranteed prizes or increases may be waived if the alternate funding mechanism as set forth in § 871.8 becomes necessary.

(6) Approval of the Group is required to change the guaranteed minimum Grand Prize amounts or minimum increases in the Grand Prize amount. The Group may increase, decrease or eliminate the guaranteed minimum Grand Prize amount or any announced minimum Grand Prize increases effective at any time following the next drawing following the action taken by the Group.

(10) Changes effective for Powerball tickets sold on or after August 22, 2021:

(i) Section 871.2(a) (relating to game description and purpose). Powerball is a five out of 69 plus one out of 26 on-line lottery game which pays the grand prize on an annuitized, parimutuel basis. Except as provided in this chapter, all other prizes are paid on a set cash, single payment basis.

(ii) Section 871.2(b). The purpose of the Powerball game is to determine winners from ticket holders matching five numbers from 1 through 69, and matching the separately drawn Powerball number, or a designated combination thereof, within a single play, with the five winning numbers and the Powerball number to be randomly drawn. Drawings will be conducted three times a week or as publicly announced by the Secretary.

(iii) Section 871.3 (relating to definitions). Advertised Grand Prize—The estimated annuitized Grand Prize amount as determined by the MUSL Central Office by use of the MUSL Annuity Factor and communicated through the Selling Lotteries prior to the Powerball Grand Prize Drawing. The Advertised Grand Prize is not a guaranteed prize amount and the actual Powerball Grand Prize may vary from the advertised amount, except in circumstances where there is a guaranteed Powerball Grand Prize amount as described in § 871.10 (related to funding of guaranteed prizes). Agent—A person or entity authorized by a Selling Lottery to sell lottery Plays. Cash election—A method of payment that the player selects, within 60 days of the date the Lottery determines the player is entitled to the Powerball grand prize, to receive a parimutuel share of the prize money allocated to the grand prize category as a one-time, lump-sum cash payment rather than as an annuity. Drawing—The formal draw event for randomly selecting the winning numbers that determine the number of winners for each prize level of the Powerball game or a Powerball promotion as described in these rules. A Powerball Drawing shall determine the winning numbers for the Powerball game, the Double Play Drawing, and the Power Play multiplier. Winning numbers for the Powerball game include the Winning numbers drawn for the Powerball game, and the number drawn to determine the Power Play multiplier. Grand prize winnings pool—An amount constituting 34.0066% of gross sales from all participating states for a particular Powerball game drawing for the purpose of paying winning grand prizes in that drawing. The grand prize winnings pool includes prize money allocated to the grand prize category from prior Powerball game drawings in which there were no winning grand prize tickets. A portion of this pool is used to fund prize reserve accounts until those accounts achieve maximum balances. Parimutuel—Wagered funds that are pooled and then paid in equal shares to winners of a prize as described in these rules. Quick pick—The random selection by the Lottery’s computer system of five numbers from 1 through 69 and a Powerball number from 1 through 26 that appear on a ticket and are played by a player in the game. Ticket—A Powerball ticket, produced by an on-line terminal from a licensed on-line retailer in an authorized manner, containing a letter prefix followed by five selected numbers from 1 through 69 and a single selected Powerball number from 1 through 26 for each basic play, ticket validation number data, drawing date, amount bet and any applicable promotion exercised by the player. Each set of five numbers and the Powerball number constitutes a basic play of which there may be one or more, up to ten on a ticket. Winning numbers—Six numbers, the first five numbers from 1 through 69, and the Powerball number from 1 through 26, selected at a Powerball drawing and subsequently validated by the MUSL, which shall be used to determine the winning Powerball plays contained on a ticket or properly registered ticketless transaction. Double Play winning numbers shall not be used to determine Powerball prizes. Powerball winning numbers shall not be used to determine Double Play prizes.

(Editor’s Note: This is a partial listing of the definitions applicable to Powerball. See § 871.3 (relating to definitions) for additional definitions.)

(iv) Section 871.5 (relating to ticket price). A Powerball basic play shall cost $2 per play. The power play option may be exercised, at the discretion of the player, for an additional $1 per play. The double play option may be exercised, at the discretion of the player, for an additional $1 per play. If both options are exercised, the total cost per play shall be $4.

(v) Section 871.6(a) (relating to Powerball bet slip and ticket characteristics and restrictions). For each basic play the player shall select, using a physical or electronic bet slip, or request quick pick selection by the computer, five numbers and a single Powerball number, in one or more of the game panels on a Powerball bet slip. Powerball bet slips shall be available at no cost to the player. The minimum entry is $2. For $2, play one game; for $4, play two games; for $6, play three games; for $8, play four games; for $10, play five games. Players are also given the option to select one or more promotions verbally or on the bet slip at the time of purchase for an additional $1 per promotion selected for each play. Game panels shall be played in alphabetical order in accordance with the instructions printed on the Powerball bet slip. A Powerball bet slip has no pecuniary or prize value and does not constitute evidence of the purchase of a ticket or the numbers selected.

(vi) Section 871.6(b). To purchase a Powerball play, players shall, in addition to the purchase price, submit a completed Powerball bet slip, request number selections either by quick pick or manual terminal entry to an on-line retailer to have a ticket issued. To purchase a ticket at a Lottery self-service terminal that dispenses terminal-based Lottery tickets, the player shall designate the drawing date or dates for which the ticket is entered, number selections and may exercise the power play promotion for an additional $1 per play. The player may use a bet slip or the Quick Pick option at a Lottery self-service terminal that dispenses terminal-based Lottery tickets. The ticket shall contain five selected numbers and a single selected Powerball number for each play, ticket validation number data, drawing date, amount bet and any applicable promotion exercised by the player. This ticket shall be the only valid receipt for claiming a prize. The ticket shall only be valid for the drawing date or dates printed on the ticket. Retailers are not permitted to allow the attachment of any remote devices to a lottery terminal to enter plays except as otherwise provided in the MUSL rules.

(vii) Section 871.6(c). If Powerball bet slips are unavailable, number selections may be given to an on-line retailer in groups of five number selections and one Powerball number selection per game section for each $2 wagered as a basic play. The player may exercise either the power play promotion or the double play promotion for an additional $1 per play per promotion selected. The retailer shall manually enter the selections into the computer terminal.

(viii) Section 871.6(e). It shall be the sole responsibility of the player to verify the accuracy of the game play or plays and other data printed on the ticket. The placing of plays, by the player or through the on-line retailer who is acting on behalf of the player in entering the play or plays, is done at the player’s own risk.

(ix) Section 871.6(f). A player may select numbers for up to 20 drawings, specifically the next drawing and the 19 subsequent drawings.

(x) Section 871.7(a) (relating to time, place and manner of conducting drawing). Time of drawing. A Powerball drawing will be held three times a week or as publicly announced by the Secretary.

(xi) Section 871.8(a) (relating to expected prize payout percentages). Determination of expected prize payout percentages for the Powerball drawing is as follows:

• Indicates a set prize.

** Fifty percent of Powerball gross sales are allocated to the winnings pool for the payment of prizes.

(xii) Section 871.8(b). Prize money allocated to the grand prize category will be paid on a parimutuel basis, divided equally by the number of plays determined by the MUSL to be the winners of the grand prize.

(xiii) Section 871.8(c). The number of plays determined by the MUSL to be winners of the second through ninth prize categories will be paid as set cash prizes, except as provided in paragraphs (1) through (4).

(1) Except as otherwise provided in section 871.8(c)(4), if the total of the set prizes (as multiplied by the respective Power Play multiplier if applicable) awarded in a Powerball drawing exceeds the percent of the prize pool allocated to set prizes, then the amount needed to fund the set prizes, including Power play prizes, shall be drawn from the following sources in the following order:

(i) The amount allocated to the set prize tiers and carried forward from previous draws, if any.

(ii) An amount from the MUSL set prize reserve account, if available, not to exceed $40,000,000 per Powerball drawing.

(iii) Any other amounts as agreed to by the MUSL Powerball Product Group in their sole discretion.

(2) Except as otherwise provided in section 871.8(c)(4), if the sources set forth in paragraph (1) are depleted and there still are not sufficient funds to pay the set prizes, including Power play prizes, for a particular Powerball drawing, the highest set prize shall become a parimutuel prize. If the amount of the highest set prize, when paid as a parimutuel prize, is less than or equal to the next highest set prize and there are still not sufficient funds to pay the remaining set prizes, the next highest set prize shall become a parimutuel prize. If necessary, and under the same test conditions set forth in the preceding sentence, each succeeding set prize level shall be converted to a parimutuel prize, in order, until all set prizes become parimutuel. If all prizes are converted to parimutuel prizes, the money available from the funding sources listed in this rule shall be divided among the winning Powerball Plays in proportion to their respective prize percentages. Powerball Set Prizes and Power Play prizes will be reduced by the same percentage.

(3) Except for winning prizes sold by the California Lottery, if all, or any portion of the set prize pool is not awarded in the current Powerball drawing, that portion of the set prize pool shall be carried forward to subsequent Powerball drawings.

(4) By agreement between the Party Lotteries and the Licensee Lotteries, the Licensee Lotteries shall independently calculate their set parimutuel prize amounts. The Party Lotteries and the Licensee Lotteries shall then agree to set the parimutuel prize amounts for all lotteries selling the game at the lesser of the independently calculated prize amounts.

(xiv) Section 871.9(b) (relating to Powerball prize payments). A grand prize shall be paid by an annuity except that a player may elect to receive the grand prize in a single cash payment provided the cash election is made by the player within 60 days of the date the Lottery determines that a grand prize-winning ticket has been sold and that a player is entitled to the prize.

(1) An election to receive the grand prize by annuity or cash made by the player after the player becomes entitled to the prize is final and cannot be revoked, withdrawn or otherwise changed.

(2) Shares of the grand prize shall be determined by dividing the cash available in the grand prize pool equally among all winners of the grand prize. A winner who elected cash payment shall be paid the share in a single cash payment.

(3) The annuitized prize shall be determined by multiplying a winner’s share of the grand prize by the MUSL annuity factor.

(xv) Section 871.9(c). The MUSL annuity factor is determined through a process as approved by the MUSL Finance and Audit Committee.

(xvi) Section 871.9(g). If more than one winning ticket for the grand prize is determined, upon meeting the requirements of § § 871.12 and 871.13 (relating to ticket validation requirements; procedures for claiming and payment of Powerball prizes), each is entitled to a parimutuel payment share of the total grand prize category.

(xvii) Section 871.9(h). A winning Powerball play is entitled only to the highest prize won by those numbers in a Powerball drawing, and a winning Double Play, play is entitled only to the highest prize won by those numbers in a Double Play drawing. A player may win both a Powerball prize and a Double Play prize if the player purchased the Double Play promotion and if the Powerball Play and the Double Play, play match the winning numbers drawn for both the Powerball game and the Double Play game.

(xviii) Section 871.9(m). Annuitized payment of the grand prize or a share of the grand prize may be rounded to facilitate the purchase of an appropriate funding mechanism. Breakage on an annuitized grand prize win shall be added to the first cash payment to the winner or winners. Prizes other than the grand prize, which under this chapter may become single payment, parimutuel prizes, may be rounded down so that prizes can be paid in multiples of whole dollars. Breakage resulting from rounding these prizes shall be carried forward to the prize pool for the next drawing.

(xix) Section 871.10(2) (relating to funding of guaranteed prizes). If there are multiple grand prize winners during a single drawing and at least one of the grand prize winners has elected the annuitized option prize, then the MUSL Annuity Factor shall be utilized to determine the cash pool. The cost of the annuitized prize or prizes will be determined at the time the annuity is purchased through a process as approved by the MUSL Board.

(xx) Section 871.10(4) is deleted in its entirety.

(xxi) Section 871.10(5). Minimum guaranteed prizes or increases may be waived if the alternate funding mechanism as set forth in § 871.8 becomes necessary.

(xxii) Section 871.10(6). Approval of the Group is required to change the guaranteed minimum Grand Prize amounts or minimum increases in the Grand Prize amount. The Group may increase, decrease or eliminate the guaranteed minimum Grand Prize amount or any announced minimum Grand Prize increases as effective at any time following the next drawing following the action taken by the Group.

(xxiii) Section 871.13(a) (relating to procedures for claiming and payment of Powerball prizes). Pennsylvania Powerball and Double Play prizes shall be claimed only through a licensed on-line Pennsylvania Lottery retailer beginning on the day following the drawing. The Lottery is not authorized to accept claims or pay prizes for Powerball tickets purchased in other jurisdictions.

(xxiv) Section 871.13(c). The holder of an apparent winning Powerball or Double Play ticket containing one or more winning lettered play selections representing combined prizes of $2,500 or less will be paid by participating on-line retailers as provided in subsection (b), if the ticket validation requirements in § 871.12 (relating to ticket validation requirements) have been met, a proper validation pay ticket has been issued by the retailer’s computer terminal and other retailer procedures have been met.

(xxv) Section 871.13(d). The holder of an apparent winning Powerball or Double Play ticket containing one or more winning lettered play selections representing combined prizes in excess of $2,500, with the exception of the grand prize category, shall first validate the apparent winning ticket at the participating Pennsylvania Lottery on-line retailer to receive a validation receipt, complete a claim form and display appropriate identification and then surrender the winning ticket and the original claim form to the retailer for transmittal to Lottery Headquarters for payment under Chapter 811 (relating to prizes).

(xxvi) Section 871.13(e). The holder of an apparent winning Powerball or Double Play ticket containing one or more winning lettered play selections representing a grand prize category prize shall present, in person, the apparent winning ticket to the Pennsylvania Lottery Headquarters for validation under Chapter 811.

(xxvii) Section 871.13(f). In the event of the death of a Powerball or Double Play grand prize winner and upon petition of the estate of the prize winner, the MUSL Powerball Product Group may accelerate payment of all remaining proceeds from the winning ticket to the estate of the winner by transferring to the estate the securities or cash, or both, being held to satisfy the prize requirements, or paying the estate the present value of the remaining payments of the winner’s prize. The valuation of the securities and determination of the present value of the accelerated lottery payments shall be at the sole discretion of the MUSL Powerball Group. The payment of a set prize to a person who dies before receiving any or all of a particular prize and to a person under 18 years of age will be paid under § § 811.16 and 811.27 (relating to prizes payable after death of prize winner; payment of prizes to persons under 18 years of age).

(xxviii) Section 871.14(b) (relating to parimutuel prize pool). An amount equal to up to 5% of a party lottery’s sales shall be deducted from a party lottery’s grand prize pool contribution and placed in trust in one or more prize pool accounts and prize reserve accounts at any time that the prize pool accounts and party lottery’s share of the prize reserve accounts is below the amounts designated by the MUSL Powerball Product Group. An additional amount of up to 20% of a party lottery’s sales shall be deducted from a party lottery’s grand prize pool contribution and placed in trust to be held by the product group at such times as determined by the MUSL Powerball Product Group.

(xxix) Section 871.14(c). The MUSL Powerball Product Group has established the following prize reserve accounts for the Powerball game:

(1) the Prize Reserve Account, which is used to guarantee the payment of valid, but unanticipated, Grand Prize claims that may result from a system error or other reason; and

(2) the Set Prize Reserve Account, which is used to fund deficiencies in low-tier prize payments, subject to the limitations of these rules.

(xxx) Section 871.14(d). The MUSL Powerball Product Group has established the following prize pool accounts for the Powerball game:

(1) The Grand Prize pool, which is used to fund the current Grand Prize.

(2) The Powerball Set Prize Pool, which is used to fund the Powerball Set Prize payments.

(3) The Set Aside Pool, which is used to fund the payment of the awarded minimum starting annuity Grand Prizes and minimum annuity Grand Prize increase, if necessary, as subject to the limitations of these rules and any limitations as may be set by the Product Group; and

(4) The Grand Prize Carry Forward Pool, which is used to fund the starting minimum annuity Grand Prize, as may be set by the Product Group, if such funds are available and if sales do not fund the Grand Prize.

(xxxi) Section 871.14(e). The Power Play Prize Pool and Power Play Pool Account are described in § 871.20 (relating to power play promotion) of these rules.

(xxxii) Section 871.14(f). The Double Play Prize Pool and Double Play Prize Pool Account are described in § 871.21 (relating to double play promotion) of these rules.

(xxxiii) Section 871.14(g). The Set Prize Pool Account holds the temporary balances that may result from having fewer than expected winners in the Powerball Set Prize (also known as low-tier prize) categories. The source of the Set Prize Pool is the Party Lottery’s weekly prize contributions less actual Powerball Set Prize liability.

(xxxiv) Section 871.14(h). Once the prize pool accounts and the party lottery’s share of the prize reserve accounts exceeds the designated amounts, the excess shall become part of the grand prize pool.

(xxxv) Section 871.14(i). The MUSL Powerball Product Group, with the approval of the Finance and Audit Committee, may establish a maximum balance for the prize pool accounts and prize reserve accounts.

(xxxvi) Section 871.14(j). The MUSL Powerball Product Group may determine to expend all or a portion of the funds in the prize pool accounts, except the Grand Prize pool account and the Grand Prize Carry Forward Pool account, and the prize reserve accounts for the following purposes:

(1) The Product Group may expend funds for the purpose of indemnifying the Party Lotteries and Licensee Lotteries in the payment of prizes to be made by the Selling Lotteries, subject to the approval of the MUSL Board and for the payment of prizes or special prizes in the game, subject to the approval of the MUSL Finance and Audit Committee; and

(2) The Product Group may expend funds for the payment of prizes or special prizes in the game, limited to prize pool and prize reserve contributions from lotteries participating in the special prize promotion, subject to the approval of the Board’s Finance and Audit Committee or that Committee’s failure to object after given two weeks’ notice of the planned action, which actions may be appealed to the full Board by the Product Group.

(3) The Grand Prize Carry Forward Pool account may only be expended to fund the starting minimum annuity Grand Prize.

(xxxvii) Section 871.14(k). The prize reserve shares of a party lottery may be adjusted with refunds to the party lottery from the prize reserve accounts as may be needed to maintain the approved maximum balance and shares of the party lotteries.

(xxxviii) Section 871.14(l). A Party Lottery may contribute to its share of prize reserve accounts over time, but in the event of a draw down from the reserve account, a Party Lottery is responsible for its full percentage share of the account, whether or not it has been paid in full.

(xxxix) Section 871.14(m). Any amount remaining in the prize pool accounts or prize reserve accounts at the end of this game shall be carried forward to a replacement prize reserve account or expended in a manner as directed by the members of the MUSL Powerball Product Group in accordance with State law.

(xl) Section 871.14(n). If the prize pool for a drawing is not sufficient to fund an announced minimum grand prize, the prize pool will be increased as necessary in accordance with MUSL rules.

