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09/23/2019 03:23 AM
Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20190&cosponId=27038
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House of Representatives
Session of 2019 - 2020 Regular Session

MEMORANDUM

Posted: December 14, 2018 09:33 AM
From: Representative Tarah Toohil
To: All House members
Subject: Taxation of Traffic Signal Foundations, Poles and Mast Arms
 
In the near future, I will be introducing legislation to clarify language in the tax code with regard to traffic signal foundations, poles and mast arms. Since its enactment of Act 45 in 1998, the Pennsylvania Department of Revenue (DOR) consistently interpreted that the exemption for traffic signals to include all the components parts of a traffic signal; the traffic signal foundations, poles and mast arms. Only the parts affixed to the ground; the bolts, foundation or wiring were subject Pennsylvania’s sales and use tax. Around 2011, the Pennsylvania Department of Revenue (DOR), through their audit process, changed this interpretation. In audits of electrical contractors who service the transportation industry, DOR began holding the contractors liable for the collection of sales taxes on the signal’s foundations, the poles and mast arms. There was no formal policy change, no published notice issued by the DOR. The only way contractors knew of their new sales tax liability was if they were audited. Contractors who had not been audited, the overwhelming majority of the industry, continue to bid projects without the sales tax, while audited contractors now apply the sales tax.

DOR’s actions have caused an unlevel playing field in the marketplace. Contractors who have not been audited, are winning projects because their bids are often between 5%-6% less then the contractors who have been audited and are applying Pennsylvania sales and use tax. The audited contractors realize that they will some day be held liable to collect the sales and use tax on the whole traffic signal apparatus, so their bids are increased by the 6% sales tax charge. The only way to change this situation and correct the imbalance is to add specific language to the sales tax code restoring the traditional definition of a traffic signal.

Please join me in co-sponsoring this corrective language and creating a more level the playing field for all electrical contractors. My legislation will add the terms “the traffic signal foundations, poles and mast arms” to the Act 45 sales tax exemption for building machinery and equipment. The National Electrical Contractors Association (NECA) supports this legislation.

Thank you for your consideration.



Introduced as HB304