PROPOSED RULEMAKING
DEPARTMENT OF REVENUE
[61 PA. CODE CHS. 7, 31--34, 42, 44--47 AND 58]
Sales and Use Tax
[28 Pa.B. 366] The Department of Revenue (Department), under authority contained in section 270 of the Tax Reform Code of 1971 (TRC) (72 P. S. § 7270), proposes amendments to Chapters 7, 31--34, 42, 44--47 and 58, to read as set forth in Annex A.
Section 270(a) of the TRC specifically provides that the Department is authorized and empowered to prescribe, adopt, promulgate and enforce, rules and regulations consistent with Article II of the TRC (72 P. S. §§ 7201--7282) (Tax for Education) relating to any matter or thing pertaining to the administration and enforcement of Article II and the collection of taxes, penalties and interest imposed by Article II.
Purpose
The Department is proposing these amendments in part, as the result of a comprehensive review of Sales and Use Tax regulations in light of Legislative changes from 1991 to the present.
Explanation of Regulatory Requirements
Section 7.3 (relating to petitions) is proposed to be amended in a number of areas. Subsection (a) removes the requirement that petitions be filed with the Secretary of the Board of Appeals, because this position no longer exists. In addition, the Board's address has been updated for petitions filed by means of the United States Postal Service; for petitions being filed through other delivery services, the regulations will require delivery to specified Board locations.
Finally, § 7.3(a) is proposed to be amended as a result of the act of June 16, 1994 (P. L. 279, No. 48) (72 P. S. § 10006) to provide that petitions are deemed to be timely filed when postmarked by the United States Postal Service or presented to Departmental personnel on or before the petition due date. The burden is on the taxpayer to prove that the petition was timely postmarked by the United States Postal Service or timely presented to the Department. The statutory period within which the Board is required to render a decision on petitions deemed timely filed by reason of being timely postmarked by the United States Postal Service, or timely presented to Department personnel other than personnel at the Board, will begin to run on the date that the petition is actually received by the Board.
Section § 7.6(b) (relating to decision and order) is proposed to be amended to allow a final decision of the Board to be signed by a designee of a member of the Board.
The Department is proposing to add § 31.4(a)(3) (relating to rentals or leases of tangible personal property). Subsection (a) sets forth general guidelines regarding imposition. Taking into consideration the presumption set forth in paragraph (1), the new paragraph (3) clarifies that, if a person leases or rents equipment together with the services of an operator to another person, who is given the right to use or direct the use of the equipment, the transaction is subject to tax. The paragraph goes on to provide examples of transactions subject to tax. Subsection (b)(1) clarifies the Department's policy with regard to the taxability of property withdrawn from inventory.
The section title for § 31.5 (relating to persons rendering taxable services) is proposed to be amended to clarify that the section applies to tangible personal property and not the various services that became taxable in 1991. ''Extended warranty'' was added to the list of designations that an agreement may have when subject to tax. This addition was done to clarify the Department's policy. Section 31.5 was also expanded generally with text and examples to better guide the taxpayer.
Section 31.7(c)(1) (relating to use tax) generally provides that, with respect to property purchased 6 months or more prior to its first taxable use in this Commonwealth, the taxpayer may elect to pay the tax on the fair market value of the property at the time of its first use in this Commonwealth or on its original purchase price. To conform this paragraph to 1991 amendments to section 201(g)(5) of the TRC (72 P. S. § 7201(g)(5)), the Department is proposing to amend the paragraph to provide that the election to use the alternative base shall be made by filing a return within 6 months of the first taxable use. Prior to the 1991 amendments, the deadline had been within 1 year from the date the return for the taxable use was due.
Section 31.26 (relating to financial institutions) currently sets forth the sales tax obligations for financial institutions. Subsection (a) provides that a financial institution shall pay tax at the time of purchase of tangible property to be used by it in the conduct of its business. Subsection (b) provides two alternatives for financial institutions selling personalized checks, coin banks and other tangible personal property subject to tax: (1) obtain a license and collect the tax from its customers, remitting the tax collected along with monthly returns; or (2) elect not to register and file returns, provided that the financial institution pay tax to its suppliers based upon the price which the merchandise is to be sold by the financial institution to its customers and reimburse itself for the tax so paid by collecting the tax from its customers. Because the regulation could be construed to provide an unfair tax advantage for financial institutions, the Department is proposing to delete § 31.26 in its entirety.
The definitions in § 32.1 (relating to definitions) apply to Chapter 32 (relating to exemptions), unless the context clearly indicates otherwise. Section 32.1 is proposed to be amended to delete the definition of ''isolated sales'' because the definition is only applicable to § 32.21 (relating to charitable, volunteer firemen's and religious organizations, and nonprofit educational institutions), and a definition of ''isolated sales'' is being added to § 32.21.