(xli) Section 871.18(c) (relating to governing law). A prize claimant agrees, as its sole and exclusive remedy that claims arising out of a Play can only be pursued against the Selling Lottery which issued the Play. Litigation, if any, shall only be maintained within the jurisdiction in which the Powerball Play was purchased and only against the Selling Lottery that issued the Play. A prize claimant waives any claim or defense that such forum is not convenient or proper. The Contractor agrees that any such court shall have in personam jurisdiction over it, and consents to service of process in any manner authorized by Pennsylvania law. No claim shall be made against any other Participating Lottery or against the MUSL.

(xlii) Section 871.18(d). Nothing in these Rules shall be construed as a waiver of any defense or claim the Selling Lottery which issued the Play, any other Participating Lottery or MUSL may have in any litigation, including in the event a player or prize claimant pursues litigation against the Selling Lottery, any other Participating Lottery or MUSL, or their respective officers, directors or employees.

(xliii) Section 871.18(e). All decisions made by a Selling Lottery, including the declaration of prizes and the payment thereof and the interpretation of Powerball Rules, shall be final and binding on all Play purchasers and on every person making a prize claim in respect thereof, but only in the jurisdiction where the Powerball Play was issued.

(xliv) Section 871.18(f). Unless the laws, rules, regulations, procedures, and decisions of the Lottery which issued the Play provide otherwise, no prize shall be paid upon a Play purchased, claimed or sold in violation of these Rules or the laws, rules, regulations, procedures, and decisions of that Selling Lottery; any such prize claimed but unpaid shall constitute an unclaimed prize under these Rules and the laws, rules, regulations, procedures, and decisions of that Selling Lottery.

(xlv) Section 871.19 (relating to probability of winning).

The probability of winning is as follows:

(xlvi) Section 871.20(a) (relating to Power Play® promotion). The power play promotion shall be available in association with the Powerball game and will continue until the Secretary publicly announces a suspension or termination thereof. The power play promotion will be conducted in accordance with the Powerball rules except that players may purchase the power play option to increase set prizes won as a result of a Powerball drawing. The Powerball grand prize will not be eligible for an increase under the power play promotion. The Secretary will on occasion announce, as a special promotion, higher promotional prize amounts to be won with the power play promotion. Selling Lotteries may require purchase of the Power Play® promotion when a player purchases a Powerball Play. Power Play® is not applicable to the Powerball Double Play Promotion.

(xlvii) Section 871.20(b). At the time of purchasing a Powerball ticket from an on-line Lottery retailer, a player may choose the power play option for one additional $1 per play for each play on the Powerball ticket. If a player chooses the power play promotion feature for any play on a ticket, every play on that ticket must participate in the promotion.

(xlviii) Section 871.20(c). The MUSL shall conduct a power play drawing and will announce results during each of the regular Powerball drawings held during the power play promotion. During each power play drawing a single number (2, 3, 4, 5, or 10) shall be randomly drawn. The 10X multiplier feature will be available for drawings in which the initially advertised annuitized Grand Prize amount is $150,000,000 or less. The MUSL Powerball Product Group may elect to run limited promotions that modify the multiplier features.

(xlix) Section 871.20(e). In drawings where the 10X multiplier is available, the expected power play prize pool for power play set prizes shall consist of up to 49.969% of each drawing period’s sales. In drawings where the 10X multiplier is not available, the expected power play prize pool for power play set prizes shall consist of up to 45.934% of each drawing period’s sales. The prize payout percentage per draw may vary. The power play prize pool shall be carried forward to subsequent power play drawings if all or a portion of the percentage is not required to pay the power play prizes for the current power play drawing and held in the Power Play Pool Account.

(l) Section 871.20(f). In drawings where the 10X multiplier is available, an additional 0.31% of power play sales may be collected and placed in the Power Play Pool Account, for the purpose of paying power play prizes. In drawings where the 10X multiplier is not available, 4.066% of power play sales may be collected and played in the Power Play Pool Account, for the purposes of paying power play prizes. Any amount remaining in the power play pool account at the end of the power play promotion shall be returned to all lotteries participating in the account after the end of all claim periods of all selling lotteries, carried forward to a replacement game, or expended in a manner as directed by the MUSL Powerball Product Group in accordance with State law.

(li) Section 871.20(g). Except as otherwise provided in section 871.20(m), if, with respect to a single Powerball drawing, the total of the Powerball set prizes without the power play option and the Powerball set prizes increased by the power play option exceeds the percentage of the prize pools allocated to the set prizes, the amount needed to fund those combined set prizes shall be drawn from the following sources in the following order:

(1) The amount allocated to the set prizes and carried forward from previous Powerball drawings, if any.

(2) The amount allocated to the Powerball Set-Prize Reserve Account, if available in the account, not to exceed forty million dollars ($40,000,000.00) per drawing.

(3) Other amounts as agreed to by the MUSL Powerball Product Group in their sole discretion.

(lii) Section 871.20(h). Except as otherwise provided in section 871.20(m), if the sources set forth in subsection (g) are depleted and there still are not sufficient funds to pay the set prizes, including the power play prizes, for a particular Powerball drawing, the highest set prize, including the prize increased by the power play option, shall become a parimutuel prize. If the amount of the highest set prize, when paid as a parimutuel prize, is less than or equal to the next highest set prize and there are still not sufficient funds to pay the remaining prizes, the next highest set prize, including the prize increased by the power play option, shall become a parimutuel prize. If necessary, under the same test set forth in the preceding sentence, each succeeding set prize level shall be converted to a parimutuel prize, in order, until all set prizes become parimutuel. If all set prizes are converted to parimutuel prizes, the money available from the funding sources listed in subsection (g) shall be divided among the winning plays in proportion to their respective prize percentages.

(liii) Section 871.20(i). Power play set prizes which become parimutuel may be rounded down so that they can be paid in multiples of whole dollars. Funds remaining after rounding shall be carried forward to the prize pool for the next power play drawing.

(liv) Section 871.20(k). When the Powerball set prizes become parimutuel, the Powerball set prize amounts will be less than the amount shown and the power play prizes for the second through the ninth category prizes shall be reduced as announced by the MUSL Powerball Product Group.

(lv) Section 871.20(l). The probability of the various power play numbers being selected in a power play drawing.

(1) The probability of the various power play numbers being selected in a power play drawing when the 10X multiplier is available, are:

(2) The probability of the various power play numbers being selected in a power play drawing when the 10X multiplier is not available, are:

(lvi) Section 871.20(m). By agreement between the Party Lotteries and the Licensee Lotteries, the Licensee Lotteries shall independently calculate their set parimutuel prize amounts, including the power play prize amounts. The Party Lotteries and the Licensee Lotteries shall then agree to set the parimutuel prize amounts for all lotteries selling the game at the lesser of the independently calculated prize amounts.

(lvii) Section 871.23(a) (relating to Double Play promotion). The Double Play promotion shall be available in association with the Powerball game and will continue until the Secretary publicly announces a suspension or termination thereof. The Double Play promotion will be conducted in accordance with the Powerball rules except that players may purchase the Double Play option to use the same set of numbers selected for a Powerball play in a second, Double Play Drawing immediately following the Powerball Drawing. Double Play does not replace or alter Power Play®. Double Play prizes will not be multiplied or increased by the Power Play® promotion. Powerball Prizes and Double Play prizes are determined separately; for example, a Powerball player who chooses to participate in Double Play may win both a Double Play prize and a Powerball prize, if their Play numbers match the Powerball winning numbers and also match the Double Play winning numbers. Selling Lotteries may require purchase of the Power Play® promotion when a player purchases a Powerball Play.

(lviii) Section 871.23(b). At the time of purchasing a Powerball ticket from an on-line Lottery retailer, a player may choose the Double Play option for one additional $1 per play for each play on the Powerball ticket. If a player chooses the Double Play promotion feature for any play on a ticket, every play on that ticket must participate in the promotion.

(lix) Section 871.23(c). The MUSL shall conduct a Double Play drawing and will announce results following each of the regular Powerball drawings held during the Double Play promotion. The purpose of the Double Play game is to determine winners from ticket holders matching five numbers from 1 through 69 and matching the separately drawn number from 1 through 26, or a designated combination thereof, within a single play, with the five winning first set numbers and the second set number to be randomly drawn. Drawings will be conducted three times a week or as publicly announced by the Secretary.

(lx) Section 871.23(d). Powerball tickets that contain the Double Play option and one or more plays eligible for a Double Play first through ninth category prize shall be entitled to a total set prize identified in § 871.23(k), unless a higher limited promotional prize amount is announced by the Secretary.

(lxi) Section 871.23(e). The expected Double Play prize pool for Double Play set prizes shall consist of 55% of each drawing period’s sales. The prize payout percentage per draw may vary. The Double Play prize pool shall be carried forward to subsequent Double Play drawings if all or a portion of the percentage is not required to pay the Double Play prizes for the current Double Play Drawing and held in the Double Play Prize Pool Account.

(lxii) Section 871.23(f). The MUSL Powerball Product Group has established the following prize pool accounts for the Double Play game:

(1) The First Prize Pool, which is used to fund the First Prize by contributing 4.9889% of sales, fund deficiencies in the Double Play Set Prize Pool, and which shall contain all funds not used to pay a First Prize or fund deficiencies in the Double Play Set Prize Pool; and

(2) The Double Play Set Prize Pool, which is used to fund the Double Play second through ninth prizes, and which may hold temporary balances that result from having fewer expected winners in the Double Play Set Prize categories.

(lxiii) Section 871.23(g). The Set Prize Pool Account holds the temporary balances that may result from having fewer than expected winners in the Powerball Set Prize (aka low-tier prize) categories. The source of the Set Prize Pool is the Party Lottery’s weekly prize contributions less actual Powerball Set Prize liability.

(lxiv) Section 871.23(h). The MUSL Powerball Product Group may determine to expend all or a portion of the funds in the prize pool accounts, except the Grand Prize pool account and the Grand Prize Carry Forward Pool account, and the prize reserve accounts for the following purposes:

(1) The Product Group may expend funds for the purpose of indemnifying the Selling Lotteries in the payment of prizes to be made by the Selling Lotteries; and

(2) The Product Group may expend funds for the payment of prizes or special prizes in the game, limited to prize pool and prize reserve contributions from lotteries participating in the special prize promotion.

(lxv) Section 871.23(i). If, with respect to a single Double Play drawing, the total of the Double Play set prizes exceeds the percentage of the prize pools allocated to the set prizes, the amount needed to fund those combined set prizes shall be drawn from the following sources in the following order:

(1) The amount allocated to Double Play Set Prize Pool, if any.

(2) An amount from the First Prize Pool, if available; and

(3) Other amounts as agreed to by the MUSL Powerball Product Group in their sole discretion.

(lxvi) Section 871.23(j). If the sources set forth in subsection (g) are depleted and there still are not sufficient funds to pay the set prizes for a particular Double Play drawing, the highest Double Play set prize shall become a parimutuel prize. If the amount of the highest Double Play set prize, when paid as a parimutuel prize, is less than or equal to the next highest set prize and there are still not sufficient funds to pay the remaining prizes, the next highest Double Play set prize shall become a parimutuel prize. If necessary, under the same test set forth in the preceding sentence, each succeeding set prize level shall be converted to a parimutuel prize, in order, until all set prizes become parimutuel. If all set prizes are converted to parimutuel prizes, the money available from the funding sources listed in subsection (g) shall be divided among the winning plays in proportion to their respective prize percentages.

(lxvii) Section 871.23(k). The probability of winning is as follows:

The provisions of this § 871.22 amended July 12, 2002, effective October 6, 2002, 32 Pa.B. 3396; amended October 11, 2002, and applies to the ticket sales beginning on Sunday, October 6, 2002, for the Powerball drawing on Wednesday, October 9, 2002, 32 Pa.B. 5144; amended July 22, 2005, effective August 28, 2005, 35 Pa.B. 4151; amended November 28, 2008, effective January 4, 2009, 38 Pa.B. 6571; amended May 27, 2011, effective May 28, 2011, 41 Pa.B. 2787; amended December 16, 2011, these changes will affect ticket sales beginning on Sunday, January 15, 2012, for the Powerball drawing on Wednesday, January 18, 2012, 41 Pa.B. 6945; amended September 27, 2013, these changes will affect ticket sales beginning October 1, 2013, 43 Pa.B. 5776; amended January 3, 2014, these changes will affect ticket sales beginning January 19, 2014, 44 Pa.B. 138; amended September 25, 2015, these changes will affect ticket sales beginning October 4, 2015, 45 Pa.B. 5884; amended April 17, 2020, these changes will affect ticket sales beginning April 9, 2020, 50 Pa.B. 2161; amended August 13, 2021, these changes will affect ticket sales beginning August 23, 2021, 51 Pa.B. 4953; amended August 27, 2021, these changes will affect ticket sales beginning August 22, 2021, 51 Pa.B. 5498. Immediately preceding text appears at serial pages (378931) to (378958) and (401397) to (401398).

This section cited in 61 Pa. Code § 871.21 (relating to future changes to Powerball).

History

• Authority: The provisions of this Chapter 871 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 871 adopted June 7, 2002, effective June 8, 2002, 32 Pa.

Chapter 872 Match 6 Lotto

61 Pa. Code § 872.1 Creation.

Under the act and this part, there is created a numbers game, called Match 6 Lotto, which will commence at the discretion of the Secretary, and will continue until the Secretary publicly announces a suspension or termination date.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.2 Purpose.

(a) Match 6 Lotto is designed to give players the opportunity to win up to four prizes in each game.

(b) For a $2 purchase, the player gets a ticket containing three sets of six numbers, the numbers in each of these sets ranging from 1 to 49. Players can win one, two or three prizes by matching, in each of their sets of numbers, three or more of the six winning numbers randomly drawn twice a week or as determined and publicly announced by the Secretary. Correctly matching three or more of the six winning numbers selected by the Lottery and meeting the other validation criteria, entitles the ticket holder to a prize identified in § 872.8(a) (relating to determination of prize winners).

(c) The combination of the player’s 18 numbers generated by the single $2 purchase (arranged in the three sets of six numbers each), offers the player an additional opportunity to win. Matching any four or more numbers from among all of their three sets of numbers to any of the winning numbers selected by the Lottery and meeting the other validation criteria, entitles the ticket holder to a prize identified in § 872.8(b).

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.3 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:

Apparent winning ticket—A game ticket bearing winning numbers which has not been validated by the Lottery.

Base play—Each of the three sets of six numbers resulting from a $2 purchase.

Combined game—The combination of the 18 numbers (three plays) on a player’s ticket.

Drawing—The process of selecting winning numbers that determine the number of winners for each prize category of the game.

First place (jackpot) prize pool—The amount allocated from Match 6 Lotto gross sales for a particular Match 6 Lotto Game drawing for the purpose of paying first place (jackpot) prizes, which may include first place (jackpot) prize moneys from previous drawings when a first place prize (jackpot) was not won as provided in § 872.8(a)(2) (relating to determination of prize winners).

Game section—One of 5 areas of the Match 6 Lotto bet slip that contains 49 squares each numbered 1 through 49. Each area is lettered Game A, B, C, D or E, and when used to purchase a ticket, corresponds to the numbers selected and the numbers that are quick picked and printed on the ticket.

Match 6 Lotto bet slip—A card having a game section used by a player to play the game.

On-line retailer or retailer—A person who is properly authorized by the Lottery to sell tickets.

Quick pick—The random selection through a Lottery terminal of six different numbers from 1 through 49 that appear as a play in the Match 6 Lotto Game.

Ticket—A Match 6 Lotto ticket is a Lottery ticket produced by a licensed retailer in an authorized manner, and contains, at the discretion of the player 1, 2, 3, 4 or 5 games, designated respectively as Game A, B, C, D and E. Each game designation is followed by its three plays. The ticket also contains at a minimum, the drawing date, the amount bet and validation data. Each game consists of three plays. A play consists of six numbers, either player or quick pick selected, from 1 through 49. The player may select or designate as quick pick selection one play per game, the remaining two plays of the game are quick pick selections.

Winning numbers—Six numbers, from 1 through 49, selected in a Match 6 Lotto drawing and which have been subsequently validated by the Lottery, which shall be used to determine the winning plays and the combined game winners on Match 6 Lotto Game tickets.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.4 Ticket sales retailers.

(a) Match 6 Lotto Game ticket sales may only be made through licensed retailers the Director will appoint and contract with as provided in § 815.42 (relating to ticket sales agents).

(b) The Lottery may terminate sales by a retailer without prior notice to the retailer if the retailer becomes delinquent in payment of proceeds due the Lottery, or fails to handle Lottery funds in the prescribed manner, or if the retailer fails to follow the contract or an addendum thereof, this part or procedures established governing the sale of tickets or if the Lottery deems it to be in the best interest of the Commonwealth.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.5 Ticket price.

Match 6 Lotto game tickets may be purchased for $2 per game. Each game shall consist of three individual plays, one of which, at the player’s option may be numbers selected by the player; the remaining two number plays are quick pick selections. These three individual plays combined constitute a game. Additional games may be purchased at the discretion of the player. A ticket may contain one to five games.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.6 Match 6 Lotto bet slip and ticket characteristics and restrictions.

(a) The player shall select, or request selection by computer, six numbered squares, in one or more of the game sections on a Match 6 Lotto bet slip. Match 6 Lotto bet slips shall be available at no cost to the player. The minimum entry is $2. For $2, play game A; for $4, play games A and B; for $6, play games A, B and C; for $8, play games A, B, C and D; for $10, play games A, B, C, D and E. Game sections shall be selected in alphabetical order in accordance with the instructions printed on the Match 6 Lotto bet slip. A Match 6 Lotto bet slip has no pecuniary or prize value and does not constitute evidence of the purchase of a ticket or the numbers selected.

(b) To purchase a ticket, players shall, in addition to the purchase price, submit the completed Match 6 Lotto bet slip, or request number selection, either by quick pick or manual terminal entry, to an on-line retailer to have issued a ticket. The ticket shall consist of one to five games, each containing three six number selections, two of which will be quick pick selections, in each game section (for each $2 wager) identified by a letter, the drawing date, amount bet and validation number data. This ticket shall be the only valid proof of the bet placed, and the only valid receipt for claiming a prize. The ticket shall only be valid for the drawing dates printed on the ticket.

(c) If Match 6 Lotto bet slips are unavailable, number selections may be given to an on-line retailer in groups of six number selections, one for each game section and for each $2 wagered. The retailer shall manually enter the selections into the computer terminal.

(d) A Match 6 Lotto ticket may not be canceled or voided once printed by the Lottery terminal, even if the ticket is printed in error.

(e) It is the sole responsibility of the ticket holder to verify the accuracy and condition of data printed on the ticket. The placing of plays is done at the player’s own risk through the on-line retailer who is acting on behalf of the player in entering the play or plays.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.7 Time, place and manner of conducting drawing.

(a) Time of drawing. A Match 6 Lotto drawing will be held twice a week or as determined and publicly announced by the Secretary.

