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Online Purchases Dominate Revenue Department Budget Hearing

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E-commerce has muddied the waters of an already complex tax code here in the Keystone State, and Revenue Secretary Dan Meuser did his best to clear things up during Appropriations Hearings on Tuesday. 

There’s some overlap between two big Department of Revenue priorities in 2012.  First, the state is compelling online retailers with a physical presence in PA to collect and remit sales taxes.  Pennsylvania consumers are also being encouraged to report the use tax that is due for online purchases when the sales tax is not collected. 

“We’re not interested in new taxes,” Secretary Meuser told the Senate Appropriations Committee.  “We’re about enforcing the laws that exist.”  Combined, the two initiatives are expected to add $49-million dollars to the state’s balance sheet. 

Online retailers have been given until September 1st to comply with state nexus laws, while line 25 on the PA-40 tax form will capture consumers’ attention this year.  It allows you to report your use taxes for all of those taxable items you may have bought online in 2012.  If you don’t have complete records of your purchases, the instructions even provide you with a table through which you can estimate the use tax that is due. 

Revenue Secretary Dan Meuser

Revenue Secretary Dan Meuser

For instance, a tax filer who made between $15,001 and $30,000 dollars in taxable income would pay an estimated $12 dollars in use tax (assuming they don’t live in Philadelphia or Allegheny counties, where the sales & use taxes are higher). 

“90% of people pay their taxes in a voluntary, compliant manner,” Meuser says.  “So our approach is aggressive education if you will, informing in many many ways.” He tells lawmakers that consumers’ self-reporting of use taxes is expected to account for $7-million of the $49-million dollar figure.

Lawmakers Say Eliminating Aircraft Tax Would Create Jobs

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The state house is expected to take up a bill soon that would eliminate a sales and use tax on aircraft sales, parts, maintenance and repair.  Supporters say Pennsylvania is  losing out to neighboring states, which have enacted some type of tax reform on fixed wing aircraft.

Representative Peter Daley (D-Fayette/Washington) says HB 1100 is not about a tax break for the wealthy; it’s about creating and retaining jobs. He says when a similar measure was passed for helicopters; a company in West Chester added more than 400 jobs.  He says if HB 1100 is enacted, it will open up the door for the aviation industry to set up shop at Pennsylvania airports with businesses that service aircraft, sell parts, perform routine inspections and even build and sell aircraft.

Representative Daley says similar measures have worked in Ohio and New York.

Craig Stephan, Vice President of Cheyenne Air Service in Washington PA, says the tax  has affected their operations. He says one of their main challenges has been in the avionics area.  He says they’ve had to cut back and lay off personnel from good, family sustaining jobs.  He says eliminating the tax would boost business.

John Graham III, President of the Pittsburgh Institute of Aeronautics, says 80% of their graduates go to jobs in other states.  He says it’s time to stop the brain drain. He says Pennsylvania should not be chasing talent away over a tax that generates so little revenue and could hinder business.

Representative Rick Mirabito (D-Lycoming) says they’re seeing a huge increase in the number of planes coming into the Williamsport Regional Airport due to the Marcellus Shale boom, and this bill could help create jobs. Right now, he says people are literally flying over the state to do their maintenance and repair in other places.

Representative Dan Moul (R-Adams/Franklin) is a private pilot, and he believes the tax is costing Pennsylvania business. He says when other states around us have a 6% advantage, before companies in this state even put out a bid for work, you can understand very quickly why the jobs are leaving Pennsylvania.

In December, the Pennsylvania Budget and Policy Center called the bill a luxury tax break that would create a subsidy for wealthy Pennsylvanians.  The center says similar aircraft industry tax breaks have failed to deliver on jobs in other states.