To reflect the 1991 amendment to the definition of ''manufacture'' in section 201(c)(6) of the TRC, the Department is proposing to add the definition of ''remanufacturing motor vehicle parts for wholesale distribution'' to § 32.1. A 1994 amendment to the definition of ''manufacture'' in section 201(c)(7) of the TRC has prompted the addition of the definition of ''remanufacturing selected items of military equipment'' to § 32.1.
The proposed revisions to § 32.2 (relating to exemption certificates) clarify the Department's policy with regard to exemption certificates and delete references to out-of-date forms. Subsection (b)(2)(iii) is proposed to be rewritten to clarify that the exemption certificate shall be properly completed and that the Department will not recognize it as such if it is not in the possession of the seller or lessor within 60 days after the date of the transaction. Subsection (d)(2) is proposed to be amended to delete outdated instructions and form references and to add language consistent with the current policy and forms.
The current language in § 32.3 (relating to sales for resale) is proposed to be deleted and replaced with a section entitled ''resale exemption.'' The proposed new language clarifies this area (which has been the source of confusion) and provides more detail and direction with regard to the resale exemption.
Consistent with confining references to ''isolated sales'' to § 32.21, § 32.4 (relating to isolated sales) is proposed to be amended to remove paragraph (6) and to renumber the remaining paragraphs accordingly.
Section 32.5 (relating to multistate sales) is proposed to be amended in a number of areas. As a result of 1991 Legislation, the sale, lease or service of tangible personal property, or the performance of various services enumerated in section 201(k)(11)--(18) of the TRC is now subject to tax. Subsection (a) has been amended and subsection (b)(2) has been added to reflect this statutory change. Subsection (b)(1) is proposed to be amended to properly refer to the United States Postal Service and to clarify that an interstate carrier may be engaged by either the vendor or purchaser without causing the transaction to become subject to tax. The two examples set forth in paragraph (1) are proposed to be deleted and replaced with new examples to modify the amendments in paragraph (1). Subsections (c)--(f) are proposed to be amended to clarify that these subsections address both tangible personal property and taxable services.
The proposed amendment to § 32.21 (relating to charitable, volunteer firemen's and religious organizations, and nonprofit educational institutions) adds a new subsection (a) for definitions. This subsection contains the definition of ''isolated sales'' as it applies to this section. As a result of creating a subsection devoted to definitions, the current subsections have been relettered accordingly. Within the new subsection (d) pertaining to sales by exempt organizations, the new subparagraph (ii) provides examples of nontaxable and taxable sales by exempt organizations.
To clarify two areas where the Department has noted confusion among taxpayers, § 32.22 (relating to sales to the United States Government or within areas subject to the jurisdiction of the Federal Government) is proposed to be amended. The proposed subsection (a) treats sales of tangible personal property to the United States Postal Service as sales to the United States Government. A new subsection (b) provides that certain sales to or use of tangible personal property for or on behalf of the United States Government are subject to tax and that building maintenance services sold to or used by the United States Government are not subject to tax. The existing subsections have been relettered accordingly.
As a result of 1991 Legislation, the performance of various services enumerated in section 201(k)(11)--(18) of the TRC is now subject to tax. Sections 32.31--32.35 specify the various services that are subject to tax when not directly used in dairying; manufacturing; processing; farming; public utilities or mining. In addition, language is proposed to be added to §§ 32.31 and 32.33 (relating to dairying; and farming) to explain that the farming and dairying exclusion applies to disinfecting or pest control services.
Section 32.36 (relating to printing and related businesses) proposes to add a new subsection (b) to address the taxability of the various services described in § 32.32(a)(3) (relating to manufacturing; processing) when they are not directly used in printing operations. This new language is also being added to § 32.37 (relating to photographers and photofinishers) in subsection (b)(2)(i). The current § 32.36(b) will be relettered accordingly.
To clarify the existing definition of ''credit sales'' forth in § 33.1 (relating to definitions), the Department is proposing amendments to the definitions to provide that a credit sale is a sale in which the purchaser pays all or part of the total purchase price after the date of purchase. Because of its use within the chapter and to remove any ambiguity, the definition of ''sale'' is proposed to be added to § 33.1.
When § 33.2 (relating to scope) was amended in 1994, the Department changed the name of the section to scope. After reviewing this change, the Department has concluded that the original name of the section, ''purchase price'' is more appropriate. Therefore, this proposal changes the section name to ''purchase price.'' To correct an error in the 1994 publication, § 32.2(b)(5) is proposed to be amended to provide that a gratuity is a voluntary payment by the purchaser or a reasonable mandatory charge by the vendor in lieu of the voluntary payment, that is billed to the purchaser and distributed directly to the vendor's employes for services rendered in connection with the purchase of food or beverages or hotel or motel accommodations. In addition, a new paragraph (6) is proposed to be added to categorize as retail excise taxes various new taxes now in existence within this Commonwealth.