(b) Place of drawing. A Match 6 Lotto drawing will be conducted in the Harrisburg area unless the Secretary directs that a drawing or part of the drawing procedure be conducted at some other location.

(c) Manner of conducting drawings. The Lottery will draw at random, six numbers from 1 through 49, with the aid of mechanical devices or any other selection methodology as authorized by the Secretary. The six numbers selected will be used in determining base play winners and combined game winners for each individual drawing. The validity of a drawing will be determined solely by the Lottery.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.8 Determination of prize winners.

(a) The Match 6 Lotto base play prizes and determination of Match 6 Lotto base prize play winners is as follows:

*Indicates set prize.

(1) Prize money allocated to the base play first prize category (jackpot) will be paid on a pari-mutuel basis, divided equally by the number of plays on tickets determined by the Lottery to be entitled to claim a first prize. The Lottery will estimate and announce the projected amount of the upcoming jackpot (first place prize pool) prior to the drawing. Payment will be made only in the amount actually in the first place (jackpot) prize pool.

(2) If, in a Match 6 Lotto drawing, there are no winning base play first place prize plays (jackpots), prize money allocated to that prize category will be added to the amount allocated for the first prize category money in the next Match 6 Lotto drawing.

(3) If more than one winning base play first place prize play is determined, each, upon meeting the requirements of § § 872.10 and 872.11 (relating to ticket validation requirements; and procedures for claiming and payment of prizes), is entitled to a prorated payment share of the total first prize category.

(b) The Match 6 Lotto combined game prizes and determination of Match 6 Lotto combined game prize play winners is as follows:

*All prizes listed are set prizes.

(c) All Match 6 Lotto prize payments, including a jackpot prize, will be made as a one time lump-sum cash payment.

(d) A winning Match 6 Lotto game ticket is entitled only to the highest prize won by those numbers on each play plus the highest prize won by those numbers on the combined game.

(e) The number of prize categories, the allocation of prize money among the prize categories and the minimum base play first place prize category (jackpot) amount may be changed at the discretion of the Secretary and the change will be announced by public notice. The changes will only apply prospectively to Match 6 Lotto drawings as of the date specified in the public notice.

(f) Retailer incentive and marketing promotion programs, including the use of unfunded free tickets, may be implemented at the discretion of the Secretary. Funds for the programs, if needed, will be drawn from the Lottery fund.

This section cited in 61 Pa. Code § 872.2 (relating to purpose); and 61 Pa. Code § 872.3 (relating to definitions).

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.9 Ticket responsibility.

(a) A ticket is a bearer document deemed to be owned by the person holding the ticket, except that if a name is contained on the back of the ticket, the person so named will, for all purposes, be considered the owner of the ticket.

(b) The Commonwealth will not be responsible for lost or stolen tickets.

(c) The purchaser of the ticket has the sole responsibility for checking the accuracy and condition of the data printed on the ticket.

(d) The Commonwealth will not be responsible for tickets redeemed in error by an on-line retailer.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.10 Ticket validation requirements.

(a) Valid tickets. To be a valid ticket, the following conditions shall be met:

(1) The ticket validation numbers shall be present in their entirety and shall correspond, using the computer validation file, to the selected numbers printed on the ticket for the date printed on the ticket.

(2) The ticket shall be intact.

(3) The ticket may not be mutilated, altered, reconstituted or tampered with.

(4) The ticket may not be counterfeit or an exact duplicate of a winning ticket.

(5) The ticket shall have been issued by the Lottery through a licensed retailer.

(6) The ticket may not have been stolen.

(7) The ticket shall be validated in accordance with § 872.11 (relating to procedures for claiming and payment of prizes).

(8) The player-selected or computer-selected numbers on the ticket shall be in individual groups of six numbers each. Each group of six numbers shall be a play. Each group of three plays shall be preceded with the designation Game A, B, C, D or E. The game and its lettered designation and the following three plays constitute a single game.

(9) The ticket data shall have been recorded on the Lottery’s central computer system prior to the drawing and the ticket data shall match this computer record in every respect.

(10) The player and computer-selected numbers, the validation data and the drawing date of an apparent winning ticket shall appear on the official file of winning tickets. A ticket with that exact data may not have been previously paid.

(11) The ticket may not be misregistered, defectively printed, or printed or produced in error to an extent that it cannot be processed by the Lottery.

(12) The ticket shall pass other confidential security checks of the Lottery.

(13) By submitting a ticket for validation, the player agrees to abide by this chapter as determined by the Secretary.

(14) There may not be another breach of this part in relation to the ticket which, in the opinion of the Secretary, justifies disqualification.

(b) Invalid or defective tickets/disputes. A ticket not passing the validation checks in subsection (a) will be considered invalid and will not be paid.

(1) In cases of doubt, the determination of the Secretary is final and binding. The Secretary may replace an invalid ticket with a ticket of equivalent sale price from a current Lottery game.

(2) If a defective ticket is purchased or if the Secretary determines to adjust an error, the sole and exclusive remedy will be the replacement of the defective or erroneous ticket with a ticket of equivalent sale price from a current Lottery game.

(3) If a ticket is not paid by the Lottery and a dispute occurs as to whether the ticket is a winning ticket, the Lottery may replace the ticket as provided in paragraph (2). This is the sole and exclusive remedy of the holder of the ticket.

This section cited in 61 Pa. Code § 872.8 (relating to prize winners); and 61 Pa. Code § 872.11 (relating to procedures for claiming and payment of prizes).

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.11 Procedures for claiming and payment of prizes.

(a) A prize shall be claimed only through a licensed on-line retailer as soon as that drawing is placed in pay status by the Lottery.

(b) An online retailer is authorized and required to make payment of a prize of $2,500 or less, if the ticket is presented within a designated time period as announced by the Secretary, on an individual winning ticket, if the retailer has sufficient funds available for payment.

(c) The holder of an apparent winning ticket representing a prize of $2,500 or less will be paid by participating on-line retailers as provided in subsection (b), if the ticket validation requirements in § 872.10 (relating to ticket validation requirements) have been met, a proper validation pay ticket has been issued by the retailer’s computer terminal and other retailer procedures have been met.

(d) The holder of an apparent winning ticket representing a prize in excess of $2,500, with the exception of the first place prize (jackpot), shall present the winning ticket to an on-line retailer or authorized claim center under Chapter 811 (relating to prizes).

(e) The holder of an apparent winning ticket representing a first place prize (jackpot) shall present, in person, the apparent winning ticket to Lottery Headquarters or a Lottery area office under Chapter 811.

(f) The payment of a prize to a person who dies before receiving a particular prize or to a person under 18 years of age will be paid under § § 811.16 and 811.27 (relating to prizes payable after death of prize winner; and payment of prizes to persons under 18 years of age).

(g) The Commonwealth will be discharged of liability after payment of prizes as provided in § 811.26 (relating to discharge of State liability upon payment).

This section cited in 61 Pa. Code § 872.8 (relating to determination of prize winners); and 61 Pa. Code § 872.10 (relating to ticket validation requirements).

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.12 Prizes.

(a) If the total of the set prizes won in a particular Match 6 Lotto drawing exceed sales for that drawing by 100% or more, then those set prize tiers, in which the stated prizes won exceed the percentage of sales anticipated to be paid in prizes/category, will become pari-mutuel. Moneys will be drawn from the Lottery Fund, to the extent necessary, to fund the payment of prizes under this subsection.

(b) If the Match 6 Lotto is terminated for any cause, prize moneys remaining undistributed will be paid out of the State Lottery Fund and used for purposes otherwise provided for by law.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.13 Unclaimed prize money.

Prize money on a winning Match 6 Lotto play may be retained by the Secretary for payment to the person entitled to it. If within 1 year of the drawing date on the ticket, no claim is made on a winning play, as determined by the Secretary, the right to claim prize money terminates, and the prize money will be paid into the State Lottery Fund and used for purposes otherwise provided for by statute.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.14 Withholding.

Federal withholding taxes will be withheld by the Lottery for prize payments in amounts required in accordance with applicable provisions of law.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.15 Purchase and prize restrictions.

A ticket may not be purchased by, and a prize will not be paid to, an officer or employee of the Lottery, Lottery professional services contractors or subcontractors, who are involved in the operation of the on-line lottery games system or its associated drawings, or to a spouse, child, brother, sister or parent residing in the same household of the officer, employee, contractor or subcontractor.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.16 Governing law.

(a) In purchasing a ticket, the purchaser agrees to comply with and abide by applicable laws, this part, instructions, conditions and final decisions of the Secretary, and procedures established by the Secretary for the conduct of the Match 6 Lotto.

(b) Decisions made by the Secretary including the declaration of prizes and the payment thereof in interpretation of this part are final and binding on players and persons making a claim in respect thereof.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

61 Pa. Code § 872.17 Probability of winning.

(a) Probabilities of winning per game:

*Odds that one or more plays in a 3-play game will win a prize at the given level. Since more than one play can win a prize, levels are not mutually exclusive.

(b) Probability of winning combined game:

*All combined game prizes are set prizes.

History

• Authority: The provisions of this Chapter 872 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 872 adopted January 2, 2004, effective January 3, 2004, 34 Pa.

Chapter 873 Lucky for Life Lotto

61 Pa. Code § 873.1 Creation.

Under the act and this part, there is created a numbers game, called Lucky for Life Lotto, which will commence at the discretion of the Secretary, and will continue until the Secretary publicly announces a suspension or termination date.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.2 Purpose.

(a) The Lucky for Life Lotto Game offers the player the opportunity to win two ways: instantly winning a prize; and correctly matching the numbers on his ticket in a single play to those drawn in the Lottery drawing in which the ticket is entered.

(b) The purpose of the Lucky for Life Lotto Game is to determine winners from ticket holders matching six numbers from 1 through 38, or a designated combination thereof, within a single play, with the six winning numbers to be randomly drawn. Correctly matching the six winning numbers drawn, or a designated combination thereof, and meeting other validation criteria, entitles the ticket holder to a set prize identified in § 873.9(a) (relating to determination of prize winners). Drawings will be conducted twice a week or as determined and publicly announced by the Secretary.

(c) In addition, every Lucky for Life Lotto ticket issued by the Lottery central computer system will be eligible to win an instant prize. The determination of the instant ticket winners, as described in § 873.7 (relating to determination of instant prize winners), will be made by the Lottery’s central computer system based upon a statistical probability of 1 in 20. This probability will be adjusted to incorporate the number of plays on each ticket.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.3 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Apparent winning ticket—A ticket bearing winning numbers which has not been validated by the Lottery. Confidential security checks—Proprietary measures used by the Lottery to validate and verify a ticket’s authenticity. Drawing—The process of selecting winning numbers that determines the number of winners for each prize category of the game. Game section—One of the five areas of the Lucky for Life Lotto bet slip that contains 38 squares each numbered 1 through 38. Each area is lettered either A, B, C, D or E and, when used to purchase a ticket, each corresponds to the numbers selected or quick picked, or both, and printed on the ticket for a single play. Lucky for Life Lotto bet slip—A card having a game section used by a player to play the game. On-line retailer or retailer—A person who is properly licensed by the Lottery to sell tickets. Pay status—The designation within the Lottery’s gaming computer system, which indicates that a given drawing has been verified and validated. Play—A single line of six numbers from 1 to 38 which represents a single $2 wager, and consists of six player-selected or quick-picked numbers, or both. Quick pick—The random selection through a Lottery terminal of up to six different numbers from 1 through 38 that appear as a play in the Lucky for Life Lotto Game. Set prize—Any prize other than the first prize category (jackpot) prize that can be won in this game. Ticket—A Lucky for Life Lotto ticket is a lottery ticket produced by a licensed retailer in an authorized manner, and contains, at the discretion of the player one, two, three, four or five plays, designated respectively as game A, B, C, D and E. The ticket also contains at a minimum, the drawing date, the amount bet, instant play data as described in § 873.7 (relating to determination of instant prize winners) and validation data. Trailing ticket—A ticket produced automatically by the lottery’s central computer system when an original ticket with remaining plays is presented for payment. The ticket contains the same pertinent play data for the remaining plays as contained on the original ticket. Validation criteria—Criteria, including those set forth in § 873.11(a) (relating to ticket validation requirements), against which Lottery tickets are compared in the determination of whether the ticket has won a prize. Winning numbers—Six numbers, from 1 through 38, selected in a Lucky for Life Lotto drawing and which have been subsequently validated by the Lottery, which shall be used to determine the winning Lucky for Life Lotto plays on tickets.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.4 Ticket sales retailers.

(a) Lucky for Life Lotto Game ticket sales may only be made through licensed retailers the Director will appoint and contract with as provided in § 815.42 (relating to ticket sales agents).

(b) The Lottery may terminate sales by a retailer without prior notice to the retailer if the retailer becomes delinquent in payment of proceeds due the Lottery, or fails to handle Lottery funds in the prescribed manner, or if the retailer fails to follow the contract or an addendum thereof, this part or procedures established governing the sale of tickets or if the Lottery deems it to be in the best interest of the Commonwealth.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.5 Ticket price.

Lucky for Life Lotto tickets may be purchased for $2 per play. A play, at the owner’s option, may be up to six numbers selected by the player from 1 through 38, and the remainder selected randomly by the Lottery computer system, or all six numbers randomly selected through the Lottery terminal. Additional plays may, at the discretion of the player, be purchased for an additional $2 for each play purchased. There may be up to five plays on a ticket.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.6 Lucky for Life Lotto bet slip and ticket characteristics and restrictions.

(a) The player shall select, or request selection by computer, up to six numbered squares from 1 through 38. If less than six numbers are selected by the player the remaining number or numbers will be selected randomly by the Lottery computer system from that same range of numbers, in one or more of the game sections on a Lucky for Life Lotto bet slip. Lucky for Life Lotto bet slips shall be available at no cost to the player. The minimum entry is $2. For $2, play game A; for $4, play games A and B; for $6, play games A, B and C; for $8, play games A, B, C, and D; for $10, play games A, B, C, D and E. Game sections shall be selected in alphabetical order in accordance with the instructions printed on the Lucky for Life Lotto bet slip. A Lucky for Life Lotto bet slip has no pecuniary or prize value and does not constitute evidence of the purchase of a ticket or the numbers selected.

(b) To purchase a ticket, a player shall, in addition to the purchase price, submit the completed Lucky for Life Lotto bet slip, or request number selection, either by quick pick or manual terminal entry, or both, to an on-line retailer to have issued a ticket. The ticket shall contain, at a minimum, a six number selection, in each play section, (for each $2 wagered), the drawing date, amount bet, validation number data and instant play data. This ticket, or a subsequently produced trailing ticket, shall be the only valid proof of the bet placed, and the only valid receipt for claiming a prize. The ticket shall only be valid for the drawing date or dates printed on the ticket.

(c) If Lucky for Life Lotto bet slips are unavailable, number selections may be given to an on-line retailer in groups of up to six number selections for each $2 wagered. The retailer shall manually enter each group of up to six number selections into the computer terminal. The terminal will randomly generate the remainder of the numbers if the player selected less than the six required numbers.

(d) A Lucky for Life Lotto ticket may not be cancelled or voided once printed by the Lottery terminal, even if the ticket is printed in error.

(e) It is the sole responsibility of the ticket holder to verify the accuracy and condition of data printed on the ticket. The placing of plays is done at the player’s own risk through the on-line retailer who is acting on behalf of the player in entering the play or plays.

(f) The Department reserves the right to stop play on a number or combination of numbers to protect the integrity of the prize structure of the game anytime during the course of the game.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.7 Determination of instant prize winners.

(a) For each Lucky for Life Lotto play, the Lottery’s central computer system will assign that play a randomly selected number from 1 through 20. Nineteen of the numbers from 1 through 20 will have been predesignated by the Lottery’s central computer as ‘‘nonwinning’’ numbers, the remaining number having been predetermined by the computer as the ‘‘winning’’ number. If the randomly selected number assigned to a play matches the predetermined ‘‘winning’’ number, that play will be an instant winning play.

(b) If on a ticket no play is an instant winner the ticket produced by the Lottery terminal will indicate ‘‘NO INSTANT WIN TRY AGAIN.’’

(c) A ticket upon which one or more plays qualifies as an instant winner will indicate ‘‘INSTANT WINNER $’’ followed by the total amount of the instant prize won on that ticket.

This section cited in 61 Pa. Code § 873.2 (relating to purpose); and 61 Pa. Code § 873.3 (relating to definitions).

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.8 Time, place and manner of conducting drawing.

(a) Time of drawing. A Lucky for Life Lotto drawing will be held twice a week or as determined and publicly announced by the Secretary.

(b) Place of drawing. A Lucky for Life Lotto drawing will be conducted in the Harrisburg area unless the Secretary directs that a drawing or part of the drawing procedure be conducted at some other location.

(c) Manner of conducting drawings. The Lottery will select at random, six numbers from a field of numbers from 1 through 38, with the aid of mechanical devices or any other selection methodology as authorized by the Secretary. The validity of a drawing will be solely determined by the Lottery.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.9 Determination of prize winners.

(a) The prizes to be awarded to an owner of an apparent winning ticket are as follows:

(b) Holders of tickets entitling them to a first prize category (jackpot) prize shall be entitled to a prize of $3,000 a month for life ($1,008,000 lifetime minimum), which shall be paid by an initial cash payment of $36,000, plus equal annual payments of $36,000, over the lifetime of the winner. In the event that the winner dies before having received the $1,008,000 minimum, payments will continue under provisions of § 811.16 (relating to prizes payable after death of prize winner) until the $1,008,000 minimum has been paid. For purposes of claiming the $3,000 a month for life prize, ‘‘lifetime’’ for legal entities shall be defined as 28 years, beginning the date the prize is claimed.

(c) If the winner of a Pennsylvania Lottery Lucky for Life Lotto first place prize is younger than 18 years of age, the winner will not begin to receive the prize until the winner has attained 18 years of age.

(d) There can only be one claimant per ticket for a first prize category (jackpot) prize.

(e) Lucky for Life Lotto prizes will be paid as follows:

(1) Individual ticket prize payments will be made as a single payment with the exception of the first prize (jackpot) category.

(2) If more than five winning first prize (jackpot) plays are determined in the same drawing, each, upon meeting the requirements of § § 873.11 and 873.12 (relating to ticket validation requirements; and procedures for claiming and payment of prizes), is entitled to a share of annual payments totaling $180,000. Each share is limited to annual payments for the lifetime of the winner equal to $180,000 divided by the actual number of jackpot prize winners. In these cases, the minimum lifetime amount is determined to be 28 annual payments each in the amount as determined above. For the purpose of calculating the share of the first-place prize pool, prizes will be rounded down to the nearest 50¢. This conditional pari-mutuel top prize payout may be changed at the discretion of the Secretary and the change will be announced by public notice in the Pennsylvania Bulletin. The change will only apply prospectively to Lucky for Life Lotto drawings as of the date specified in the public notice.

