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Senate of Pennsylvania
Session of 2013 - 2014 Regular Session


Posted: February 13, 2013 05:47 PM
From: Senator Patrick M. Browne
To: All Senate members
Subject: Business Privilege Tax
In the near future, I intend to re-introduce legislation which was Senate Bill 405 of the 2011-12 legislative session.

In its decision in V.L. Rendina, Inc. v. Harrisburg and the Harrisburg School District, 130 MAP 2005, 2007 Pa. LEXIS 2872 (Pa. Dec. 27, 2007), the Pennsylvania Supreme Court reversed its previous position that a municipality cannot tax an entity that lacks a permanent base of operations within its borders. As a result of this decision, ambiguity now exists with respect to a municipality’s ability to tax any and all taxpayers conducting any business within its borders despite the court’s prior distinction between a business “privilege” tax and a business “transaction” tax.

This legislation would amend the Local Tax Enabling Act to clarify this ambiguity and to make absolutely clear when a municipality may tax a company performing work within its borders. Specifically, this legislation will amend the Local Tax Enabling Act to provide that:
  • A mercantile or transaction tax on the privilege of conducting specific transactions or business within a taxing jurisdiction on the gross receipts from such transactions or business may be imposed by a local taxing jurisdiction wherein such business transactions took place. A taxpayer may exclude such gross receipts from any tax on or measured by such gross receipts which is imposed by a jurisdiction in which the taxpayer maintains a base of operations.
  • A business privilege tax on the privilege of doing business within a taxing jurisdiction on or measured by gross receipts may be imposed by the local taxing jurisdiction only if the privilege of doing business is exercised through a base of operations in the local taxing jurisdiction. If a taxpayer maintains more than one base of operations, the local taxing jurisdiction shall only be able to tax the gross receipts generated by the base of operations located within that local taxing jurisdiction.
  • The term ”base of operations” shall mean “an actual, physical and permanent place of business from which a taxpayer manages, directs and controls its business activities at that location and shall not include a structure which is utilized in a municipality for the purpose of overseeing construction for the duration of the construction project.”

Cosponsors of Senate Bill 405 of the 2011-12 session included Senators FOLMER and ALLOWAY.

Introduced as SB631