Subsection (a) of § 33.4 (relating to credit and lay-away sales) is proposed to be amended to add three examples that explain when tax shall be remitted to the Department. The Department felt these examples would clarify the section and reduce confusion among some taxpayers.
As a result of Suburban Cable TV Co. v. Commonwealth, 570 A.2d 601 (Pa. Cmwlth. 1990) aff'd per curiam 527 Pa. 364, 591 A.2d 1054 (1991), the definition of ''licensed commercial or educational station'' is amended in § 42.1 (relating to definitions) to include a registered cable television company operated under the authority of the Federal Communications Commission.
Section 42.3 (relating to property) is proposed to be amended to conform the section to terminology utilized in the cable industry.
Minor revisions are proposed to §§ 44.2 and 45.1 (relating to cooperative agricultural associations; and exemption of electric cooperative corporations) to incorporate the 1991 Legislation that provides for the taxation of various services enumerated in section 201(k)(11)--(18) of the TRC.
Consistent with the 1991 and 1994 statutory amendments in sections 201(aa) and 204(51) of the TRC (72 P. S. §§ 7201(aa) and 7204(51)), § 46.9 (relating to financial institution security equipment) is proposed to be amended to clarify that building maintenance and building repair services performed on financial institution security equipment are subject to tax.
Section § 47.18(a) (relating to totalizator equipment) is proposed to be amended by deleting the term ''resident'' because it was determined to be unnecessary and to more appropriately define the term ''totalizator company.'' The section is also being amended to clarify that when the term ''corporation'' is used in this section, it is referring to a racing corporation. In response to the repeal of taxation of computer services in Act 1997-7, the section is also being amended to clarify that the nontaxable service referenced in (b)(1) and (2) is a nontaxable computer service.
Finally, § 58.13 (relating to carpeting and other floor coverings) is proposed to be amended to reflect the taxation of various services enumerated in sections 201(k)(11)--(18) of the TRC. Additionally, subsection (a) is deemed unnecessary and is proposed to be deleted. The remaining subsections are relettered accordingly.
Affected Parties
Taxpayers obligated to collect or remit Sales and Use Tax and persons and businesses filing petitions with the Board of Appeals may be affected by the proposed amendments.
Fiscal Impact
The Department has determined that the proposed amendments will have no significant fiscal impact on the Commonwealth.
Paperwork
The proposed amendments will not generate additional paperwork for the public or the Commonwealth.
Effectiveness/Sunset Date
The proposed amendments will become effective upon final publication in the Pennsylvania Bulletin. These regulations 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 comments, suggestions or objections regarding the proposed amendments to Anita M. Doucette, 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 January 13, 1998, the Department submitted a copy of these proposed amendments to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House and Senate Committees on Finance. In addition to submitting the proposed amendments, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation.'' A copy of this material is available to the public upon request.
If IRRC has objections to any portion of the proposed amendments, it will notify the Department within 10 days of the close of the Committees' review period. The notification shall specify the regulatory review criteria that have not been met by the portion of the proposed amendments to which an objection is made. The Regulatory Review Act specifies detailed procedures for review, prior to final publication of the amendments, by the Department, the General Assembly and the Governor of objections raised.
(Editor's Note: A proposal to amend § 32.21 remains outstanding at 27 Pa.B. 6469 (December 13, 1997)).
ROBERT A. JUDGE, Sr.,
SecretaryFiscal Note: 15-386. No fiscal impact; (8) recommends adoption.
Annex A
TITLE 61. REVENUE
PART I. DEPARTMENT OF REVENUE
Subpart A. GENERAL PROVISIONS
CHAPTER 7. BOARD OF APPEALS § 7.3. Petitions.
(a) Filing. Petitions [should be filed with the Secretary of the Board of Appeals, Post Office Box 8480, Harrisburg, Pennsylvania 17105] sent through the United States Postal Service shall be addressed to the Pennsylvania Department of Revenue, Board of Appeals, Department 281021, Harrisburg, PA 17128-1021. Petitions sent through all other delivery services shall be addressed to the Pennsylvania Department of Revenue, Board of Appeals, 4th and Walnut Streets, Strawberry Square, 10th Floor, Harrisburg, PA 17120. Petitions should be filed within the time limits prescribed by statute or this title--see § 7.4 (relating to filing of special petitions). Petitions are filed on the date received by the Board. Written petitions received by the Board after the date prescribed by statute or this title, but either postmarked by the United States Postal Service or presented to other Department personnel [prior to or on the date prescribed by statute or this title] on or before the petition due date, are deemed to be timely filed [as of the date of receipt by the other Department personnel]. The burden is on the taxpayer to present evidence sufficient to prove that the petition was timely postmarked by the United States Postal Service or timely presented to the Department. When a petition is deemed timely filed by reason of being timely postmarked by the United States Postal Service or timely presented to Department personnel other than personnel at the Board, the statutory period in which the Board is required to render a decision begins to run on the date that the petition is actually received by the Board.