(f) A winning Lucky for Life Lotto play is entitled only to the highest prize won by those numbers, plus the instant prize, if applicable.

(g) The number of prize categories, the allocation of prize money among the prize categories, the instant prize amount and frequency of instant prize award, and the annuity amount or terms may be changed at the discretion of the Secretary and the change will be announced by public notice in the Pennsylvania Bulletin. The changes will only apply prospectively to Lucky for Life Lotto drawings as of the date specified in the public notice.

(h) Retailer incentive and marketing promotion programs, including the use of free tickets, may be implemented at the discretion of the Secretary. Funds for the programs, if needed, will be drawn from the Lottery fund.

This section cited in 61 Pa. Code § 873.2 (relating to purpose).

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.10 Ticket responsibility.

(a) A ticket is a bearer document deemed to be owned by the person holding the ticket, except that if a name is contained on the back of the ticket, the person so named will, for all purposes, be considered the owner of the ticket.

(b) The Commonwealth will not be responsible for lost or stolen tickets.

(c) The purchaser of the ticket has the sole responsibility for checking the accuracy and condition of the data printed on the ticket.

(d) The Commonwealth will not be responsible for tickets redeemed in error by a player at an on-line retailer.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.11 Ticket validation requirements.

(a) Valid tickets. To be a valid ticket, the following conditions shall be met:

(1) The ticket validation number shall be present in its entirety and shall correspond to the computer record generated at the time the ticket is produced.

(2) The ticket shall be intact.

(3) The ticket may not be mutilated, altered, reconstituted or tampered with.

(4) The ticket may not be counterfeit or an exact duplicate of a winning ticket.

(5) The ticket shall have been issued by the Lottery through a licensed retailer.

(6) The ticket may not have been stolen.

(7) The ticket shall be validated in accordance with § 873.12 (relating to procedures for claiming and payment of prizes).

(8) The player-selected or computer-selected numbers, or both, on the ticket shall be in individual groups of six numbers each associated with a single letter, A, B, C, D or E. The six numbers and the associated letter shall constitute a single play.

(9) The ticket data shall have been recorded on the Lottery’s central computer system prior to the drawing and the ticket data shall match this computer record in every way.

(10) The player-selected and computer-selected numbers, the validation number data and the drawing date of an apparent winning ticket shall appear on the official file of winning tickets; and a ticket with that exact data may not have been previously paid.

(11) The ticket may not be misregistered, defectively printed or printed or produced in error to an extent that it cannot be processed by the Lottery.

(12) The ticket shall pass other confidential security checks of the Lottery.

(13) By submitting a ticket for validation, the player agrees to abide by this chapter as determined by the Secretary.

(14) There may not be another breach of this part in relation to the ticket which, in the opinion of the Secretary, justifies disqualification.

(b) Invalid or defective tickets/disputes. A ticket not passing the validation checks in subsection (a) will be considered invalid and will not be paid.

(1) In cases of doubt, the determination of the Secretary is final and binding. The Secretary may replace an invalid ticket with a ticket of equivalent sale price from a current Lottery game.

(2) If a defective ticket is purchased or if the Secretary determines to adjust an error, the sole and exclusive remedy will be the replacement of the defective or erroneous ticket with a ticket of equivalent sale price from a current Lottery game.

(3) If a ticket is not paid by the Lottery and a dispute occurs as to whether the ticket is a winning ticket, the Lottery may replace the ticket as provided in paragraph (2). This is the sole and exclusive remedy of the holder of the ticket.

This section cited in 61 Pa. Code § 873.3 (relating to definitions); 61 Pa. Code § 873.9 (relating to determination of prize winners); and 61 Pa. Code § 873.12 (relating to procedures for claiming and payment of prizes).

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.12 Procedures for claiming and payment of prizes.

(a) A prize shall be claimed only through a licensed on-line retailer, and except for the instant prize, may be claimed as soon as that drawing is placed in pay status by the Lottery.

(1) The holder of a ticket designated as an instant prize winner may claim the instant prize before or after the drawing for which the ticket was valid.

(2) The holder of a ticket designated as an instant prize winner, who has claimed the instant prize prior to the drawing for which the ticket is valid shall be issued a trailing ticket which shall contain the same relevant play information as contained in the redeemed ticket except for the instant prize data.

(b) An on-line retailer is authorized and required to make payment of a prize of $2,500 or less, if the ticket is presented within a designated time period as announced by the Secretary, on an individual winning ticket, if the retailer has sufficient funds available for payment.

(c) The holder of an apparent winning ticket representing a prize of $2,500 or less will be paid by participating on-line retailers as provided in subsection (b), if the ticket validation requirements in § 873.11 (relating to ticket validation requirements) have been met, a proper validation pay ticket has been issued by the retailer’s computer terminal, and other retailer procedures have been met.

(d) The holder of an apparent winning ticket representing a prize in excess of $2,500, with the exception of the first place prize (jackpot), shall present the winning ticket to an on-line retailer or authorized claim center under Chapter 811 (relating to prizes).

(e) The holder of an apparent winning ticket representing a first place prize (jackpot) shall present, in person, the apparent winning ticket to Lottery Headquarters under Chapter 811.

(f) The payment of a prize to a person who dies before receiving any or all of a particular prize or to a person under 18 years of age will be paid under § § 811.16 and 811.27 (relating to prizes payable after death of prize winner; and payment of prizes to persons under 18 years of age).

(g) The Commonwealth will be discharged of liability after payment of prizes as provided in § 811.26 (relating to discharge of State liability upon payment).

This section cited in 61 Pa. Code § 873.9 (relating to determination of prize winners); and 61 Pa. Code § 873.11 (relating to ticket validation requirements).

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.13 Prizes.

(a) If the total of the set prizes awarded in a Lucky for Life Lotto drawing exceeds the sales for that drawing by 100% or more, then those set nonjackpot prize tiers, in which the stated prizes won exceed the percentage of sales anticipated to be paid in prizes/category, will become pari-mutuel (rounded down to the nearest 50¢) to the extent necessary to limit the total set prizes awarded to 200% of sales. Moneys shall be drawn from the Lottery Fund, to the extent necessary, to fund the payment of prizes under this subsection.

(b) If the Lucky for Life Lotto is terminated for any cause, prize moneys remaining undistributed will be paid out of the State Lottery Fund and used for purposes otherwise provided for by law.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.14 Unclaimed prize money.

Prize money on a winning Lucky for Life Lotto play may be retained by the Secretary for payment to the person entitled to it. If within 1 year of the drawing date on the ticket, no claim is made on a winning play, as determined by the Secretary, the right to claim prize money terminates, and the prize money will be paid into the State Lottery Fund and used for purposes otherwise provided for by statute.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.15 Withholding.

Federal withholding taxes will be withheld by the Lottery for prize payments in amounts required in accordance with applicable provisions of law.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.16 Purchase and prize restrictions.

A ticket may not be purchased by, and a prize will not be paid to, an officer or employee of the Lottery, Lottery professional services contractors or subcontractors, who are involved in the operation of the on-line Lottery games system or its associated drawing; or to a spouse, child, brother, sister or parent residing in the same household of the officer, contractor, or subcontractor.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.17 Restriction on voluntary assignment of first place prize (jackpot).

A prize payable over, and whose term is determined by the lifetime of the winner, can be voluntarily assigned only to the extent of remaining unpaid minimum guaranteed prize amount.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.18 Governing law.

(a) In purchasing a ticket, the purchaser agrees to comply with and abide by applicable laws, this part, instructions, conditions and final decisions of the Secretary, and procedures established by the Director for the conduct of the Lucky for Life Lotto.

(b) Decisions made by the Director or the Secretary including the declaration of prizes and the payment thereof in interpretation of this part are final and binding on players and persons making a claim in respect thereof.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

61 Pa. Code § 873.19 Probability of winning.

History

• Authority: The provisions of this Chapter 873 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 873 adopted August 20, 2004, effective August 21, 2004, 34 Pa.

Chapter 874 Raffle Lottery Games

61 Pa. Code § 874.1 Creation.

Under the act and this part, there is created a raffle game, called raffle lottery games, which will commence at the discretion of the Secretary, and will continue until the Secretary publicly announces a suspension or termination date.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.2 Purpose.

(a) A raffle lottery game is a lottery game that is of limited duration, having preestablished and announced beginning, end sale, and drawing dates. A limited number of tickets or chances, each unique from all others, will be offered for the opportunity to win one of a number of predetermined and announced prizes.

(b) This chapter establishes procedures for the creation of on-line raffle lottery games, sales of tickets, validation of winners, and payment of prizes for on-line raffle lottery games conducted by the Pennsylvania State Lottery.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.3 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Apparent winning ticket—A raffle lottery game ticket bearing a winning number, which has not yet been validated by the Lottery. Chance—A unique multiple-digit number, computer-selected from the range of numbers designated for a raffle Lottery drawing, also known as a play. Drawing—The process of selecting the winning numbers that determine the winners for each designated prize for a particular raffle game. On-line retailer or retailer—A person who is properly licensed by the Lottery to sell tickets. Prize—The item or money that can be won as specified by the notice for each raffle lottery game as published under § 874.4 (relating to notice of raffle lottery game rules). Raffle lottery game—A lottery game for which a chance or play will be sold for a limited announced period of time, and in which a maximum designated number of chances or plays will be offered, and the winning chances or plays will be selected from only those chances or plays actually sold. Ticket—A raffle lottery ticket produced by the Lottery and sold by a licensed retailer in an authorized manner containing at a minimum a unique multiple-digit number constituting a single play or chance, the drawing date and validation data. Winning number—The unique multiple-digit number selected in a particular raffle lottery game drawing, which has been subsequently validated by the Lottery, and which shall be used to determine the winning plays in that particular raffle lottery game.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.4 Notice of raffle lottery game rules.

Prior to the commencement of sales of a raffle lottery game, the Department will publish a notice in the Pennsylvania Bulletin containing, at a minimum, the following information about the particular raffle game:

(1) The name of the raffle lottery game.

(2) The purchase price of a raffle lottery game chance or play.

(3) The date after which sales of chances or plays can be made.

(4) The date after which sales of chances or plays cannot be made.

(5) The manner in which the selection of winning chances or plays will be made.

(6) The date and time for the selection of the winning chances or plays.

(7) The maximum odds of the game and prizes that can be won.

(8) The maximum number of chances or plays that can be sold in that raffle lottery game.

(9) The number and description of prizes available to be awarded in that raffle.

(10) The existence of a finalist, grand prize, second chance or other offering, if applicable, and the procedure for conducting the same, if applicable.

(11) The existence of retailer bonus programs, if any, and the rules for determining awards under the program.

(12) Other information necessary for the conduct of that lottery raffle game.

This section cited in 61 Pa. Code § 874.3 (relating to definitions); and 61 Pa. Code § 874.5 (relating to price); and 61 Pa. Code § 874.7 (relating to determination of prize winning tickets).

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.5 Price.

The Secretary in conformance with the law will prescribe the purchase price of a raffle lottery game chance or play. The purchase price for each raffle chance or play shall be published in the notice provided by § 874.4 (relating to notice of raffle lottery game rules).

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.6 Ticket sales retailers.

(a) Raffle lottery game ticket sales may only be made through licensed retailers the Director will appoint and contract with as provided in § 815.42 (relating to ticket sales agents).

(b) The Lottery may terminate sales by a retailer without prior notice to the retailer if the retailer becomes delinquent in payment of proceeds due the Lottery, or fails to handle Lottery funds in the prescribed manner, or if the retailer fails to follow the contract or any addendum thereof, this part or procedures established governing the sale of tickets or if the Lottery deems it to be in the best interest of the Commonwealth.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.7 Determination of prize winning tickets.

(a) Raffle lottery game prize winning chances or plays will be determined under this part and specific raffle lottery game notifications published in the Pennsylvania Bulletin under § 874.4 (relating to notice of raffle lottery game rules).

(b) A prize shall be paid only if the ticket meets the criteria established in § 874.10 (relating to ticket validation and requirements).

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.8 Lottery raffle game purchase and ticket characteristics.

(a) To purchase a ticket, a player shall request an on-line retailer to issue a ticket. The ticket, at a minimum, will contain one chance or play which shall consist of one unique, computer-generated, multiple-digit number from the range of numbers published in the Pennsylvania Bulletin for that particular raffle, the drawing date, amount bet and validation data. The ticket shall be the only valid proof of the bet placed, and the only valid receipt for claiming a prize. The ticket shall only be valid for the drawing date printed on the ticket.

(b) A raffle lottery game ticket may not be canceled or voided once printed by the Lottery terminal, even if the ticket is printed in error.

(c) It is the sole responsibility of the ticket holder to verify the accuracy and condition of data printed on the ticket. The placing of plays through the on-line retailer, who is acting on behalf of the player in entering the chance or plays, is done at the player’s own risk.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.9 Raffle ticket responsibility.

(a) A raffle lottery game ticket is a bearer document deemed to be owned by the person holding the ticket, except that if a name is contained on the back of the ticket, the person so named will, for all purposes, be considered the owner of the ticket.

(b) The purchaser of a ticket has the sole responsibility for checking the accuracy and condition of the data printed on the ticket.

(c) The Commonwealth will not be responsible for a lost or stolen raffle lottery game ticket.

(d) The Commonwealth will not be responsible for a ticket redeemed by a player in error.

(e) A prize shall be claimed within 1 year of the date of the raffle for which the ticket was entered.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.10 Ticket validation and requirements.

(a) Valid tickets. To be a valid raffle lottery game ticket, the presented ticket must meet the following conditions:

(1) The ticket validation numbers must be present in their entirety and correspond, using the computer validation file, to the selected numbers printed on the ticket for the date printed on the ticket.

(2) The ticket must be intact.

(3) The ticket may not be mutilated, altered, reconstituted or tampered with.

(4) The ticket may not be counterfeit or an exact duplicate of a winning ticket.

(5) The ticket shall have been issued by the Lottery through a licensed retailer.

(6) The ticket may not have been stolen.

(7) The ticket shall be validated in accordance with § 874.11 (relating to procedures for claiming and payment of prizes).

(8) The ticket data shall have been recorded on the Lottery’s central computer system prior to the drawing and the ticket data must match this computer record in every respect.

(9) The computer-assigned numbers, the validation data and the drawing date of an apparent winning ticket must appear on the official file of winning tickets. A ticket with that exact data may not have been previously paid.

(10) The ticket may not be misregistered, defectively printed, or printed or produced in error to an extent that it cannot be processed by the Lottery.

(11) The ticket shall pass other confidential security checks of the Lottery.

(12) By submitting a ticket for validation, the player agrees to abide by this chapter as determined by the Secretary.

(13) There may not be another breach of this part in relation to the ticket which, in the opinion of the Secretary, justifies disqualification.

(b) Invalid or defective tickets/disputes. A ticket not passing the validation checks in subsection (a) will be considered invalid and will not be paid.

(1) In cases of doubt, the determination of the Secretary is final and binding. The Secretary may replace an invalid ticket with a ticket of equivalent sale price from a current Lottery game.

(2) If a defective ticket is purchased or if the Secretary determines to adjust an error, the sole and exclusive remedy will be the replacement of the defective or erroneous ticket with a ticket of equivalent sale price from a current Lottery game.

(3) If a ticket is not paid by the Lottery and a dispute occurs as to whether the ticket is a winning ticket, the Lottery may replace the ticket as provided in paragraph (2). This is the sole and exclusive remedy of the holder of the ticket.

This section cited in 61 Pa. Code § 874.8 (relating to lottery raffle game purchase and ticket characteristics); and 61 Pa. Code § 874.11 (relating to procedures for claiming and payment of prizes).

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.11 Procedures for claiming and payment of prizes.

(a) A prize shall be claimed only through a licensed on-line retailer as soon as that drawing is placed in pay status by the Lottery.

(b) An on-line retailer is authorized and required to make payment of a prize of $2,500 or less, if the ticket is presented within a designated time period as announced by the Secretary, on an individual winning ticket, if the retailer has sufficient funds available for payment.

(c) The holder of an apparent winning ticket representing a prize of $2,500 or less will be paid by participating on-line retailers as provided in subsection (b), if the ticket validation requirements in § 874.10 (relating to ticket validation and requirements) have been met, a proper validation pay ticket has been issued by the retailer’s computer terminal and other retailer procedures have been met.

(d) The holder of an apparent winning ticket representing a prize in excess of $2,500, with the exception of the first prize, shall present the winning ticket to an on-line retailer or authorized claim center under Chapter 811 (relating to prizes).

(e) The holder of an apparent winning ticket representing a first tier prize shall present, in person, the apparent winning ticket to Lottery Headquarters or a Lottery area office under Chapter 811.

(f) The payment of a prize to a person who dies before receiving a particular prize or to a person under 18 years of age will be paid under § § 811.16 and 811.27 (relating to prizes payable after death of prize winner; and payment of prizes to persons under 18 years of age).

(g) The Commonwealth will be discharged of liability after payment of prizes as provided in § 811.26 (relating to discharge of State liability upon payment).

This section cited in 61 Pa. Code § 874.10 (relating to ticket validation and requirements).

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.12 Prizes.

(a) Moneys shall be drawn from the Lottery Fund, to the extent necessary, to fund the payment of prizes under this subsection.

(b) If the raffle lottery game is terminated for any cause, prize moneys remaining undistributed will be paid out of the State Lottery Fund and used for purposes otherwise provided for by law.

(c) A winning raffle lottery game ticket is entitled only to the highest prize won by the number on each play or chance.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.13 Unclaimed prize money.

Unclaimed prize money on winning raffle lottery game tickets will be retained by the Secretary for payment to the persons entitled thereto for 1 year from the announced close of the raffle lottery game. If no claim is made within 1 year of the announced close of the raffle lottery game conducted by the State Lottery under this chapter, the right of a ticket holder to claim the prize represented by that ticket, if any, expires and the prize money will be paid into the State Lottery Fund and used for purposes otherwise provided for by statute.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.14 Withholding.

Federal withholding taxes will be withheld by the Lottery for prize payments in amounts required in accordance with applicable provisions of law.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.15 Purchase and prize restrictions.

A ticket may not be purchased by, and a prize will not be paid to, an officer or employee of the Lottery, Lottery professional services contractors or subcontractors, who are involved in the operation of the on-line lottery games system or its associated drawings, or to a spouse, child, brother, sister or parent residing in the same household of the officer, employee, contractor or subcontractor.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.16 Governing law.

(a) In purchasing a ticket, the purchaser agrees to comply with and abide by applicable laws, this part, instructions, conditions and final decisions of the Secretary, and procedures established by the Secretary for the conduct of the raffle lottery game.

