Pennsylvania has made many changes that will impact companies doing business in the state. Namely, in the fall of 2016, Pennsylvania Governor Wolf signed House Bill 1198, making several tax law changes aimed at generating much-needed revenue for the state. Significant changes include expanding the sales tax base, enacting a tax amnesty program, changing tax credits and incentives, and changing the administrative processing of amended Pennsylvania tax returns.
Beginning August 1, 2016, Pennsylvania expanded their taxation of digital goods. Digital goods are defined as tangible personal property to include video, photographs, books, music, games, canned software, applications (apps), satellite radio service, and any other taxable tangible personal property digitally or electronically delivered, streamed or accessed, and including updates, support and maintenance. Taxpayers must evaluate whether to collect Pennsylvania sales tax on sales of digital goods and if Pennsylvania use tax is due on any taxable purchases of digital goods where no sales tax was collected by the vendor.
HB 1198 creates a 60-day tax amnesty program. The governor has announced amnesty will be available from April 21, 2017, to June 19, 2017. Program requirements can be viewed here www.revenue.pa.gov/taxamnesty/ and several highlights are provided below:
- All tax types are eligible.
- Delinquent taxes eligible for the program include: liabilities for returns not filed, liabilities not reported, underreported or not established, and delinquent no later than December 31, 2015.
- Taxpayers are required to pay 100 percent of all taxes due during the amnesty period, along with one half of the interest previously due and allows for a limited lookback to 2011 on certain unknown liabilities. Penalties will be waived for participating taxpayers.
- Taxpayers who decide to participate in this program remove themselves from future delinquent tax or amnesty programs.
- The program provides for a clawback provision for participating taxpayers and allows the state to collect all penalties and interest previous waived from the taxpayer if the taxpayer becomes delinquent in post-amnesty periods in the payment of taxes or filing of returns.
- Taxpayers who decide NOT to participate in this program may be assessed a 5% additional penalty on future assessments that were eligible for amnesty.
Shares Tax on Financial Institutions
H.B. 1198 also makes changes to the Bank and Trust Company Share Tax, which includes increasing the tax rate to 0.95%, adjustments to the receipts factor, changes to the nexus receipts threshold, and several changes to the tax calculations and options available to taxpayers.
Tax Credits and Incentives
Pennsylvania is amending and creating a multitude of tax credits and incentives. Taxpayers with operations in Pennsylvania should evaluate these credit changes for new opportunities or adjustments to currently used credits.
- Note that taxpayers located in a Keystone Opportunity Zone (including Expansion and Improvements Zones) may apply for a 10-year extension of their incentives upon meeting certain employee or capital investment requirements.
- R&D credit becomes permanent.
- The credits effected include taxpayers in industries such as computer data centers, coal energy, manufacturing, video game production, film, waterfront and rural development, as well as small breweries.
Amended Pennsylvania Tax Returns
Pennsylvania will now be required to provide written notice regarding their acceptance or disagreement with amended returns within one year from filing by the taxpayer. This change is effective for amended returns filed after December 31, 2016. If the taxpayer disagrees with the state’s disallowance of an amended return, the taxpayer may file a petition for review within 90 days or, if not eligible for a petition of review, the taxpayer may pay the tax, interest and penalties due and then request a refund.
If you have business activities in Pennsylvania, work closely with your tax advisor to assess these new developments for any opportunities or obligations for your company.
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.