* * * * * § 7.6. Decision and order.
* * * * * (b) The Board's final decision and order will be in writing and signed by one or more members of the Board or a member's designee, except that, in the case of taxes subject to audit and approval by the Department of the Auditor General, the final decision and order is subject to the approval of the Department of the Auditor General.
* * * * *
CHAPTER 31 IMPOSITION
GENERAL PROVISIONS § 31.4. Rentals or leases of tangible personal property.
(a) Imposition. Transfers of possession or of custody of tangible personal property for consideration, by whatever means effected and irrespective of the terms employed by the parties to describe the transaction, are taxable. The rental, lease or license to use or consume tangible personal property is subject to tax. For example, when a machine shop grants to another the right to use its machinery on weekends for a fee, the transaction is taxable. Similarly, the grant of a right to use an electronic computer for a fee is subject to tax. If a transferee fails to pay the tax to the transferor in connection with a taxable transaction, the Commonwealth may collect the tax from either the transferor or transferee.
* * * * * (3) If a person leases or rents equipment together with the services of an operator to another person, who is given the right to use or direct the use of the equipment, the transaction is subject to tax. For example, when a company furnishes a motor vehicle with a driver to a customer on a time, mileage or load basis, the transaction is subject to tax if the customer has the right to direct where the vehicle is driven or to otherwise control its use. Similarly, when an owner of a crane furnishes a crane with an operator to a construction contractor, although the technical operation and maintenance of the crane are under the control of the operator, the transaction is subject to tax because the contractor has the right to direct the use of the crane.
(b) Exemptions. Persons who purchase tangible personal property for the predominant purpose of renting or leasing it to others are entitled to claim the resale exemption. Purchases of repair parts or otherwise taxable services for the property are similarly entitled to exemption. Purchases of equipment or supplies used in conjunction with the service or care of rental property are subject to tax [since] because the materials are not considered to be resold.
(1) [If a purchaser uses or consumes property purchased for resale or disposes of property purchased for resale in a manner other than for resale, the purchaser becomes the ultimate consumer or user of the property and shall pay use tax with respect to the taxable use. When the property is used or consumed in a manner other than for resale, the purchaser shall also pay use tax on otherwise taxable services which were performed on the property if the purchaser purchased the services exempt from tax by claiming the resale exemption.] When property is withdrawn from inventory, it will be taxed as follows:
(i) Property permanently withdrawn from inventory is subject to Use Tax upon the prevailing market price of the property at the time it is withdrawn from inventory.
(ii) Property temporarily withdrawn from inventory is subject to Use Tax upon the fair rental value of the property during the period of use. For purposes of this subparagraph, the term ''fair rental value'' means the amount which would be charged for the property in the open market for a similar period of time and place. When the actual fair rental value is unknown, the Department will recognize 3% of the purchase price as a monthly fair rental value of the property if the purchase price is the fair market value of the property.
* * * * * § 31.5. Persons rendering taxable services to tangible personal property.
* * * * * (e) Application of tax to service or maintenance agreement. [Persons] A person who [enter] enters into a ''service'' [agreements] agreement to render a taxable service [are] to tangible personal property is making [''sales] a ''sale at retail'' and shall collect sales tax [on the entire charge made under the agreement] in accordance with this section. The fact that the agreement may be designated ''Inspection,'' ''Maintenance,'' ''Extended Warranty'' or by any other name does not change this rule if, under the terms of the agreement, the persons [shall be] are obligated to render a taxable service upon the tangible personal property of their customers. For example, when a firm enters into [agreements] an agreement with a serviceman to have its office equipment inspected, repaired and cleaned, the entire charge, without any deduction for separately stated items, is subject to tax.
(1) If payment for repairs made under the agreement is made by the obligor of the agreement directly to the person making the repairs, the purchaser of the agreement shall pay tax on the purchase price of the agreement and on the amount of each deductible paid under to the agreement.
(2) If under the agreement the obligor of the agreement reimburses the purchaser for the cost of repairs paid for by the purchaser, the purchase price of the agreement is not subject to tax.