(b) Decisions made by the Secretary including the declaration of prizes and the payment thereof in interpretation of this part are final and binding on players and persons making a claim in respect thereof.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

61 Pa. Code § 874.17 Retailer promotion programs.

Retailer incentive and marketing promotion programs, including the use of unfunded free tickets, may be implemented at the discretion of the Secretary. Funds for the programs, if needed, will be drawn from the Lottery Fund.

History

• Authority: The provisions of this Chapter 874 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 874 adopted July 29, 2005, effective July 30, 2005, 35 Pa.

Chapter 875 Terminal-Based Lottery Games

61 Pa. Code § 875.1 Creation.

Under the act and this part, there is created a category of lottery games, called terminal-based lottery games, which will commence at the discretion of the Secretary, and will continue until the Secretary publicly announces a suspension or termination date.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.2 Purpose.

(a) The purpose of a terminal-based lottery game is to determine winners from terminal-based lottery game ticket holders matching a designated combination of numbers, letters, symbols, or a specified combination thereof, with the winning numbers, letters or symbols randomly drawn as determined and publicly announced by the Secretary.

(b) The object of the game is for a player to have selected the designated numbers, letters or symbols, as defined in the game notice for the particular game as published in the Pennsylvania Bulletin, which match all or a specified combination of the winning numbers, letters or symbols drawn in the game drawing in which the terminal-based lottery game ticket is participating.

(c) Correctly matching all or a designated combination of the winning numbers, letters or symbols drawn, and meeting the other validation criteria as defined in § 875.7 (relating to determination of prize-winning, terminal-based lottery game tickets), entitles the terminal-based lottery game ticket holder to a prize identified in the game notice for the particular game as published in the Pennsylvania Bulletin.

(d) This chapter establishes procedures for the creation of terminal-based lottery games, sales of terminal-based lottery game tickets, validation of winners and payment of prizes for terminal-based lottery games conducted by the Pennsylvania State Lottery.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.3 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Apparent winning terminal-based lottery game ticket—A terminal-based lottery game ticket which has not yet been validated by the Lottery, bearing winning numbers, letters or symbols. Bet slip—A preprinted game-specific form prepared by the Lottery upon which the player may mark or designate the numbers, letters or symbols which when processed through the Lottery terminal produces a terminal-based lottery game ticket with the numbers, letters or symbols constituting the player’s selection. Drawing—The process of selecting the winning numbers, letters or symbols that determine the winners for each designated prize for a particular terminal-based lottery game. Lottery Central Computer System—The computer gaming system on which all Lottery bets are registered through a computer terminal located at a licensed Lottery retailer. Lottery terminal—A device installed at a retail location by the Lottery for the purpose of selling and validating on-line and instant tickets, performing inventory functions, generating informational accounting reports and performing other functions at the discretion of the Lottery. On-line retailer or retailer—A person who is properly licensed by the Lottery and has a valid agreement to sell terminal-based lottery game tickets issued through a Lottery terminal, also referred to as a Lottery retailer or licensed retailer. Pay status—The Lottery central computer system designation into which a game is placed after the Lottery officials verify the accuracy of the game’s drawing and which enables the validation and payment of winning terminal-based lottery game tickets. Play—A chance to participate in a particular terminal-based lottery game drawing. Prize—The item or money that can be won as specified by the notice for each terminal-based lottery game as published under § 875.4 (relating to notice of terminal-based lottery game rules). Quick pick—The random selection through a Lottery terminal of the different numbers, letters or symbols that appear as a play in a particular terminal-based lottery game. Secretary—The Secretary of Revenue of the Commonwealth. Terminal-based lottery game—Any Lottery game, also referred to as an on-line game, for which a terminal-based lottery game ticket is generated through a computer connected to the Lottery central computer system. Terminal-based lottery game ticket—A bearer instrument produced through a Lottery terminal that is the player’s record of a wager for an on-line lottery game and sold by a licensed retailer in an authorized manner containing at a minimum the appropriate play data as published in the Pennsylvania Bulletin for that particular terminal-based lottery game, the drawing dates, amount bet, and validation data. A terminal-based lottery game ticket may contain one or more plays as prescribed in the notice of terminal-based lottery game rules. Top prize—The highest prize available to be won as published in the Pennsylvania Bulletin for that particular terminal-based lottery game. Winning numbers—The numbers, letters or symbols selected in a particular Lottery game drawing, which have been subsequently validated by the Lottery, and which shall be used to determine the winning plays as published in the Pennsylvania Bulletin for that particular terminal-based lottery game.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.4 Notice of terminal-based lottery game rules.

Prior to the commencement of sales of a terminal-based lottery game, the Department will publish a notice in the Pennsylvania Bulletin containing, at a minimum, the following information about the particular terminal-based lottery game:

(1) The name of the terminal-based lottery game.

(2) The purchase price of a terminal-based lottery game.

(3) A description of the game.

(4) Bet slip and terminal-based lottery game ticket characteristics.

(5) The time, place and manner of conducting drawings.

(6) Prizes available to be won and determination of prize winners.

(7) Probability of winning and prize restrictions, if any.

(8) Restrictions on procedures for claiming prizes, if any.

(9) The existence of a finalist, grand prize, second-chance or other offering, if applicable, and the procedure for conducting the same, if applicable.

(10) Other information necessary for the conduct of that terminal-based lottery game.

This section cited in 61 Pa. Code § 875.3 (relating to definitions); and 61 Pa. Code § 875.7 (relating to determination of prize-winning, terminal-based lottery game tickets).

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.5 Purchase price.

The Secretary will prescribe the purchase price of a terminal-based lottery game play or terminal-based lottery game ticket.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.6 Terminal-based lottery game ticket sales.

Terminal-based lottery game tickets may only be sold through Lottery retailers.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.7 Determination of prize-winning, terminal-based lottery game tickets.

(a) Terminal-based lottery game prize-winning plays will be determined under this part and specific terminal-based lottery game notifications published in the Pennsylvania Bulletin under § 875.4 (relating to notice of terminal-based lottery game rules).

(b) A prize shall be paid only if the terminal-based lottery game ticket meets the criteria established in § 875.10 (relating to terminal-based lottery game ticket validation and requirements).

This section cited in 61 Pa. Code § 875.2 (relating to purpose).

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.8 Terminal-based lottery game purchase and terminal-based lottery game ticket characteristics.

(a) To purchase a terminal-based lottery game ticket, the players shall request an on-line retailer to issue a terminal-based lottery game ticket. The terminal-based lottery game ticket, at a minimum, will contain appropriate play data as published in the Pennsylvania Bulletin for that particular terminal-based lottery game, the drawing dates, amount bet, and validation data. The terminal-based lottery game ticket shall be the only valid proof of the bet placed, and the only valid receipt for claiming a prize. The terminal-based lottery game ticket shall only be valid for the drawing dates printed on the terminal-based lottery game ticket.

(b) A terminal-based lottery game ticket may not be canceled or voided once printed by the Lottery terminal, even if the terminal-based lottery game ticket is printed in error.

(c) It is the sole responsibility of the terminal-based lottery game ticket holder to verify the accuracy and condition of data printed on the terminal-based lottery game ticket. The purchase of plays is at the player’s own risk.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.9 Terminal-based lottery game ticket responsibility.

(a) A terminal-based lottery game ticket is a bearer document deemed to be owned by the person holding the terminal-based lottery game ticket, except that if a name is contained on the back of the terminal-based lottery game ticket, the person so named will, for all purposes, be considered the owner of the terminal-based lottery game ticket.

(b) The holder of a terminal-based lottery game ticket has the sole responsibility for checking the accuracy and condition of the data printed on the terminal-based lottery game ticket.

(c) The Commonwealth will not be responsible for a lost or stolen terminal-based lottery game ticket.

(d) The Commonwealth will not be responsible for a terminal-based lottery game ticket redeemed by a player in error.

(e) A prize shall be claimed within 1 year of the date of the terminal-based lottery drawing for which the terminal-based lottery game ticket was entered.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.10 Terminal-based lottery game ticket validation and requirements.

(a) Valid terminal-based lottery game tickets. To be a valid terminal-based lottery game ticket, the presented terminal-based lottery game ticket must meet the following conditions:

(1) The terminal-based lottery game ticket validation numbers shall be present in their entirety and correspond, using the Lottery’s validation file, to the selected numbers, letters or symbols printed on the terminal-based lottery game ticket for the dates printed on the terminal-based lottery game ticket.

(2) The terminal-based lottery game ticket must be intact.

(3) The terminal-based lottery game ticket may not be mutilated, altered, reconstituted or tampered with.

(4) The terminal-based lottery game ticket may not be counterfeit or an exact duplicate of a winning ticket.

(5) The terminal-based lottery game ticket shall have been issued by the Lottery through a licensed retailer.

(6) The terminal-based lottery game ticket may not have been stolen.

(7) The terminal-based lottery game ticket shall be validated in accordance with § 875.11 (relating to procedures for claiming and payment of prizes).

(8) The terminal-based lottery game ticket data shall have been recorded on the Lottery’s central computer system prior to the drawing and the terminal-based lottery game ticket data shall match this computer record in every respect.

(9) The player or computer-selected numbers, letters or symbols, the validation data and the drawing date of an apparent winning terminal-based lottery game ticket shall appear on the official file of winning terminal-based lottery game tickets. A terminal-based lottery game ticket with that exact data may not have been previously paid.

(10) The terminal-based lottery game ticket may not be misregistered, defectively printed, or printed or produced in error to an extent that it cannot be processed by the Lottery.

(11) The terminal-based lottery game ticket shall pass other confidential security checks of the Lottery.

(12) By submitting a terminal-based lottery game ticket for validation, the player agrees to abide by this chapter as determined by the Secretary.

(13) There may not be another breach of this part in relation to the terminal-based lottery game ticket which, in the opinion of the Secretary, justifies disqualification.

(b) Invalid or defective terminal-based lottery game tickets/disputes. A terminal-based lottery game ticket not passing the validation checks in subsection (a) will be considered invalid and will not be paid.

(1) In cases of doubt, the determination of the Secretary is final. The Secretary may replace an invalid terminal-based lottery game ticket with a terminal-based lottery game ticket of equivalent sale price from a current Lottery game.

(2) If a defective terminal-based lottery game ticket is purchased or if the Secretary determines to adjust an error, the sole and exclusive remedy will be the replacement of the defective or erroneous terminal-based lottery game ticket with a terminal-based lottery game ticket of equivalent sale price from a current Lottery game.

(3) If a terminal-based lottery game ticket is not paid by the Lottery and a dispute occurs as to whether the terminal-based lottery game ticket is a winning terminal-based lottery game ticket, the Lottery may replace the terminal-based lottery game ticket as provided in paragraph (2). This is the sole and exclusive remedy of the holder of the terminal-based lottery game ticket.

This section cited in 61 Pa. Code § 875.7 (relating to determination of prize-winning, terminal-based lottery game tickets); and 61 Pa. Code § 875.11 (relating to procedures for claiming and payment of prizes).

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.11 Procedures for claiming and payment of prizes.

(a) A prize shall be claimed only through a licensed on-line retailer as soon as that drawing is placed in pay status by the Lottery.

(b) An on-line retailer is authorized and required to make payment of a prize of $2,500 or less, if the terminal-based lottery game ticket is presented within a designated time period as announced by the Secretary, on an individual winning terminal-based lottery game ticket, if the retailer has sufficient funds available for payment.

(c) The holder of an apparent winning terminal-based lottery game ticket representing a prize of $2,500 or less will be paid by participating on-line retailers as provided in subsection (b), if the terminal-based lottery game ticket validation requirements in § 875.10 (relating to terminal-based lottery game ticket validation and requirements) have been met, a proper validation pay ticket has been issued by the retailer’s computer terminal and other retailer procedures have been met.

(d) The holder of an apparent winning terminal-based lottery game ticket representing a prize in excess of $2,500, with the exception of a top prize, shall present the terminal-based lottery game ticket to an on-line retailer or authorized claim center under Chapter 811 (relating to prizes).

(e) The holder of an apparent winning terminal-based lottery game ticket representing a top prize shall present, in person, the ticket to Lottery Headquarters or a Lottery area office.

(f) The payment of a prize to a person who dies before receiving a particular prize or to a person under 18 years of age will be paid under § § 811.16 and 811.27 (relating to prizes payable after death of prize winner; and payment of prizes to persons under 18 years of age).

(g) The Commonwealth will be discharged of liability after payment of prizes as provided in § 811.26 (relating to discharge of State liability upon payment).

This section cited in 61 Pa. Code § 875.10 (relating to terminal-based lottery game ticket validation and requirements).

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.12 Funding for prizes.

(a) Moneys will be drawn from the Lottery Fund, to the extent necessary, to fund the payment of prizes under this subsection.

(b) If the terminal-based lottery game is terminated for any cause, prize moneys remaining undistributed will remain in the State Lottery Fund and used for purposes otherwise provided for by law.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.13 Unclaimed prize money.

Prize money on a winning terminal-based lottery game ticket may be retained by the Secretary for payment to the person entitled thereto. If no claim is made within 1 year of the date of the terminal-based lottery drawing for which the terminal-based lottery game ticket was entered, the right of a terminal-based lottery game ticket holder to claim the prize represented by that terminal-based lottery game ticket, if any, expires and the prize money will be paid into the State Lottery Fund and used for purposes otherwise provided for by statute.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.14 Withholding.

Federal withholding taxes will be withheld by the Lottery for prize payments in amounts required in accordance with applicable provisions of law.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.15 Purchase and prize restrictions.

A terminal-based lottery game ticket may not be purchased by, and a prize will not be paid to, an officer or employee of the Lottery, Lottery professional services contractors or subcontractors who are involved in the operation of the terminal-based lottery games system or its associated drawings, or to a spouse, child, brother, sister or parent residing in the same household of the officer, employee, contractor, or subcontractor.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.16 Governing law.

(a) In purchasing a ticket, the purchaser agrees to comply with and abide by applicable laws, this part, instructions, conditions and final decisions of the Secretary, and procedures established by the Secretary for the conduct of the terminal-based lottery game.

(b) Decisions made by the Secretary including the declaration of prizes and the payment thereof in interpretation of this part are final and binding on players and persons making a claim in respect thereof.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

61 Pa. Code § 875.17 Retailer promotion programs.

Retailer incentive and marketing promotion programs, including the use of unfunded free terminal-based lottery game tickets, may be implemented at the discretion of the Secretary. Funds for the programs, if needed, will be drawn from the Lottery Fund.

History

• Authority: The provisions of this Chapter 875 issued under section 303 of the State Lottery Law (72 P.
• Source: The provisions of this Chapter 875 adopted May 19, 2006, effective May 20, 2006, 36 Pa.

Chapter 876 iLottery

61 Pa. Code § 876.1 Scope.

This chapter establishes procedures for the notification of iLottery game rules, iLottery registration and participation requirements, lottery account requirements and iLottery self-exclusion requirements.

The provisions of this § 876.1 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391083).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.2 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise: Bonus money—Credit issued to a registered iLottery player that does not have a cash value, but which can be converted to a predetermined cash value as further detailed in § 876.14a (relating to withdrawals from a lottery account). Bureau—The Pennsylvania State Lottery created to administer and operate the lottery by order of the Executive Board. Cash-out games—A type of iLottery game in which the registered iLottery player is given the option to end the game early for a predetermined amount of money. Drawing—The process of selecting the numbers, letters or symbols that determine the winning numbers, letters or symbols or the outcome of an iLottery game or an individual play, chance or share. Fixed payouts—The numbers and amounts of prizes established for an iLottery game, regardless of how many plays, chances or shares are sold. iLottery—A system that provides for the distribution of lottery products through numerous channels that include, but are not limited to, web applications, mobile applications, mobile web, tablets and social media platforms that allow a registered iLottery player to interface through a portal for the purpose of obtaining lottery products and ancillary services, such as account management, game purchase, game play and prize redemption. iLottery game—

(i) Internet instant games and other lottery products offered through iLottery.

(ii) The term does not include games that represent physical, Internet-based or monitor-based interactive lottery games which simulate casino-style lottery games, specifically including poker, roulette, slot machines and blackjack. Instant win game—A type of iLottery game in which the result of a play, chance or share is the display of numbers, letters or symbols indicating whether a prize has been won. Unlike Internet instant games, no reveal is required to determine whether a prize has been won. Internet instant game—A lottery game of chance in which, by the use of a computer, tablet computer or other mobile device, a registered iLottery player purchases a play, chance or share with the result of a play, chance or share being a reveal on the device of numbers, letters or symbols indicating whether a lottery prize has been won according to an established methodology as provided by the Bureau. Lottery account—An account established by an individual with the Bureau that shall be used to register for iLottery and to participate in iLottery. A lottery account may be used to purchase or use lottery products, to participate in lottery promotions and second chance drawings and for lottery communications. Lottery products—Plays, shares or chances offered by the Bureau as well as lottery property that may be exchanged for plays, shares or chances. The term includes any lottery game or lottery product authorized by the Secretary and offered by the Bureau under the act of August 26, 1971 (P.L. 351, No. 91) (72 P.S. § § 3761-301—3761-315), known as the State Lottery Law, or act 42 of 2017 (P.L. 419, No. 42) (4 Pa.C.S. § § 501—505 (relating to lottery)) such as instant tickets, terminal-based tickets, raffle games, play-for-fun games, lottery vouchers, subscription services and gift cards. Lotto game—A type of iLottery game in which a registered iLottery player chooses ‘‘X’’ numbers, letters or symbols from a field of ‘‘Y’’ numbers, letters or symbols. The field of ‘‘Y’’ numbers, letters or symbols is established by the Bureau. To win, a registered iLottery player matches a designated combination of numbers, letters, symbols, or a specified combination thereof, with the winning numbers, letters or symbols randomly drawn by the Bureau. Examples of lotto games include Powerball and MegaMillions® and similar games in which multiple ‘‘Y’’ numbers, letters or symbols are chosen from a single set of numbers, letters or symbols. Numbers game—A type of iLottery game in which a registered iLottery player chooses ‘‘X’’ numbers, letters or symbols from multiple fields of ‘‘Y’’ numbers, letters or symbols. The player must choose whether to purchase a straight play or a box play. In straight play, the numbers, letters or symbols are matched in the same order as the winning numbers are drawn by the Bureau. In box play, the numbers, letters or symbols match all of the winning numbers drawn by the Bureau, but in any order. Examples of numbers games include Pick 4 and Pick 5 and similar games in which ‘‘Y’’ numbers, letters or symbols are chosen from multiple sets of numbers, letters or symbols. Pari-mutuel—A prize structure in which the total available prize pool or pool is split between all winners at a particular prize level or levels. Play—An opportunity, for a predetermined price, to participate in an iLottery game. May also be referred to as a chance or a share. Prize or lottery prize—The item or money that can be won in each iLottery game as determined by the prize structure for that iLottery game. A prize or lottery prize may also be referred to as lottery winnings in this chapter. Prize pool or pool—Amount of money designated for payments of prizes for an iLottery game. The term can also mean a preset number of plays, chances or shares containing a predetermined number of winners. Prize tiers—One or more different levels, amounts or types of prizes for an iLottery game. Progressive—An iLottery game prize structure in which the top prize available begins with a minimum prize amount, as determined by the Bureau, which grows at a predetermined rate every time a play is purchased and then resets to the minimum prize amount whenever a top prize winning play is purchased. Purchase price—The cost of a play, chance or share for an iLottery game. Randomizer—A device or program that generates a random set of numbers. Random number generator—A secured computerized system, which draws random numbers to determine the outcome of an individual play, chance or share or an iLottery game. Registered iLottery player—An individual who creates a lottery account with the Bureau, registers for iLottery and is approved for participation in iLottery. Responsible gambling tools—Settings available to a registered iLottery player through iLottery that promote responsible gambling. Secretary—The Secretary of Revenue of the Commonwealth. Subscription services—A payment, advance payment or promise of payment for multiple lottery products over a specified period of time, including payment through iLottery. Top prize—The highest prize available to be won in an iLottery game. Traditional lottery products—Lottery products offered by the Bureau under 61 Pa. Code Chapters 801—875 (relating to State Lotteries). Winning play—A play, chance or share that has been validated by the Bureau and qualifies for a prize. Winning numbers—The numbers, letters or symbols selected in a particular iLottery game that have been validated by the Bureau and are used to determine the winning plays for that particular iLottery game.

