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PA Bulletin, Doc. No. 05-2314



[61 PA. CODE CHS. 31 AND 46]

Revision of Construction Contractors; Sales Tax Requirements

[35 Pa.B. 6767]

   The Department of Revenue (Department), under section 270 of the Tax Reform Code of 1971 (TRC) (72 P. S. § 7270), proposes to amend 61 Pa. Code §§ 31.11 and 31.12 (relating to definitions; and imposition of tax) and delete §§ 46.2, 46.3, 46.6 and 46.9, to read as set forth in Annex A.

Purpose of Proposed Rulemaking

   During normal review of its regulations, the Department determined that deleting §§ 46.2, 46.3, 46.6 and 46.9 in their entirety not only rids 61 Pa. Code of duplicated regulations, it also alleviates any possible confusion to those who read Chapters 31 and 46 (relating to imposition; and construction contractors). This proposed rulemaking amends § 31.11 by transferring to it a specific list of financial institution security equipment from § 46.9 (relating to financial institution security equipment) whose installation constitutes a construction activity. The list of financial institution security equipment is now being properly placed in § 31.11 under construction activities. In addition, § 31.12(b)(1) is amended to include language transferred from § 46.6 (relating to contractors renting equipment to others) and will be properly placed in Chapter 31.

Explanation of Regulatory Requirements

   When the Pennsylvania Sales and Use Tax regulations were originally adopted in 1972, 61 Pa. Code Part I, Subpart B., Article II (relating to sales and use tax), was divided into two divisions: regulations and rulings. At that time, regulations provided general guidance and rulings were issued to respond to specific questions. In 1993, the Department deleted the antiquated distinction between the two types of documents in Article II; however, the Department did not delete documents that had been classified as rulings even though the information contained in a ruling was also set forth in a regulation. In the case of § 46.9 (relating to financial institution security equipment), the rules governing all construction contracts including the sale, installation and repair of financial institution security equipment were already addressed in §§ 31.11--31.16 (relating to construction contractors).

   The Department wants to avoid the duplication of information and believes that the guidelines that financial institutions (banks) and contractors need to know on the timing of the taxation of security equipment is set forth as it is for all other contractors in §§ 31.11--31.16.

   Specifically, the sections to be deleted and their duplicated regulation are as follows:

Section Name Duplicated in
61 Pa. Code
46.2Construction of exempt public utility facilities § 32.34(a)(3)(ii)
46.3Construction contractor installing stained glass windows§ 31.12(c)
46.6 Contractors renting equipment to others§ 34.1
§ 31.12(b)(1) proposed amendment
46.9 Financial institution security equipment §§ 31.11--31.16 proposed amendments

Affected Parties

   Parties who read Chapters 31 and 46, specifically, financial institutions that enter into agreements for the purchase and installation of financial institution security equipment that involve construction activities, may be affected by this proposed rulemaking.

Fiscal Impact

   The Department has determined that the proposed rulemaking will have no fiscal impact on the Commonwealth.


   The proposed rulemaking will not create significant additional paperwork for the public or the Commonwealth.

Effectiveness/Sunset Date

   This proposed rulemaking will be effective upon final-form publication in the Pennsylvania Bulletin. The amendments are scheduled for review within 5 years of final publication. No sunset date has been assigned.

Contact Person

   Interested persons are invited to submit in writing any comments, suggestions or objections regarding the proposed amendments to Mary R. Sprunk, Office of Chief Counsel, PA Department of Revenue, Dept. 281061, Harrisburg, PA 17128-1061, within 30 days after the date of the publication of this notice in the Pennsylvania Bulletin.

Regulatory Review

   Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on December 2, 2005, the Department submitted a copy of this proposed rulemaking to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House Committee on Finance and the Senate Committee on Finance.

   The Committees may, at any time prior to the submittal of the final-form rulemaking, convey to the Department and IRRC, their comments, recommendations and objections to the proposed rulemaking. IRRC may, within 30 days of the close of the public comment period, submit to the Department and Committees any comments, recommendations and objections to the proposed rulemaking. The notification shall specify the regulatory review criteria that have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review of objections raised, prior to final-form publication of the amendments, by the Department, the General Assembly and the Governor.


   Fiscal Note: 15-430. No fiscal impact; (8) recommends adoption.

Annex A







§ 31.11. Definitions.

   The following words and terms, when used in this section and §§ 31.12--31.16, have the following meanings, unless the context clearly indicates otherwise:

*      *      *      *      *

   Construction activities--An activity resulting from an agreement or contract under which a contractor attaches or affixes tangible personal property to real estate so as to become a permanent part thereof. Construction activities also include the service of repairing real estate even though tangible personal property is not transferred by a contractor in conjunction with the repairs which he makes. In the absence of satisfactory evidence to the contrary, the following items are presumed to become a permanent part of real estate:

*      *      *      *      *

Financial institution security equipment, including:

   Accelerated cash terminals or cash guards

   Access control systems

   After-hour depositories

   Alarm systems (burglar, police, fire and the like)

   Automatic banking systems

   Bandit reserve barriers

   Bulletproof windows

   Customer convenience counters

   Drive-in windows (bay, flush, counter and the    like)

   Fire doors

   Quick depositories

   Receiving lockers, heads or chests


   Safety deposit boxes

   Surveillance and security systems

   Television banking systems

   Teller rails and lockers


   Vault doors (automatic, manual, emergency and    the like)

   Vault ventilators

*      *      *      *      *

§ 31.12. Imposition of tax.

*      *      *      *      *

   (b)  Sales activities. Imposition of tax on sales activities shall conform with the following:

   (1)  A contractor who, in addition to performing construction activities, makes sales at retail, as defined by the TRC, of tangible personal property is deemed to be a vendor and is required to register with the Department for the collection and remission of tax upon the sales which he makes. Construction contractors renting equipment to other contractors shall apply for a license under the act and collect tax with respect to these rentals.

*      *      *      *      *


   (Editor's Note: As part of this proposed rulemaking, the Department is proposing to delete the text of §§ 46.2, 46.3, 46.6 and 46.9, 61 Pa. Code pages 46-1, 46-3 and 46-5--46-8, serial pages (265805) to (265807) and (265809) to (265812).)

§ 46.2. (Reserved).

§ 46.3. (Reserved).

§ 46.6. (Reserved).

§ 46.9. (Reserved).

[Pa.B. Doc. No. 05-2314. Filed for public inspection December 16, 2005, 9:00 a.m.]

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