(3) Examples are as follows:
(i) ''L'' law firm purchases an extended service contract for its new photocopier from ''M.'' The cost of the contract is $200. The contract provides that ''M'' pays the person making the repairs less a $50 deductible, which ''L'' pays. Under the contract, repairs of $125 are made. At the time ''L'' purchases the extended service contract, ''L'' shall pay tax on the $200 purchase price of the contract and, at the time the $125 repairs are made, ''L'' shall pay tax on the $50 deductible paid in connection with the repairs.
(ii) Mike purchases a new leaf blower and a maintenance agreement from a retail store. The cost of the maintenance agreement is $15. The maintenance agreement provides that Mike pays for the cost of repairs and is then reimbursed. Mike has $36 of repairs made to the leaf blower. At the time the repairs are purchased, Mike shall pay tax on $36 paid for repairs but the $15 purchase price of the maintenance agreement is not subject to tax.
(iii) Sherry purchases an extended warranty for her new automobile. The cost of the warranty is $690. Under the warranty, the seller of the warranty pays directly the person making the repairs less a $100 deductible that Sherry pays. At the time Sherry purchases the warranty, she shall pay tax on the $690 purchase price and, at the time she pays the deductible in connection with repairs made under the warranty, she shall pay tax on the deductible.
* * * * * § 31.7. Use [tax] Tax.
* * * * * (c) Alternate imposition. Use [tax] Tax is generally imposed upon the original purchase price of tangible personal property. Exceptions to this general rule are as follows:
(1) Purchases made 6 months or longer prior to first taxable use--fair market value. For property purchased 6 months or more prior to its first taxable use in this Commonwealth, the taxpayer may elect to pay the tax on the fair market value of the property at the time of its first use in [the] this Commonwealth rather than on its original purchase price. The fair market value is the prevailing market price of similar personal property at the time and place of its first taxable use. The election to use this alternative base shall be made [within 1 year from the date the return for the taxable use is due] by filing [notice with the Bureau on Form PA-3] a return within 6 months of the first taxable use and by paying the proper tax together with any accrued penalties and interest due.
* * * * * § 31.26. [Financial institutions] (Reserved).
[(a) Purchases by financial institutions. A financial institution shall pay the tax at the time of purchase of all tangible personal property to be used by it in the conduct of its business. This includes all tangible personal property gratuitously furnished by the financial institutions to its customers, such as passbooks, check books, deposit slip books or similar items.
(b) Sales by financial institutions. A financial institution selling personalized check books, coin banks or other items of tangible personal property subject to tax may do one of the following:
(1) Obtain a license, collect the tax from its customers and remit the tax collected along with its monthly returns.
(2) Elect not to register and file returns, if in the latter case it pays tax to its suppliers based upon the price at which the merchandise is to be sold by the financial institution to its customers and reimburse itself for the tax so paid by collecting the tax from its customers.]
CHAPTER 32. EXEMPTIONS
GENERAL PROVISIONS § 32.1. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
* * * * * [Isolated sales--Sales of taxable property or services which:
(1) Occur no more frequently than three times nor for more than a total of 7 days in any 1-calendar year.
(2) Are not made from a location at which other businesses are making similar sales of the same taxable property or services upon which tax is required to be collected.]
Manufacturing--The performance as a business of an integrated series of operations which places personal property in a form, composition or character different from that in which it was acquired whether for sale or use by the manufacturer. The change in form, composition or character shall result in a different product having a distinctive name, character and use. Operations such as compounding, fabricating or processing are illustrative of the types of [operation which] operations that may result in such a change although any operation [which has that result] that results in such a change may be manufacturing. Mere changes in chemical composition or slight changes in physical properties are not sufficient. For example, the C Company, as its business operation, takes coffee beans and thereafter, by mechanical and hand labor, cleans [them] the beans, removes the outer skins and roasts the beans. The roasted coffee, resulting from the C Company's activities, is not a manufactured product, notwithstanding the fact that there has been a change in the color, weight and size of [bean] the beans. The term includes remanufacturing motor vehicle parts for wholesale distribution and remanufacturing selected items of military equipment.
* * * * * Remanufacturing motor vehicle parts for wholesale distribution--The remanufacture for wholesale distribution of motor vehicle parts from used parts acquired in bulk by a remanufacturer that uses an assembly line process involving the complete disassembly of the parts and the integration of the components thereof with other used or new components. The term includes the salvaging, recycling or reclaiming of used parts by the remanufacturer.
Remanufacturing selected items of military equipment--The remanufacture or retrofit of aircraft, armored vehicles or other defense-related vehicles having a finished value of at least $50,000 using a process that involves the disassembly of the aircraft, vehicles, parts or components, including electric or electronic components; the integration of those parts and components with other used or new parts or components, including the salvaging, recycling or reclaiming of the used parts or components; and the assembly of the new or used aircraft, vehicles, parts or components. For purposes of this definition, the following terms or phrases have the following meanings:
(i) ''Aircraft'' means fixed wing aircraft, helicopters, powered aircraft, tilt-rotor or tilt-wing aircraft, unmanned aircraft and gliders.