The provisions of this § 876.2 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial pages (391083) to (391084).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.2a Lottery products available through iLottery.

The Secretary shall authorize and determine the availability of lottery products through iLottery and for purchase using a lottery account.

The provisions of this § 876.2a adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

This section cited in 61 Pa. Code § 876.2d (relating to iLottery game rules by category of game offered).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.2b Traditional lottery products.

(a) The Secretary may authorize the sale of traditional lottery products through iLottery and for purchase using a lottery account.

(b) Traditional lottery products delivered through a lottery account may be delivered to a registered iLottery player electronically or in a form and manner determined by the Bureau.

(c) Traditional lottery products offered through iLottery are governed by applicable regulations and corresponding notices published in the Pennsylvania Bulletin, unless otherwise noted by the Bureau in the notice for the applicable traditional lottery product.

The provisions of this § 876.2b adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

This section cited in 61 Pa. Code § 876.2d (relating to iLottery game rules by category of game offered).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.2c Categories of iLottery games.

(a) In addition to traditional lottery products, the Secretary may authorize and the Bureau may offer categories of iLottery games which include the following types of iLottery games:

(1) Numbers games.

(2) Instant win games.

(3) Lotto games.

(4) Internet instant games.

(5) Cash-out games.

(b) The outcomes of iLottery games or plays, chances or shares of iLottery games may be determined on demand or at a predetermined date and time established by the Secretary.

(c) The outcomes of iLottery games or plays, chances or shares of iLottery games may be determined by one or more of the following methods:

(1) Randomizer.

(2) Random number generator.

(3) Drawing.

(d) Prize structures for iLottery games may include one or more of the following:

(1) Pari-mutuel.

(2) Prize tiers.

(3) Progressive.

(4) Fixed-payout.

(5) Prize pool or pools.

(e) Categories of iLottery games may contain any combination of the characteristics described in subsections (a)—(d) and (g).

(f) A drawing may be conducted by a mechanical device using balls, a random number generator, a randomizer or by using any other method authorized by the Secretary.

(g) The outcome of an iLottery game may be determined on demand or at a predetermined date and time as established by the Secretary.

The provisions of this § 876.2c adopted under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.2c adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

This section cited in 61 Pa. Code § 876.2d (relating to iLottery game rules by category of game offered); and 61 Pa. Code § 876.9 (relating to iLottery terms and conditions).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.2d iLottery game rules by category of game offered.

For each category of iLottery game authorized under § § 876.2a, 876.2b and 876.2c (relating to lottery products available through iLottery; traditional lottery products; and categories of iLottery games), the Secretary will publish a notice in the Pennsylvania Bulletin with the following minimum information, as applicable:

(1) iLottery game type or types under § § 876.2b(c) and 876.2c(a).

(2) Definitions.

(3) Whether the outcome of the iLottery game or plays, chances or shares of the iLottery game is determined on demand or at a predetermined date and time established by the Secretary under § § 876.2b(c) and 876.2c(b).

(4) How the outcome or winning numbers of the iLottery game or play, chance or share are determined under § 876.2c(c).

(5) Prize structure of the iLottery game under § 876.2c(d).

(6) Purchase price or range of purchase prices for a play, chance or share of the iLottery game.

(7) Availability.

(8) Other relevant information as established by the Secretary.

The provisions of this § 876.2d adopted under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.2d adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

This section cited in 61 Pa. Code § 876.9 (relating to iLottery terms and conditions); and 61 Pa. Code § 876.12 (relating to prizes).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.4 iLottery game description.

The Secretary will post an iLottery game description on the Bureau’s iLottery web site and the Bureau’s mobile application for each iLottery game, with the following minimum information:

(1) The name of the iLottery game.

(2) The purchase price or range of purchase prices of a play, chance or share for the iLottery game.

(3) The chances of winning the iLottery game and the prizes which can be won.

(4) iLottery game instructions.

(5) The existence of a finalist, grand prize, second chance or other offering, if applicable, and the procedure for the conduct of the same, if applicable.

(6) If applicable, the existence of a bonus game, a mini-game or a game within a game, the instructions for conduct of the same and the chances of winning the bonus game, mini-game or game within a game and the prizes which can be won.

(7) Other information necessary for the conduct of the iLottery game.

The provisions of this § 876.4 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.4 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial pages (391084) to (391085).

This section cited in 61 Pa. Code § 876.5 (relating to price); and 61 Pa. Code § 876.9 (relating to iLottery terms and conditions).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.5 Price.

The purchase price of a play, chance or share for each iLottery game will be included in the iLottery game description for each game, as provided for under § 876.4 (relating to iLottery game description).

The provisions of this § 876.5 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.5 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391085).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.6 Governing law.

(a) By registering to participate in iLottery, the registered iLottery player agrees to comply with and abide by Federal and State law, this chapter, the iLottery terms and conditions as provided for under § 876.9 (relating to iLottery terms and conditions) and final decisions of the Secretary.

(b) Revenues generated by iLottery games will be apportioned as provided by 4 Pa.C.S. § 503(f) (relating to iLottery authorization) and section 3761-311 of the State Lottery Law (72 P.S. § 3761-311) regarding disposition of funds.

The provisions of this § 876.6 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.6 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391085).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.7 General provisions.

(a) An individual shall establish a lottery account and register for iLottery as provided for under § 876.10 (relating to iLottery registration and participation) to purchase a play, chance or share or to purchase lottery products using a lottery account.

(b) An individual shall accept, consent, acknowledge and agree to be legally bound by the iLottery terms and conditions as provided for under § 876.9 (relating to iLottery terms and conditions) to register for iLottery, to purchase a play, chance or share through iLottery and to purchase lottery products using a lottery account.

(c) An individual shall be located in this Commonwealth to purchase a play, chance or share.

(d) An individual shall be 18 years of age or older to register for iLottery, to purchase a play, chance or share or to purchase lottery products using a lottery account.

The provisions of this § 876.7 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.7 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391085).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.8 Applicability.

This chapter applies to iLottery and the sale of plays, chances or shares through iLottery and the purchase of lottery products using a lottery account, as offered and administered by the Department and the Bureau.

The provisions of this § 876.8 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.8 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391085).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.9 iLottery terms and conditions.

(a) The terms and conditions for the establishment of a lottery account and for the registration and participation in iLottery will be published in the Pennsylvania Bulletin and will be known as the iLottery terms and conditions.

(1) Amendments to the iLottery terms and conditions will be published in the Pennsylvania Bulletin.

(2) The iLottery terms and conditions will be available on the Bureau’s iLottery web site and other locations as established by the Secretary.

(b) The iLottery terms and conditions for the establishment of a lottery account and for registration and participation in iLottery will include all of the following:

(1) Acknowledgment, consent, agreement and acceptance by the individual to all of the following:

(i) Confirmation by the Bureau of the applicant’s age and identity.

(ii) The use of a mechanism by the Bureau to detect the physical location of a registered iLottery player in compliance with 4 Pa.C.S. § 503(h)(1) (relating to iLottery authorization).

(iii) The terms of the end user license agreement for the software and terms and conditions of any third-party services used for the implementation and operation of iLottery and the provision of iLottery games.

(iv) The monitoring and recording by the Department or the Bureau of any iLottery communications and geographic location information.

(v) The jurisdiction of the Commonwealth to resolve disputes arising out of the conduct of iLottery.

(vi) Any moneys remaining on deposit in the registered iLottery player’s lottery account as abandoned and unclaimed property if the registered iLottery player has not logged into the lottery account using their username and password in more than 3 years.

(vii) The registered iLottery player’s lottery account may be suspended or closed for reasons established by the Secretary, including any of the following:

(A) Violations of the iLottery terms and conditions as provided for under this chapter.

(B) The registered iLottery player has been charged with or convicted of an offense under 18 Pa.C.S. § § 4106, 5111, 5512—5514, 4 Pa.C.S. § 1518 or § 3905 or conspiracy to commit offenses under 18 Pa.C.S. § 903, or equivalent crimes under Federal law or the law of another state.

(C) A self-exclusion request under § 876.16 (relating to self-exclusion from iLottery).

(D) The application of a responsible gambling tool by a registered iLottery player, as described in the iLottery terms and conditions, which limits the ability of the registered iLottery player to log into the lottery account.

(E) Other reasons as established by the Secretary.

(viii) Other terms and conditions that may apply related to registration and participation in iLottery.

(ix) Lottery winnings are subject to Federal and State withholding taxes and prizes awarded to the registered iLottery player will be reduced by the amount of withholding required under applicable law.

(x) Lottery winnings are subject to certain deductions as required by law and prizes awarded to the registered iLottery player will be reduced by any amount required to be deducted under applicable law.

(xi) To receive certain prizes, as identified and described in the iLottery game rules provided for under § 876.2c (relating to categories of iLottery games) or iLottery game descriptions as provided for under § 876.4 (relating to iLottery game description) or promotional prize notices provided for under § 811.41 (relating to promotional prizes), the registered iLottery player may be required to take additional measures to claim a prize, including to appear in person at a specified Bureau claim center.

(xii) Use of electronic communications to establish a lottery account, for iLottery registration, communications regarding the lottery account and other communications related to iLottery as determined by the Bureau.

(xiii) Ability of the registered iLottery player to use the responsible gambling tools available through iLottery.

(xiv) Ability of the registered iLottery player to self-exclude from iLottery and the extent to which the self-exclusion applies to use of the registered iLottery player’s lottery account.

(xv) Methods by which moneys or credits may be deposited and under what circumstances moneys or credits may be deposited into the registered iLottery player’s lottery account.

(xvi) Moneys or credits deposited and held in the registered iLottery player’s lottery account do not earn interest.

(xvii) Methods by which moneys or credits may be withdrawn and under what circumstances moneys or credits may be withdrawn from the registered iLottery player’s lottery account.

(xviii) Reporting of suspected fraudulent or unlawful activity related to the operation of iLottery.

(xix) Dispute resolution procedures related to iLottery.

(xx) Information provided to the Department or Bureau during the establishment, use, access or closure of the registered iLottery player’s lottery account is true and correct.

(xxi) Methods by which a registered iLottery player may purchase lottery products as a gift or for the benefit of another person.

(xxii) iLottery game rules as described in § 876.2d (relating to iLottery game rules by category of game offered) and iLottery game descriptions in § 876.4.

(xxiii) Terms and conditions for iLottery promotions as provided for under § 876.17 (relating to iLottery promotional prizes).

(xxiv) Information related to subscription services as provided for under § 876.19 (relating to subscription services).

(2) Rules and obligations applicable to the registered iLottery player, other than rules of individual games, including all of the following:

(i) Prohibition against allowing another individual to access or use the registered iLottery player’s lottery account.

(ii) Prohibition against purchasing a play, chance or share unless the registered iLottery player is physically located in this Commonwealth.

(iii) Prohibition against using automated computerized software or other equivalent mechanisms to engage in iLottery. Nothing in this section shall prohibit the use of adaptive technologies by registered iLottery players with a disability as defined in the Americans with Disabilities Act of 1990 (42 U.S.C.A. § § 12101—12213).

(iv) Prohibition against participation in iLottery by an individual under 18 years of age.

(v) Prohibition of an individual who self-excluded from iLottery from participating in iLottery.

(vi) Prohibition against purchasing a play, chance or share or receiving a prize if the registered iLottery player is:

(A) An officer or employee of the Bureau.

(B) A spouse, child, brother, sister or parent residing as a member of the same household as an officer or employee of the Bureau.

(C) An officer or employee of a contractor or subcontractor who is directly involved in the operation of iLottery or the provision of iLottery related services.

(D) A spouse, child, brother, sister or parent residing as a member of the same household as an officer or employee of a contractor or subcontractor who is directly involved in the operation of iLottery or the provision of iLottery related services.

(3) Any other terms and conditions the Secretary deems necessary and relevant for the conduct of iLottery.

The provisions of this § 876.9 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.9 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial pages (391085) to (391088).

This section cited in 61 Pa. Code § 876.6 (relating to governing law); 61 Pa. Code § 876.7 (relating to general provisions); 61 Pa. Code § 876.10 (relating to iLottery registration and participation); 61 Pa. Code § 876.10a (relating to registered iLottery player lottery account requirements); 61 Pa. Code § 876.11a (relating to methods to fund a lottery account); 61 Pa. Code § 876.14a (relating to withdrawals from a lottery account); 61 Pa. Code § 876.16 (relating to self-exclusion from iLottery and responsible gambling tools); and 61 Pa. Code § 876.19 (relating to subscription services).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.10 iLottery registration and participation.

(a) An individual may not participate in iLottery without first creating a lottery account and registering to participate in iLottery through the Bureau as described in this chapter.

(b) A registered iLottery player agrees to be bound by the iLottery terms and conditions as provided for under § 876.9 (relating to iLottery terms and conditions).

(c) To establish a lottery account and register for iLottery, an individual shall provide the following information:

(1) The individual’s name as it appears on a valid government-issued identification or tax documents.

(2) The individual’s date of birth.

(3) The entire or last four digits of the individual’s Social Security Number, or comparable equivalent.

(4) The individual’s address.

(5) The individual’s telephone number.

(6) The individual’s e-mail address.

(7) Any other information as established by the Secretary to be necessary to verify the age and identity of the individual.

(d) An individual may be required to provide additional information or documentation, as set forth in the iLottery terms and conditions as provided for under § 876.9, to establish a lottery account or register for iLottery. The information may be used for iLottery registration or to confirm information provided by that individual during the registration process.

(e) The lottery account will require a username and password.

(f) Access to the lottery account and participation in iLottery is limited to the registered iLottery player.

(g) An individual will be prohibited from establishing a lottery account and from registering for iLottery if one or more of the following occurs:

(1) The Department is unable to verify the age of the individual.

(2) The Department is unable to verify the identity of the individual.

(3) The individual fails to agree to the iLottery terms and conditions as provided for under § 876.9.

(4) The information provided to the Bureau is false or misleading.

(5) Other reasons set forth in the iLottery terms and conditions as provided for under § 876.9.

(h) A registered iLottery player may not purchase a play, chance or share or purchase lottery products using a lottery account if the Bureau is unable to verify that the registered iLottery player is physically located within the geographical borders of this Commonwealth.

(i) An individual may not open, access, maintain or otherwise use more than one lottery account for participation in iLottery. This does not prohibit a registered iLottery player who closes a lottery account from reopening the lottery account or creating a new account, as applicable, at a later date.

(j) An individual may not register or attempt to register for iLottery using more than one lottery account.

(k) By establishing a lottery account and registering for iLottery, a registered iLottery player agrees that all communications related to the establishment and use of the lottery account may be through electronic communications. All electronic communications from the Bureau may be directed to a registered iLottery player based on the lottery account information provided by the registered iLottery player and verified by the Bureau.

(l) An individual must create a lottery account and register for iLottery through the Bureau’s iLottery web site or the Bureau’s mobile application.

(m) A lottery account may be closed by the registered iLottery player at any time.

(n) A registered iLottery player’s lottery account information may be retained by the Bureau to prevent another individual from using the same lottery account information to open a different lottery account.

(o) To close the registered iLottery player’s lottery account, the registered iLottery player is required to contact the Bureau. The Bureau may require the registered iLottery player to confirm lottery account information prior to closing the lottery account.

The provisions of this § 876.10 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.10 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial pages (391088) to (391089).

This section cited in 61 Pa. Code § 876.7 (relating to general provisions).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.10a Registered iLottery player lottery account requirements.

A registered iLottery player is subject to all of the following:

(1) The end user license agreement or agreements for software used in the provision of iLottery.

(2) The terms and conditions of any third-party service providers used in the provision of iLottery, including electronic payment processors, electronic payment transmitters and financial institutions.

(3) The confirmation of the individual’s age and identity.

(4) To at all times provide true and correct information to the Department and the Bureau during the establishment, access, use or closure of the registered iLottery player’s lottery account.

(5) The continuous monitoring and recording of information communicated and transactions conducted through iLottery, including electronic communications.

(6) The use of a mechanism by the Bureau to detect the physical location of the registered iLottery player in compliance with 4 Pa.C.S. § 503(h)(1) (relating to iLottery authorization).

(7) The registered iLottery player’s lottery account may be suspended or closed for any of the following reasons:

(i) Violations of the iLottery terms and conditions as provided for under § 876.9 (relating to iLottery terms and conditions).

(ii) A self-exclusion request under § 876.16 (relating to self-exclusion from iLottery and responsible gambling tools).

(iii) The application of a responsible gambling tool which limits access to the registered iLottery player’s lottery account as set forth in the iLottery terms and conditions as provided for under § 876.9.

(iv) The determination that the registered iLottery player has been charged with or convicted of an offense under 18 Pa.C.S. § § 4106, 5111 and 5512—5514, 4 Pa.C.S. § 1518 or § 3905 or conspiracy to commit offenses under 18 Pa.C.S. § 903, or equivalent crimes under Federal law or the law of another state.

(v) Other reasons as established by the Secretary.

(8) The registered iLottery player’s use of iLottery and software or third-party services used by the Bureau in the provision of iLottery shall comply at all times with all applicable statutes, regulations and the iLottery terms and conditions as provided for under § 876.9.

(9) The iLottery privacy policy, available on the Bureau’s iLottery web site and on the Bureau’s mobile application.

The provisions of this § 876.10a adopted under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.10a adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.11 Purchase and prize restrictions.

