PRINTER'S NO. 341
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
397
Session of
2023
INTRODUCED BY PHILLIPS-HILL, PENNYCUICK, BARTOLOTTA AND STEFANO,
FEBRUARY 21, 2023
REFERRED TO FINANCE, FEBRUARY 21, 2023
AN ACT
Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
act relating to tax reform and State taxation by codifying
and enumerating certain subjects of taxation and imposing
taxes thereon; providing procedures for the payment,
collection, administration and enforcement thereof; providing
for tax credits in certain cases; conferring powers and
imposing duties upon the Department of Revenue, certain
employers, fiduciaries, individuals, persons, corporations
and other entities; prescribing crimes, offenses and
penalties," in sales and use tax, further providing for
definitions.
The General Assembly finds and declares as follows:
(1) In 2003, the General Assembly and the Governor
expanded the 5% gross receipts tax to mobile
telecommunications service which makes mobile
telecommunications service subject to both the 6% sales tax
and the 5% gross receipts tax.
(2) The main policy argument for imposing the gross
receipts tax on wireless service was to create parity with
landline phone service which was already subject to the tax.
(3) For this reason, the legislation expanding the tax
to wireless telecommunications services also included a
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provision that provided a sales tax exemption for
"...machinery and equipment and parts therefor and supplies
to be used or consumed by the purchaser directly in the
operations of...the producing of mobile telecommunications
service."
(4) The General Assembly intended for the sales tax
exemption to apply to all equipment, parts and supplies used
to build and maintain wireless networks since landline
companies enjoyed the same exemption but wireless providers
did not.
(5) The new result of these two provisions was a
significant increase in revenue to the Commonwealth, and in
the 18 years that this tax has been imposed on the wireless
industry, the Commonwealth has collected approximately
$4,000,000,000 in gross receipts taxes on wireless services.
(6) At the time, the first iPhone had not even been sold
and wireless connectivity was almost exclusively voice
communications.
(7) Nobody could have predicted the dramatic growth in
wireless service utilization, especially wireless data
services and this rapid growth in demand has led wireless
companies to make significant network investments in order to
keep up with customer demand.
(8) This proposed language clarifies that the sales tax
exemption for wireless network equipment applies to network
investment in the equipment that provides wireless voice and
data services, as the original legislative intent of the
provision clearly did not make a distinction between these
types of wireless services.
(9) This ensures that wireless infrastructure and
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broadband deployment across Pennsylvania will not be slowed
by new taxes on that investment.
(10) That the amendment of section 201(d)(17) of the act
of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
of 1971, is intended to clarify existing law and may not be
construed to change existing law.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 201(d)(17) of the act of March 4, 1971
(P.L.6, No.2), known as the Tax Reform Code of 1971, is amended
to read:
Section 201. Definitions.--The following words, terms and
phrases when used in this Article II shall have the meaning
ascribed to them in this section, except where the context
clearly indicates a different meaning:
* * *
(d) "Processing." The performance of the following
activities when engaged in as a business enterprise:
* * *
(17) The producing of Internet access, as defined in section
1105(5) of the Internet Tax Freedom Act (47 U.S.C. ยง 151 note)
as of December 23, 2003, or mobile telecommunications services.
* * *
Section 2. This act shall take effect in 60 days.
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