(ii) ''Armored vehicles'' means tanks, armed personnel carriers and all other armed track or semi-track vehicles.
(iii) ''Other defense-related vehicles'' means trucks, truck tractors, trailers, jeeps and other utility vehicles, including any unmanned vehicles.
* * * * * § 32.2. Exemption certificates.
* * * * * (b) Relief from tax liability. A seller or lessor who accepts in good faith an exemption certificate which discloses a proper basis for exemption upon its face is relieved of liability for collection or payment of tax upon transactions covered by the certificate.
* * * * * (2) Acceptance in good faith. An exemption certificate to be accepted in good faith shall also meet the following requirements:
* * * * * (iii) [The] A properly completed certificate shall be in the physical possession of the seller or lessor, and available for Departmental inspection, on or before the 60th day following the date of the sale or lease to which the certificate relates. [Where a certificate is not made available for Departmental inspection on or before that time, the seller or lessor shall prove to the satisfaction of the Department, by means of evidence other than an exemption certificate, that the sale or lease in question is, in fact, exempt. In the absence of proof the transaction will be deemed taxable and assessed as such.] If the purchaser claims the resale exemption, a properly completed certificate shall contain the purchaser's sales tax license number or reasonable explanation as to why the purchaser is not required to have a sales tax license number. The Department will not recognize a properly completed exemption certificate that is not in the possession of the seller or lessor within 60 days after the date of the transaction. A vendor of taxable property or services who fails to obtain a properly completed certificate shall have the burden of establishing that the sale is exempt from tax.
* * * * * (d) Forms of certificates. The following exemption certificate forms and instructions have been promulgated by the Department:
* * * * * (2) Forms for purchase of motor vehicles. [The following form is designed for purchase of motor vehicles, and is not valid for purposes other than that for which it is designed: Form REV-191 Vehicles Sales and Use Tax Return. This form shall be used for claims of exemption upon the purchase or lease of a motor vehicle, trailer, semitrailer or tractor which is required by law to be registered with the Bureau of Motor Vehicles, and shall accompany the application for title.] The Department of Transportation forms MV-1 and MV-4ST shall be used in connection with the payment of tax or the claim for exemption upon the purchase or use of a motor vehicle, trailer, semitrailer, tractor or motorcycle requiring title or registration for use on the highway.
§ 32.3. [Sales for resale] Resale exemption.
(a) [Sales for resale exempt. A transfer for consideration of the ownership, custody or possession of tangible personal property or the rendition of taxable services for the purpose of resale is exempt from tax. Transfer for the purpose of resale shall include the following:
(1) The transfer of tangible personal property or rendition of taxable services on, or purchase of, repair parts for property which is:
(i) To be sold, rented or leased in the regular course of business. However, the sale of malt or brewed beverages or liquor to a person who is a retail dispenser or a holder of a retail liquor license under The Liquor Code (47 P. S. §§ 1-101--9-902), does not qualify for the resale exemption.
(ii) To be physically incorporated as ingredient or constituent into other personal property which is to be sold in the regular course of business or transported in interstate commerce to a destination outside of this Commonwealth.
(2) Personal property purchased or having a situs within this Commonwealth solely for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into personal property and thereafter transported outside of this Commonwealth for use exclusively outside this Commonwealth.
(b) Presumption of taxability. Every sale of tangible personal property is presumed to be at retail and therefore subject to tax. A purchaser claiming the resale exemption shall therefore establish that the specific property purchased is to be resold. A purchaser who uses or consumes property purchased for resale or who disposes of property purchased for resale in a manner other than by resale becomes the ultimate consumer or user of the property and shall pay a use tax with respect to the taxable use.]
Resale exemption. The following transactions qualify for a resale exemption:
(1) The transfer of ownership, custody or possession of, including the grant of a license to use, tangible personal property or taxable services that is sold, rented or leased in the regular course of the purchaser's business.
(2) The transfer of ownership of tangible personal property that is physically incorporated as an ingredient or constituent of other tangible personal property that is sold in the regular course of the purchaser's business.
(3) The obtaining of the following taxable services performed upon tangible personal property that is sold, rented or leased in the regular course of the purchaser's business:
(i) The service of printing or imprinting tangible personal property furnished either directly or indirectly by the purchaser.
(ii) The service of washing, cleaning, waxing, polishing or lubricating of motor vehicles.
(iii) Inspecting of motor vehicles under the mandatory requirements of 75 Pa.C.S. §§ 101--9805 (relating to the Vehicle Code).