(a) Individuals must be at least 18 years of age or older to register for iLottery or to purchase a play, chance or share.

(b) A registered iLottery player shall be located within the geographical boundaries of this Commonwealth to purchase a play, chance or share.

(c) A play, chance or share may not be purchased by and a prize may not be awarded to the following:

(1) An officer or employee of the Bureau.

(2) A spouse, child, brother, sister or parent residing as a member of the same household as an officer or employee of the Bureau.

(3) An officer or employee of a contractor or subcontractor who is directly involved in the operation of iLottery or the provision of iLottery related services.

(4) A spouse, child, brother, sister or parent residing as a member of the same household as an officer or employee of a contractor who is directly involved in the operation of iLottery or the provision of iLottery related services.

(d) A registered iLottery player is prohibited from cancelling the purchase of a play, chance, share or lottery product.

The provisions of this § 876.11 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.11 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391089).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.11a Methods to fund a lottery account.

(a) A registered iLottery player shall deposit moneys or credits in the lottery account prior to purchasing a play, chance or share or purchasing other lottery products using a lottery account.

(b) The Secretary will determine the methods by which a registered iLottery player may fund a lottery account and purchase lottery products. The Bureau will describe those methods in the iLottery terms and conditions as provided for under § 876.9 (relating to iLottery terms and conditions).

(c) Methods for funding a lottery account may include the following:

(1) A registered iLottery player’s credit card or debit card, including prepaid cards.

(2) Gift cards, as authorized by the Secretary and issued by the Bureau.

(3) Player cards, as authorized by the Secretary and issued by the Bureau.

(4) Automated clearing house transfers.

(5) Bonus money, credits or promotional prizes issued by the Bureau.

(6) Prizes received from a winning play.

(7) Payment processors or payment transmitters.

(8) Any other method authorized by the Secretary.

(d) The Secretary may establish conditions of purchase applicable to credit card and debit card transactions, such as daily deposit limits.

(e) The Secretary may establish a minimum deposit amount.

The provisions of this § 876.11a adopted under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.11a adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.11b Lottery account moneys and credits.

(a) Moneys or credits deposited into a registered iLottery player’s lottery account may be used to purchase plays, chances or shares and lottery products, as authorized by the Secretary and offered by the Bureau.

(b) Moneys or credits deposited and held in a registered iLottery player’s lottery account will not earn interest.

(c) Moneys or credits remaining on deposit in a registered iLottery player’s lottery account will be considered abandoned and unclaimed property if the registered iLottery player has not logged into the lottery account using their username and password for more than 3 years.

The provisions of this § 876.11b adopted under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.11b adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.12 Prizes.

(a) Prizes may be awarded by check, draft or electronically through the registered iLottery player’s lottery account or other means as authorized by the Secretary and offered by the Bureau.

(b) The Bureau will report taxable prizes and events to relevant taxing authorities based on established statutory thresholds.

(c) The Commonwealth and its agents, officers and employees shall be discharged of liability upon award of a prize.

(d) Prizes will be reduced by required tax withholding and any deductions for outstanding liabilities as required by law, including those set forth in § 876.14 (relating to deductions required by law).

(e) A registered iLottery player may be prohibited from accessing a prize until the Department or the Bureau determines whether there are outstanding liabilities that must be deducted from the prize, including those set forth in § 876.14.

(f) Winning plays will be determined based on the iLottery game rules as established in § 876.2d (relating to iLottery game rules by category of game offered) and by the data recorded by the Bureau on its system or systems of record.

The provisions of this § 876.12 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.12 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391089).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.12a Prize claims.

(a) The Bureau will generate applicable tax forms for reportable gambling and lottery winnings as required by State and Federal laws and regulations.

(b) The Bureau may use lottery account information provided by a registered iLottery player and verified by the Bureau to generate applicable tax forms for reportable gambling and lottery winnings.

(c) The Bureau may require a registered iLottery player to complete a claim form and to submit it in person at a claim center designated by the Bureau.

(d) A prize requiring the completion of a claim form will not be credited to the registered iLottery player’s lottery account until a properly completed claim form is submitted to and accepted by the Bureau.

(e) If a registered iLottery player fails to complete a claim form as required by this section, the prize money will be retained for payment to the registered iLottery player for 1 year after the prize is won. If a claim form is not completed within that period, the ability to claim the prize will expire and the prize money will be used consistent with the State Lottery Law (72 P.S. § § 3761-301—3761-315).

The provisions of this § 876.12a adopted under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.12a adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.13 Withholding.

Federal and State withholding taxes will be withheld by the Bureau from prize payments as required by law.

The provisions of this § 876.13 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.13 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391089).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.14 Deductions required by law.

In addition to any withholding required by Federal and State law, the Department will deduct amounts from prizes as required by law, including those amounts required under:

(1) 23 Pa.C.S. § 4308 (relating to lottery winnings intercept).

(2) 72 P.S. § 215 regarding lottery winnings intercept.

The provisions of this § 876.14 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.14 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391089).

This section cited in 61 Pa. Code § 876.12 (relating to prizes).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.14a Withdrawals from a lottery account.

(a) A registered iLottery player may withdraw moneys from the registered iLottery player’s lottery account.

(b) The Secretary may require a minimum balance in the registered iLottery player’s lottery account prior to authorizing a withdrawal.

(c) The Bureau shall not be required to grant a withdrawal request immediately. A withdrawal request from a registered iLottery player’s lottery account may be delayed for reasons consistent with this chapter and as set forth in the iLottery terms and conditions as provided for under § 876.9 (relating to iLottery terms and conditions).

(d) A registered iLottery player may be required to provide the Bureau with information to verify the details of a withdrawal request before the withdrawal request from the registered iLottery player’s lottery account is processed.

(e) A registered iLottery player shall be prohibited from withdrawing bonus money from the registered iLottery player’s lottery account where the registered iLottery player fails to convert bonus money into cash in conformance with the promotional terms and conditions issued under § § 811.41 and 876.17 (relating to promotional prizes; and iLottery promotional prizes).

(f) A registered iLottery player may request that a withdrawal from the registered iLottery player’s lottery account be credited to any payment type authorized by the Secretary and offered by the Bureau.

(g) The Bureau may make adjustments to a registered iLottery player’s lottery account if the Bureau determines that moneys or bonus moneys are mistakenly credited to a registered iLottery player’s lottery account.

(h) The Bureau will deduct the purchase price of a lottery product from a registered iLottery player’s lottery account following the purchase of a lottery product.

The provisions of this § 876.14a adopted under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.14a adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

This section cited in 61 Pa. Code § 876.2 (relating to definitions).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.15 Termination of a game.

The Secretary may terminate an iLottery game at any time and without notice.

The provisions of this § 876.15 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.15 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391090).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.16 Self-exclusion from iLottery and responsible gambling tools.

(a) A registered iLottery player may request self-exclusion from iLottery under this section.

(b) A registered iLottery player may request self-exclusion through the registered iLottery player’s lottery account or through other means authorized by the Secretary and offered by the Bureau.

(c) A registered iLottery player may select from the predetermined periods of self-exclusion authorized by the Secretary and offered by the Bureau.

(d) During a period of self-exclusion, a self-excluded, registered iLottery player may not purchase plays, shares or chances, deposit moneys into the registered iLottery player’s lottery account, or otherwise participate in iLottery and iLottery promotions prior to the conclusion of the self-exclusion period.

(e) During a period of self-exclusion, a registered iLottery player elects not to receive e-mails or other communications about iLottery.

(f) The Bureau may require a registered iLottery player to verify any of the following lottery account information to request self-exclusion:

(1) The individual’s name as it appears on a valid government-issued identification or tax documents.

(2) The individual’s date of birth.

(3) The entire or last four digits of the individual’s Social Security Number or comparable equivalent.

(4) The individual’s address.

(5) The individual’s telephone number.

(6) The individual’s e-mail address.

(7) Any other information as established by the Secretary to be necessary to verify the age and identity of the individual.

(g) To request self-exclusion, a registered iLottery player must:

(1) Acknowledge and agree that self-exclusion is requested voluntarily.

(2) Acknowledge and agree that self-exclusion applies to iLottery but may apply to other lottery products, promotions and drawings as set forth in the iLottery terms and conditions as provided for under § 876.9 (relating to iLottery terms and conditions).

(3) Acknowledge and agree to waive and release the Commonwealth and its agents and employees from all liability relating to the processing and enforcement of self-exclusion.

(h) A self-excluded, registered iLottery player shall be prohibited from logging into the registered iLottery player’s lottery account using their username and password until the self-exclusion period expires.

(i) A self-excluded, registered iLottery player may request the release of moneys in the registered iLottery player’s lottery account as set forth in the iLottery terms and conditions as provided for under § 876.9.

(j) The self-exclusion period will become effective immediately upon submission and verification of the request.

(k) A request for self-exclusion is irrevocable.

(l) At the conclusion of any period of self-exclusion, a self-excluded, registered iLottery player must contact the Bureau to reinstate the registered iLottery player’s lottery account.

(m) The Bureau may offer responsible gambling tools applicable to iLottery and the purchase of lottery products through a lottery account as set forth in the iLottery terms and conditions provided for under § 876.9.

(n) During any period of self-exclusion or through the use of responsible gambling tools, a registered iLottery player may be prohibited from participating in second chance drawings, promotions offered by the Bureau and marketing communications from the Bureau.

The provisions of this § 876.16 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.16 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391090).

This section cited in 61 Pa. Code § 876.9 (relating to iLottery terms and conditions); and 61 Pa. Code § 876.10a (relating to registered iLottery player lottery account requirements).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.17 iLottery promotional prizes.

The Secretary may authorize iLottery promotions and issue the terms and conditions related thereto under this chapter and § 811.41 (relating to promotional prizes).

The provisions of this § 876.17 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.17 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391090).

This section cited in 61 Pa. Code § 876.9 (relating to iLottery terms and conditions); and 61 Pa. Code § 876.14a (relating to withdrawals from a lottery account).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.18 Agent promotion programs.

Agent incentive and marketing promotion programs may be implemented at the discretion of the Secretary. Funds for the programs, if needed, will be drawn from the Lottery Fund.

The provisions of this § 876.18 amended under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.18 amended March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528. Immediately preceding text appears at serial page (391090).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.19 Subscription services.

(a) The Bureau may offer subscription services for lottery products as authorized by the Secretary.

(b) The subscription services will be governed by the iLottery terms and conditions as provided for under § 876.9 (relating to iLottery terms and conditions).

(c) Details of subscription services purchased through iLottery will be available electronically through a registered iLottery player’s lottery account.

The provisions of this § 876.19 adopted under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.19 adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

This section cited in 61 Pa. Code § 876.9 (relating to iLottery terms and conditions).

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

61 Pa. Code § 876.20 Confidential information.

The following information about a registered iLottery player is confidential, exempt from being disclosed and will be maintained by the Bureau:

(1) The individual’s last name.

(2) The individual’s address.

(3) The individual’s telephone number.

(4) The individual’s financial information.

(5) The individual’s self-exclusion information.

(6) The individual’s Social Security Number or comparable equivalent.

(7) Information related to the individual’s use of responsible gambling tools.

(8) The individual’s play history, including information related to wins and losses.

(9) The individual’s play tendencies.

The provisions of this § 876.20 adopted under 4 Pa.C.S. § 503; and section 303(a) of the State Lottery Law (72 P.S. § 3761-303(a)).

The provisions of this § 876.20 adopted March 13, 2020, effective March 14, 2020, 50 Pa.B. 1528.

History

• Authority: The provisions of this Chapter 876 issued under 4 Pa.
• Source: The provisions of this § 876.

Part VI Board of Claims

Chapter 900 Government of the Board of Claims—Statement of Policy

61 Pa. Code § 900.1 Creation and meetings.

(a) The Legislature created the Board of Claims (Board) and it is required to devote full time to the duties imposed by the act of May 20, 1937 (P. L. 728, No. 193) (act) (72 P. S. § § 4651-1—4651-10). The Board will be open and operating Monday through Friday in Harrisburg except on legal holidays as established by the Board.

(b) Executive administrative meetings of the Board, as needed, will be held in the Harrisburg headquarters location, 7th Floor Fulton Building, 3rd and Locust Streets, Harrisburg, Pennsylvania.

(c) The Board will comply with the Sunshine Act (65 P. S. § § 271—286) and other laws applicable to regular meetings.

(d) Special meetings of the Board may be held at the Harrisburg headquarters, and special meetings may be called by the Chairperson or Vice Chairperson with concurrence of one other member upon 1 day’s notice or special meetings may be held at any time by unanimous consent of the Board. In the case of special meetings, the Sunshine Act and other laws applicable to special meetings will be fully complied with. Business of the Board’s government will be transacted at administrative or special meetings.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.2 Quorum.

At the hour appointed for meetings, the Executive Secretary or Secretary will call the roll of the members and announce whether a quorum is present. If a quorum is present, the Board will proceed with the business before it. Two members of the Board will be necessary to constitute a quorum and no action of the Board will be binding unless two members vote in favor thereof.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.3 Officers.

The officers of the Board for its government shall be a Chairperson, who will be the Lawyer Member and Chief Administrative Judge; Vice Chairperson, who will be the Citizen Member; and Secretary, who will be the Engineer Member. These officers will have a term which corresponds to their term of office as required by the act and until their successors are appointed and qualified.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.4 Chairperson.

The Board Chairperson, Lawyer Member, will preside at meetings at which he is present. He will be the Chief Administrative Judge and will have general supervision of the legal administrative affairs of the Board subject to the act, this chapter and associated policy and procedure directives issued by the Board.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.5 Vice Chairperson.

The Vice Chairperson, Citizen Member, will perform the duties and exercise the functions of the Chairperson in his absence, or during his inability to act or during a vacancy in the office of the Lawyer Member. The Vice Chairperson will have charge of overseeing the requisition, purchasing and personnel functions as approved by Board resolution. The Vice Chairperson will perform other duties as may be assigned by the Board.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.6 Secretary.

The Secretary, Engineer Member, subject to the act, this chapter and associated policy and procedure directives will have charge of overseeing the budgeting and expenditure of funds as approved by Board resolution.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.7 Senior Counsel.

(a) The Senior Counsel will be appointed by the Board and will be a lawyer in good standing before the Supreme Court of Pennsylvania. He will be responsible for the overall management of claims submitted to the Board so that all cases will, as far as practicable, be listed for hearing in a timely manner, will supervise all legal counsel employed by the Board and coordinate and expedite the proceedings as governed by 231 Pa. Code (relating to the Rules of Civil Procedure) and this chapter, not otherwise inconsistent with the act.

(b) The Senior Counsel will, in cooperation with the Executive Secretary, be responsible for the performance of the reporter function, to catalog and have published the Opinions of the Board, under the act and other incidental duties assigned by the Board. The Senior Counsel will be required to devote full time to these duties.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.8 Executive Secretary.

The Executive Secretary will be appointed by the Board and devote full time to the duties assigned by the Board. The Executive Secretary will be responsible for the processing of claims in the Fiscal Code Division, performance of the custodial functions of the Board’s documents and, with the Senior Counsel, carry-out the reporter function and other incidental duties assigned by the Board.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.9 Chief Administration.

The Chief Administrator will be appointed by the Board and devote full time to the duties assigned by the Board. The Chief Administrator will be responsible for administering the clerical staff support functions, preparation of the budget, payroll, purchasing and payment documents and other incidental duties as assigned by the Board.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.10 Hearing panels.

(a) The Board will be responsible for the appointment of three hearing panels and oversight of their operation and performance in conducting hearings and submitted findings and recommendations.

(b) The Board may appoint three hearing panels regionally located in the western, central and eastern parts of this Commonwealth. Each hearing panel shall consist of two individuals, one of whom will be a registered engineer and the other of whom will be a lawyer in good standing before the Supreme Court of Pennsylvania and will be the Panel Chairperson. The Board will appoint qualified panelists from the respective regions and may appoint alternate panel members, lawyers in good standing before the Supreme Court of Pennsylvania or registered in engineering when panel vacancies are anticipated to observe and study the Board’s claim process. The Board, in a timely manner, will review and approve case assignments to panels and the location of their hearings and submissions of recommendations.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.11 Board employes.

With majority consent, the Board will have the power to and may appoint, promote, demote or discharge employes, including lawyers, engineers, stenographers and legal assistants as needed in the proper exercise of its function.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.12 Orders.

Actions of the Board will be memorialized by orders of the Board.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.13 Case discussions.

The Board will establish the time and dates for executive case discussion meetings after all Findings of Fact and Conclusions of Law have been filed with the Board by the plaintiff and defendant.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.14 Amendment of chapter.

This chapter may be altered, amended or repealed and a new statement of policy may be adopted by the Board.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

61 Pa. Code § 900.15 Inconsistencies.

A statement of policy of the Board that is inconsistent with this chapter is void.

History

• Source: The provisions of this Chapter 900 adopted December 17, 1993, effective December 18, 1993, 23 Pa.

Part IX Pennsylvania Gaming Cash Flow Management

Chapter 1001 Pennsylvania Gaming Cash Flow Management

61 Pa. Code § 1001.1 Scope.

This chapter establishes procedures for the administration and distribution of all net slot machine revenue, gross table game revenue, collection of tax and collection of other assessments under the act. In addition, this chapter clarifies the administrative procedures for transferring the statutorily established amounts of funding as prescribed in the act.

The provisions of this § 1001.1 amended December 31, 2010, effective January 1, 2011, 41 Pa.B. 41. Immediately preceding text appears at serial page (328797).

History

• Source: The provisions of this § 1001.

61 Pa. Code § 1001.2 Purpose.

The purpose of this chapter is to notify prospective licensed entities and certificate holders, as well as the general public, of the procedures and requirements for distributing net slot machine revenue, gross table game revenue, collection of tax and collection of other assessments.

The provisions of this § 1001.2 amended December 31, 2010, effective January 1, 2011, 41 Pa.B. 41. Immediately preceding text appears at serial page (328798).

History

• Source: The provisions of this § 1001.

