§ 58.11. Taxes paid; purchases resold.
(a) A licensee may claim a credit on his sales tax return for taxes paid on purchases of property included in inventory which have been resold or leased in the ordinary course of the licensee’s business. This credit is referred to as a credit for ‘‘Taxes Paid—Purchases Resold’’ or, as abbreviated, TPPR. The Department’s intention in granting this credit is to eliminate the necessity of filing a petition for refund in circumstances where a less formal procedure would be appropriate. This credit is subject to certain limitations in subsections (b) and (c) and will not be considered a substitute for situations in which a refund may be claimed under Chapter 7 (relating to Board of Appeals).
(b) A TPPR credit may be claimed when a licensee pays Pennsylvania sales or use tax on an item included in inventory which the licensee subsequently sells as a sale at retail. In filing the regularly scheduled return, the licensee may recover the tax overpayment by claiming a credit for the amount of tax he has previously paid on the property.
Example. ‘‘A’’ owns and operates an aluminum siding company with 50% of the business derived from retail sales and 50% from construction contracts. ‘‘A’’ enters into a construction contract with ‘‘B’’ whereby he is to install 1,000 square feet of aluminum siding on ‘‘B’s’’ house. ‘‘A’’ purchases the 1,000 square feet of aluminum siding at $3 per square foot and he correctly pays $180 sales tax on the $3,000 purchase price because he anticipates that he will be the ultimate consumer of the siding. Before the contract is performed, ‘‘A’’ decides to sell at retail the aluminum siding at $5 per square foot to ‘‘C’’. At the time of sale ‘‘A’’ properly collects $300 sales tax from ‘‘C’’ who purchases the aluminum siding for $5,000. In reporting the $300 tax which he has collected from ‘‘C’’, ‘‘A’’ is permitted to claim a credit of $180 for the sales tax which he had previously paid on this item.
(c) A claim for TPPR credit is subject to the following limitations:
(1) The TPPR credit shall be taken within 3 years of the original payment of tax on the item which has been sold.
Example. Adopt the facts from the example in subsection (b), except that ‘‘A’’ purchased the aluminum siding in January, 1966 and sold same to ‘‘C’’ in January 1974. Since more than 3 years have elapsed from the original purchase, ‘‘A’’ may not claim a credit on his return for the first quarter of 1974.
(2) The amount of TPPR credit taken on any one return may not exceed the total amount due the Commonwealth for that period before the TPPR credit. The balance on the return may not be less than zero, and the amount of TPPR credit which exceeds the tax due amount may be carried forward on subsequent returns. Documentation shall be retained which supports the TPPR credit amount shown on the return for a period of at least 3 years from the date of the return. The TPPR credit shall be taken within 3 years of the original payment of tax on the item which has been resold or leased. Filing a timely petition for refund is required if the total credit cannot be recovered within 3 years.
Example. Use the same facts as above except that ‘‘A’’ resells the aluminum siding at $2 per square foot. The sale price would be $2,000 and the tax collected would be $120. Since ‘‘A’’ wishes to claim a credit of $180, his credit would exceed the total amount due the Commonwealth for the quarter by $60 (assuming this was his only transaction in the period). The maximum credit ‘‘A’’ may claim is $120. ‘‘A’’ must wait until the following quarter to claim the $60 excess against his remittance for that quarter. In other words, the credit may not reduce amount remitted below zero.
(3) The TPPR credit will only be granted in situations where a licensee has either paid the Commonwealth sales or use tax upon property and has resold or leased the same property as a normal sale at retail of inventory. In claiming the credit for the tax on his return, the taxpayer shall note TPPR beside the word ‘‘credit’’ on the credit line of the return. The amount of the credit shall be entered on the same line in the column provided for amounts. This amount shall be subtracted from the sum of ‘‘total tax due’’, penalty and interest; the remainder should then be inserted opposite the word ‘‘payment’’ on the payment line of the return.
Authority The provisions of this § 58.11 amended under section 270 of the Tax Reform Code of 1971 (P. L. 6, No. 2) (72 P. S. § 7270).
Source The provisions of this § 58.11 adopted December 27, 1974, effective December 28, 1974, 4 Pa.B. 2709; amended June 23, 1989, effective June 24, 1989, 19 Pa.B. 2663. Immediately preceding text appears at serial pages (115269) and (40449).
Cross References This section cited in 61 Pa. Code § 58.13 (relating to carpeting and other floor coverings).
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