(iv) The service of repairing, altering, mending, pressing, fitting, dyeing, laundering, dry cleaning or cleaning tangible personal property other than wearing apparel or shoes.
(v) The service of applying or installing tangible personal property as a repair or replacement part of other tangible personal property other than wearing apparel or shoes.
(b) Special resale exemption. The following transactions qualify for a special resale exemption:
(1) The obtaining of the following taxable services performed upon tangible personal property that is transported in interstate commerce to a destination outside this Commonwealth.
(i) The service of printing or imprinting tangible personal property furnished either directly or indirectly by the purchaser.
(ii) The service of washing, cleaning, waxing, polishing or lubricating of motor vehicles.
(iii) Inspecting of motor vehicles under the mandatory requirements of 75 Pa.C.S. §§ 101--9805.
(iv) The service of repairing, altering, mending, pressing, fitting, dyeing, laundering, dry cleaning or cleaning tangible personal property other than wearing apparel or shoes.
(v) The service of applying or installing tangible personal property as a repair or replacement part of other tangible personal property other than wearing apparel or shoes.
(2) The transfer of ownership of tangible personal property purchased solely for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into tangible personal property within this Commonwealth and thereafter transported outside this Commonwealth.
* * * * * § 32.4. Isolated sales.
* * * * * (b) Transactions which are not isolated sales. The following are examples of transactions which [shall] will not be considered isolated sales:
* * * * * (6) [The sale of a property by a charitable, volunteer firemen's or religious organization or nonprofit educational institution as a fund raising activity, if the following is applicable:
(i) The sales or series of sales is conducted more than three times or more than a total of 7 days in any year.
(ii) The organization or institution is making sales of taxable property other than food or beverages sold at or from a school or church, on the same premises in competition with other vendors required to collect tax.
(7)] The sale of motor vehicles, trailers, [semi-trailers] semitrailers, motor boats, aircraft, snowmobiles or other similar tangible personal property required under Federal law or the laws of the Commonwealth to be registered or licensed.
[(8)](7) * * *
* * * * * § 32.5. Multistate sales.
(a) Transactions where delivery is made to locations within this Commonwealth. [Where delivery of taxable property or services is made to locations within this Commonwealth, the transactions shall be subject to tax. Delivery in this Commonwealth to a nonresident purchaser does not make the transaction exempt.] The sale, rental or lease of, or service performed on, tangible personal property, or the performance of a taxable service enumerated in section 201(k)(11)--(18) of the TRC (72 P. S. § 7201(k)(11)--(18)), which is delivered in this Commonwealth to a purchaser, lessee or an agent of the purchaser or lessee is subject to tax, notwithstanding that the purchaser, lessee or agent of the purchaser or lessee may subsequently transport the property to a location outside this Commonwealth.
(b) Transactions where delivery is made to locations outside this Commonwealth.
(1) When tangible personal property is sold, leased or serviced within this Commonwealth and the vendor, lessor or serviceperson is obligated to deliver it to a point outside of this Commonwealth, or to deliver it to [a] an interstate carrier or to the [mails] United States Postal Service for transportation to a point outside this Commonwealth, [sales tax does not apply] the transaction is not subject to tax. [However, where tangible personal property under a sale, lease or service is delivered in this Commonwealth to the buyer or lessee or their agent, other than an interstate carrier, the tax applies, notwithstanding that the buyer or lessee may subsequently transport the property out of this Commonwealth.] The interstate carrier may be engaged by either the vendor or purchaser.
Examples:
[Henrietta Higgins, a speech pathologist, purchased disposable laboratory supplies from a Commonwealth retailer. The retailer delivers the supplies (cost and freight) to Providence, Rhode Island. Title to the supplies passed to Higgins at the Commonwealth point of shipment, but sales tax does not apply because delivery is made out-of-State.Ahab Inc., a maker of specialized steel in this Commonwealth, supplies harpoons to Neptune Inc., a Massachusetts fishing concern. The harpoons are delivered to Neptune Inc.'s agent (freight on board) Harrisburg, Pennsylvania for ultimate delivery in Massachusetts. Sales tax applies to this transaction because delivery is made and title passes in this Commonwealth.]''A,'' a resident of New Jersey, obtains a repair service for his motor vehicle at a repair shop located in this Commonwealth. The repair shop performs the repairs and delivers the motor vehicle to ''A'' at ''A's'' New Jersey residence. The charge for the repair service is not subject to Pennsylvania Sales or Use Tax.''B,'' a Delaware resident, has his french horn repaired by a Philadelphia instrument repair shop. The repair shop performs the required repairs and ships the horn to ''B'' in Delaware by the United States Postal Service. The charge for the repair service is not subject to Pennsylvania Sales or Use Tax.