61 Pa. Code § 1001.3 Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise. Act—The Pennsylvania Race Horse Development and Gaming Act (4 Pa.C.S. § § 1101—1904). Annual minimum distribution—As provided under the act, 2% of the gross terminal revenue of the licensed gaming entity or $10 million, whichever is greater. Banking day—The part of any day that the Federal Reserve has established for a bank to be opened to the public for carrying on substantially all of its banking functions. Board—The Pennsylvania Gaming Control Board of the Commonwealth. CCS—The central control computer system controlled by the Department and accessible by the Board, to which all slot machines communicate for the purpose of recording, reviewing, reporting and auditing real-time information regarding the events that occur during the operation of a slot machine. The system calculates the taxes and assessments due daily and provides information to the Department to track daily deposits. Certificate holder—As defined in section 1103 of the act (relating to definitions). Collection Account—A Department bank account authorized by the Treasury for the collection of taxes and other payments received from licensed gaming entities and which is maintained and reconciled by the Department. Concentration Account—A Treasury bank account used for the deposit and disbursement of all recognized Commonwealth moneys and which is maintained and reconciled by the Treasury Department. Credit against tax—Credit as specified in section 1209(c) of the act (relating to slot machine license fee) and established if the tax rate imposed by section 1403 of the act (relating to establishment of State Gaming Fund and net slot machine revenue distribution) upon slot machine daily gross terminal revenue is increased at any time during the term of 10 years following the initial issuance of the slot machine license. Department—The Department of Revenue of the Commonwealth. EFT—Electronic funds transfer. Fund—A fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances and the changes therein, that are segregated for the purpose of carrying on specific activities or attaining certain objectives established for the receipt of gross terminal revenue distributions and gross table game revenue under the act. General Fund—The fund into which general, nonearmarked revenues of the Commonwealth are deposited and from which monies are appropriated to pay the general expenses of the Commonwealth. Gross table game revenue—As defined in section 1103 of the act. Gross terminal revenue—As defined in section 1103 of the act. Licensed gaming entity—As defined in section 1103 of the act. Manufacturers—As defined in section 1103 of the act. Office of the Budget—An administrative agency as authorized by section 609 of The Administrative Code of 1929 (71 P. S. § 229) under the direct supervision of the Secretary of the Budget. Pennsylvania Gaming Economic Development and Tourism Fund—The fund established under section 1407 of the act (relating to Pennsylvania Gaming Economic Development and Tourism Fund). Pennsylvania Race Horse Development Fund—The fund established under section 1405 of the act (relating to Pennsylvania Race Horse Development Fund). Property Tax Relief Fund—The fund established under section 1409 of the act (relating to Property Tax Relief Fund). Race Horse Improvement Daily Assessment—The amount each operating licensed gaming entity shall pay daily to the Department, according to Department calculations. State Gaming Fund—The fund established under section 1403 of the act. Suppliers—As defined in section 1103 of the act. Treasury—The Treasury Department of the Commonwealth.

The provisions of this § 1001.3 amended December 31, 2010, effective January 1, 2011, 41 Pa.B. 41. Immediately preceding text appears at serial pages (328798) to (328799).

History

• Source: The provisions of this § 1001.

61 Pa. Code § 1001.4 Calculations of credit against tax and Race Horse Improvement Daily Assessment.

(a) Credit against tax. The amount of the credit must be equal to the difference between the tax calculated at the rate in effect when a license was issued to the licensed gaming entity and certificate holder and the tax calculated at the increased rate. The credit shall be applied on a dollar-for-dollar basis but may not extend beyond the 10-year period following the initial issuance of the license.

(b) Race Horse Improvement Daily Assessment. The amount of this assessment shall be calculated in accordance with section 1405(b) of the act (relating to Pennsylvania Race Horse Development Fund).

The provisions of this § 1001.4 amended December 31, 2010, effective January 1, 2011, 41 Pa.B. 41. Immediately preceding text appears at serial page (328799).

History

• Source: The provisions of this § 1001.

61 Pa. Code § 1001.5 Administration and distribution of moneys held by licensed gaming entities, certificate holders and the Commonwealth.

(a) Application of section. This section applies to the collection of tax, the collection of other assessments and all transfers of moneys to and from the General Fund, State Gaming Fund, Pennsylvania Gaming Economic Development and Tourism Fund, Pennsylvania Race Horse Development Fund and any other fund as specified in this chapter.

(b) Deposits and transfers of gross table game revenue to Treasury by certificate holders.

(1) Certificate holders shall make computations of table game revenue in accordance with section 13A62 of the act (relating to table game taxes), on a daily basis and report the computed amount to the Department on a weekly basis on the form and in the manner prescribed by the Department.

(2) A deposit is required to be made at the time the report is submitted to the Department into the Department’s collection account established to collect the taxes and assessments.

(c) Deposits and transfers to Treasury by licensed gaming entities.

(1) The Department will notify each licensed gaming entity, Treasury and Office of the Budget of the actual amount each licensed gaming entity shall be required to deposit with Treasury as calculated by the CCS in accordance with sections 1323, 1403 and 1405—1407 of the act. A licensed gaming entity shall make deposits with Treasury after receipt of the Department’s notice to the licensed gaming entity and by the date and times specified by the Department.

(2) Payments shall be electronically transferred by the licensed gaming entities and available to the Commonwealth by the deadline established by the Department. Moneys shall be deposited in the Department’s Collection Account.

(3) System problems or failures, such as power outages and states of emergency, will not excuse the licensed gaming entity from making the required deposits in a timely manner. The licensed gaming entity shall immediately notify the Department and the Board of any of these problems.

(4) The Department will maintain records of deposits to the Department’s Collection Account under this chapter and will share information, as practicable, to assist Treasury in its reconciliation of deposits into its Concentration Account.

(5) The administration of assessments will be as follows:

(i) Proration of assessment. Upon imposition of the annual minimum distribution amount, as specified in section 1403(c)(3) of the act (relating to establishment of State Gaming Fund and net slot machine revenue distribution), regardless of whether the minimum is subject to the budgetary limitations of section 1403 of the act, the required minimum shall be prorated for that portion of the municipality’s fiscal year that the Board determines that the licensed gaming entity was actually in operation.

(ii) Limitation of assessment. Upon imposition of the minimum distribution upon the licensed gaming entity, the required minimum shall be paid in accordance with the administrative procedures of this section.

(6) The Department reserves the right, upon notice served upon the licensed gaming entity and the Board, to temporarily disable the licensed gaming entity’s slot machines through the CCS until the Department receives verification that the required deposit has been made.

(d) Distributions of local share assessments.

(1) Distributions of local share assessments to municipalities. If a licensed gaming entity and certificate holder fails to reach the requisite annual minimum distribution as required under the act within 15 days following the end of the municipality’s fiscal year, the Department will notify the licensed gaming entity and certificate holder of the shortfall and the amount to be remitted. A licensed gaming entity and certificate holder shall remit the difference required to meet the requisite annual minimum distribution as required under the act within 15 days following the end of the municipality’s fiscal year. The licensed gaming entity and certificate holder shall remit the required payment to the Department for distribution in accordance with sections 1403(c)(3) and 13A63(c) of the act (relating to establishment of state gaming fund and net slot machine revenue distribution; and local share assessment). Distributions specified in this chapter shall be made by the licensed gaming entity and certificate holder to the Department, no later than 15 days from the Department’s notice of the shortfall.

(2) Distributions of local share assessments to counties. The Department will make distributions in accordance with sections 1403(c)(2) and 13A63(b) of the act. If the minimum distribution exceeds the applicable annual municipal allocation cap in section 1403(c)(3) of the act, the amount in excess of the municipal allocation cap shall be distributed by the Department in accordance with section 1403(c)(2) of the act.

The provisions of this § 1001.5 corrected July 14, 2006, effective July 1, 2006, 36 Pa.B. 3450; amended July 20, 2007, effective July 21, 2007, 37 Pa.B. 3410; amended December 31, 2010, effective January 1, 2011, 41 Pa.B. 41. Immediately preceding text appears at serial pages (328800) and (341505).

Pre-enforcement Challenge

Commonwealth court lacked original jurisdiction to consider pre-enforcement challenge to tax assessment and there was adequate administrative remedy to consider assessment regulations. Sands Bethworks Gaming v. Dep’t of Revenue, 958 A.2d 125, 131-132 (Pa. Cmwlth. 2008)

This section cited in 61 Pa. Code § 1001.6 (relating to administration of amounts deposited by licensed gaming entities and certificate holders with Treasury to pay Commonwealth gaming related costs and expenses); and 61 Pa. Code § 1001.8 (relating to State Gaming Fund transfer).

History

• Source: The provisions of this § 1001.

61 Pa. Code § 1001.6 Administration of amounts deposited by licensed gaming entities and certificate holders with Treasury to pay Commonwealth gaming related costs and expenses.

(a) No later than 2 business days prior to the commencement of slot machine operations, the licensed gaming entity and certificate holder shall make all deposits required under section 1401 of the act (relating to slot machine licensee deposits) in the Department’s Collection Account. Upon transfer of the deposit into Treasury’s Concentration Account, the deposit shall be credited to an account established in Treasury for the licensed gaming entity and certificate holder. The account established shall also be used to recognize and account for all future deposits required from the licensed gaming entity and certificate holder by the Department for administrative costs and all future withdrawals made by the Department for reimbursement of administrative costs.

(b) Each licensed gaming entity and certificate holder shall maintain a minimum account balance with Treasury in accordance with section 1401 of the act.

(c) Moneys related to this account shall be transferred to the Department’s Collection Account and from Treasury by EFT or other methods of funds transfer in accordance with § 1001.5(c) (relating to administration and distribution of moneys held by licensed gaming entities, certificate holders and the Commonwealth).

(d) Reimbursement of Commonwealth expenses will be as follows:

(1) The Department will issue to the licensed gaming entity and certificate holder, periodic assessments of expenses incurred by the Board, Department, Office of Attorney General and the Pennsylvania State Police, regarding expenses directly related to the licensed gaming entity and certificate holder, under budgets approved by the Board and upon appropriation by the General Assembly as required in section 1402.1 of the act (relating to itemized budget reporting). Expenses not included in budgets approved by the Board may not be assessed against the licensed entity under this section.

(2) Expenses incurred by the Commonwealth and assessed to the licensed gaming entity and certificate holder shall be charged back to the licensed gaming entity and certificate holder and deducted from the licensed gaming entity’s and certificate holder’s account, as specified in section 1401 of the act (relating to slot machine licensee deposits) and this section.

(3) General administrative costs of the Commonwealth not specifically assessed to a licensed gaming entity and certificate holder under paragraph (1), shall be borne by each licensed gaming entity and certificate holder on a pro rata basis, at the discretion of the Secretary of Revenue until all Category 1 and Category 2 licensed gaming entities and certificate holders are operating as permitted under the act.

The provisions of this § 1001.6 amended December 31, 2010, effective January 1, 2011, 41 Pa.B. 41. Immediately preceding text appears at serial pages (341505) to (341506).

Pre-enforcement Challenge

Commonwealth court lacked original jurisdiction to consider pre-enforcement challenge to tax assessment and there was adequate administrative remedy to consider assessment regulations. Sands Bethworks Gaming v. Dep’t of Revenue, 958 A.2d 125, 131-132 (Pa. Cmwlth. 2008)

History

• Source: The provisions of this § 1001.

61 Pa. Code § 1001.7 Deposits of license, permit and other fees.

The fees for manufacturers’ and suppliers’ licenses, employment permits and other licenses and permits as the Board may require, excluding license fees paid for Categories 1, 2 and 3 licenses under sections 1209 and 1305 of the act (relating to slot machine license fee; and Category 3 slot machine license), shall be deposited with Treasury into a restricted receipt account within the State Gaming Fund. Fees to be paid under section 13A61 of the act (relating to table game authorization fee) and fees related to table games to be paid under section 1208 of the act (relating to collection of fees and fines) shall be deposited within the General Fund in accordance with section 13A61(f). The fees deposited within the Gaming Fund will be transferred from a restricted receipt account into a restricted revenue account of the State Gaming Fund to be used by the Board to pay its operating expenses. License fees paid for Categories 1, 2 and 3 licenses under sections 1209 and 1305 of the act shall be paid into the State Gaming Fund in accordance with sections 1209(d) and 1305 of the act.

The provisions of this § 1001.7 amended December 31, 2010, effective January 1, 2011, 41 Pa.B. 41. Immediately preceding text appears at serial pages (341506) to (341507).

History

• Source: The provisions of this § 1001.

61 Pa. Code § 1001.8 State Gaming Fund transfers.

(a) Application of section. This section applies to the transfers of moneys to and from the State Gaming Fund.

(b) Quarterly distributions. Quarterly distributions from the State Gaming Fund to counties or municipalities in which a licensed facility is located, as determined by the Board, and as specified in Chapter 14 of the act (relating to revenues), shall be performed in accordance with the Governor’s Management Directive 305.4 (relating to payments to counties), § 1001.5 (relating to administration and distribution of moneys held by licensed gaming entities, certificate holders and the Commonwealth) and the following provisions:

(1) The Department will submit payment requisitions, accompanied by documentation, to the Office of the Budget for payment through Treasury.

(2) The Department will determine the annual inflation adjustment and will publish notice of the inflation adjustment in the Pennsylvania Bulletin by February 1 of each year.

(3) The Department will make distributions quarterly, no later than 30 days following the end of each calendar quarter.

(c) Tax, assessments and credit against tax.

(1) Determinations of gross terminal revenue and the calculations of taxes and other assessments due will be determined by the Department based on the actual calculations by the CCS and the certificate holders’ weekly reports of table game revenue made to the Department.

(2) Except in the case of gross table game revenue which will be self-reported to the Department by the certificate holders, the Department will notify each licensed gaming entity and Treasury of the amount of tax and other assessments due to the Commonwealth.

(3) Each licensed gaming entity and certificate holder shall deposit the amount specified in paragraph (2) into the Department’s Collection Account, in the manner prescribed under § 1001.5(c).

(4) The Department will enter into an agreement with each licensed gaming entity setting forth the terms and conditions of any credit against tax as claimed by the licensed gaming entity.

(5) Taxes and other assessments due as determined by the Department shall remain payable by the licensed gaming entity and certificate holder to the Department in accordance with section 1501(a) of the act (relating to responsibility and authority of department) regardless of any discrepancies between the licensed gaming entity’s and certificate holder’s calculation and that of the Department’s or amounts contested by any party concerning the credit against taxes due. Resolution of disputed payments due will be addressed by the Department through adjustments it makes to its calculation of future payment amounts due. The Department may make adjustments to its calculation of future payment amounts due after resolution of any dispute regarding the amount of taxes due. The Department will provide notice to the Board of the final calculations of taxes due under this subsection.

(6) Any remittance due that is caused by the imposition of the tax or other assessments on nonbanking days as well as holidays shall be remitted by the licensed gaming entity and certificate holder on the next banking day. For example, any tax that has accrued on Independence Day shall be transferred on the following banking day.

(d) Imposition of a penalty. Failure to comply with this section that results in the failure to transmit the requisite amounts to the Department’s Collection Account shall result in the imposition of a penalty of 5% per month up to a maximum of 25% of the amounts due and unpaid by the licensed gaming entity and certificate holder. Payments made by a licensed gaming entity toward delinquent amounts, including penalties, shall be allocated to the licensed gaming entity’s delinquency in accordance with the priority of payments as specified under section 209 of the Taxpayers’ Bill of Rights (72 P. S. § 3310-209).

The provisions of this § 1001.8 amended December 31, 2010, effective January 1, 2011, 41 Pa.B. 41. Immediately preceding text appears at serial pages (341507) and (328803).

History

• Source: The provisions of this § 1001.

61 Pa. Code § 1001.9 State Gaming Economic Development Tourism Fund transfers.

(a) Department personnel will notify the respective licensed gaming entity and Treasury of the amounts the licensed gaming entity shall be required to deposit in the Department’s Collection Account. Deposits shall be made on the same banking day as the date of the notice by the Department.

(b) Moneys shall be transferred by the licensed gaming entity by EFT or other method the Department may require and shall be deposited in the Department’s Collection Account prior to being transferred to Treasury’s Concentration Account.

(c) System problems or failures, such as power outages and states of emergency, will not excuse the licensed gaming entity from making the required deposits in a timely manner. The licensed gaming entity shall immediately notify the Department and the Board of the problems.

(d) The Department will maintain records of the Department’s Collection Account under this chapter and will share information as practicable, to assist Treasury in its reconciliation of deposits into its Concentration Account.

History

• Source: The provisions of this § 1001.

61 Pa. Code § 1001.10 Pennsylvania Race Horse Development Fund transfers.

(a) Prior to making each Race Horse Improvement Daily Assessment against a licensed gaming entity, the Department will determine the amount of each licensed gaming entity’s gross terminal revenue.

(b) Except as provided in section 1406(a)(2) and (2.1) of the act (relating to distributions from Pennsylvania Race Horse Development Fund), 18% of the gross terminal revenue of each Category 1 licensed gaming entity shall be returned to each active and operating Category 1 licensed gaming entity that conducts live racing subject to the assessment cap in section 1405(c) of the act (relating to Pennsylvania Race Horse Development Fund), and subject to the allocations specified in section 1406(a)(1)(i)—(iii) of the act.

(c) Procedures concerning Pennsylvania Race Horse Development transfers are as follows:

(1) Department personnel will notify the respective licensed gaming entity and Treasury of the actual amount each licensed gaming entity shall be required to deposit in the Department’s Collection Account as determined by the CCS. Deposits shall be made on the same banking day as the date of the notice by the Department.

(2) Moneys shall be transferred by the licensed gaming entity by EFT or other method as the Department may require and shall be deposited in the Department’s Collection Account prior to being transferred to Treasury’s Concentration Account.

(3) System problems or failures, such as power outages and states of emergency, will not excuse the licensed gaming entity from making the required deposits in a timely manner. The licensed gaming entity shall immediately notify the Department and the Board of any of these problems.

(4) The Department will maintain records of the Department’s Collection Account under this chapter and will share information as practicable, to assist Treasury in its reconciliation of deposits to its Concentration Account.

(d) The Department will notify each active and operating Category 1 licensee conducting live racing, Treasury and Office of the Budget of the amounts each active and operating Category 1 licensee conducting live racing will receive. An eligible Category 1 licensee will receive from Treasury a weekly payment from the Pennsylvania Race Horse Development Fund in accordance with the act. The deposits required under section 1406(a)(1)(ii) of the act will be deducted by the Department before making the payment to each active and operating licensee and transferred to the appropriate State fund, under section 1406 of the act.

(1) Payments will be electronically transferred by the Commonwealth and will be available to the licensee by the deadline established by the Department.

(2) Both Treasury and the Department will maintain records of distributions under this chapter and will share information, as practicable, to assist each agency in its reconciliation process.

(e) For purposes of the calculations and distributions of section 1406(a) of the act, live racing will be determined annually, and as a Category 1 licensed gaming entity commences live racing in accordance with section 1303(b) of the act (relating to additional Category 1 slot machine license requirements).

The provisions of this § 1001.10 amended December 31, 2010, effective January 1, 2011, 41 Pa.B. 41. Immediately preceding text appears at serial pages (328804) to (328805).

History

• Source: The provisions of this § 1001.

61 Pa. Code § 1001.11 Property Tax Relief Fund transfers.

The Department will determine the appropriate amount of moneys to be transferred into the Property Tax Relief Fund. The moneys will be transferred only after all amounts of funding have been met concerning the transfers of money to the other funds specified in section 1408 of the act (relating to transfers from State Gaming Fund) and other applicable laws.

History

• Source: The provisions of this § 1001.