(2) When an otherwise taxable service is performed within this Commonwealth and the vendor, lessor or serviceperson is obligated to deliver the service to a point outside of this Commonwealth, or to deliver the service to an interstate carrier or to the United States Postal Service for transportation to a point outside this Commonwealth, the transaction is not subject to tax.
Examples:
''K,'' a New York business, contracts with ''H,'' a Pennsylvania temporary help supply agency, to provide a temporary employe whose wages are paid by ''H.'' The employe reports for work at ''K's'' New York business location where the employe will perform duties under ''K's'' supervision. The contract represents a help supply service but is not subject to Pennsylvania Sales or Use Tax because the service was delivered outside of this Commonwealth.''J,'' an Ohio retailer, purchases an employment contract from ''M,'' a Pennsylvania employment agency. The employe is required to report for work at a location in Ohio. The purchase is not subject to Pennsylvania Sales or Use Tax because the employment service was delivered outside of this Commonwealth.(c) [When] Collection of tax by a vendor, lessor or serviceperson shall collect tax. A vendor, lessor or serviceperson [engaged in business activity] maintaining a place of business within this Commonwealth shall collect the tax imposed by the [act] TRC with respect to the following transactions unless they are otherwise exempt:
(1) [Where] If the tangible personal property or the taxable service is shipped from a point outside this Commonwealth to a point within this Commonwealth.
(2) [Where] If the tangible personal property or the taxable service is shipped from a point within this Commonwealth to another point within this Commonwealth by a route a portion of which is outside this Commonwealth.
(3) [Where] If the tangible personal property or the taxable service is purchased and delivered within this Commonwealth [even though] and the purchaser subsequently transports the tangible personal property or the taxable service to a location outside this Commonwealth. [with the following exceptions:
(i) Property purchased or having a situs within this Commonwealth solely for the purpose of being processed, fabricated or manufactured into, attached to or incorporated into personal property and thereafter transported outside this Commonwealth for use exclusively outside this Commonwealth shall be deemed to be a resale and therefore is not subject to tax.
(ii) The sale at retail or use of motor vehicles, trailers or semitrailers, or bodies attached to the chassis thereof sold to a nonresident of this Commonwealth to be used outside this Commonwealth which are registered in a state other than this Commonwealth within 20 days after delivery to the vendee is not subject to tax.]
(d) Maintenance of records. A vendor, lessor or serviceperson [making sales of] selling tangible personal property [exempt from the] or a service which is not subject to tax [set forth in this section] because the property or service is delivered to an out-of-State location shall maintain records of the transactions, together with documents evidencing the delivery of the tangible personal property or taxable service to a destination outside this Commonwealth. The documents include waybills, bills of lading, insurance or registry receipt issued by the United States [Post Office] Postal Service, mail orders, shipping orders or other data pertinent to the purchase and delivery.
(e) [Property] Tangible personal property or a taxable service [is] not exempt by reason of being used in interstate [and] or foreign commerce. Unless the tangible personal property or taxable service is otherwise exempt by reason of this section or this chapter, the sale or use of tangible personal property or a taxable service in this Commonwealth [shall be] is subject to [the] tax notwithstanding the fact that the purchaser is engaged in interstate or foreign commerce or that the tangible personal property or taxable service may be intended for use in interstate or foreign commerce.
(f) [Interim storage of property to be used exclusively outside this Commonwealth. Effective March 4, 1971, the interim storage in] Use within this Commonwealth purchased outside. The use within this Commonwealth of tangible personal property or a taxable service purchased outside this Commonwealth for use outside this Commonwealth and upon which no work or services are performed is [a taxable use] subject to tax. The use tax shall be based upon the original purchase price of the tangible personal property or taxable service. [The storage charges are exempt from tax.]
Examples:
''P,'' a Pennsylvania corporation, operates from its corporate headquarters in Philadelphia. ''P'' also has business locations in Ohio, Indiana and California. ''P'' purchased word processor paper in bulk which was shipped to its Philadelphia location. ''P'' broke down the bulk shipment and rewrapped and shipped quantities of the paper to its business locations in Ohio, Indiana and California. ''P's'' purchase of the entire shipment of paper is subject to tax because ''P'' made a use of the paper in this Commonwealth.Contractor ''C'' purchases lumber within the state of Delaware which is delivered by the vendor to ''C's'' business location in this Commonwealth. The lumber is stored in ''C's'' warehouse and later transported to New Jersey where ''C'' uses the lumber to construct a building. No work or services are performed on the lumber during storage. ''C's'' storage of the lumber within this Commonwealth constitutes a taxable use. Thus, the lumber is subject to Pennsylvania use tax.
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