On July 13th, Governor Wolf signed into law Act 84 of 2016 (House Bill 1198), which makes changes to the Pennsylvania tax code and raises additional revenue to balance the 2016-2017 state budget.
The following is a summary of the significant tax law changes that may affect you or your business:
- Vendor sales tax discount is capped at $300 annually. Vendors that timely file and remit sales tax collections to Pennsylvania were historically permitted to discount their sales tax liability by 1%. However, the changes made in Act 84 limit the discount to the lesser of 1% of the sales tax collected or $25/return for monthly filers; $75/return for quarterly filers; $150/return for semi-annual filers. This change is effective for monthly sales tax returns due August 20, 2016.
- Digital downloads now subject to PA sales and use tax. Effective August 1, 2016, Act 84 expands the sales and use tax base to include items delivered electronically, digitally, or streamed. Examples include apps, games, music, books, video (including streaming video), satellite radio service and canned software.
- All lottery winnings are now subject to PA personal income tax. Act 84 extends the current tax on gambling winnings to include cash prizes of the PA State Lottery. This change has been made retroactive to January 1, 2016.
- Tax amnesty program will be established for a period of 60 consecutive days to allow delinquent taxpayers to come forward and receive favorable terms from the PA Department of Revenue. These benefits include a five-year look-back period (non-filers would ordinarily have an unlimited look-back period) and abatement of half of the interest owed. Actual dates of the tax amnesty program will be announced at a later time but it must end prior to June 30, 2017. The Department will also provide more details about the program once it is established.
- Tax increase on cigarettes and new tobacco products tax. Effective August 1, 2016, Act 84 increases the cigarette tax rate by $1.00 per pack. It also imposes a new tobacco products tax on e-cigarettes, smokeless tobacco and roll-your-own tobacco, which is effective October 1, 2016.
In addition to these state revenue increasing changes, Act 84 also included a variety of new tax credits and incentives aimed at job creation. These new credits include: the Concert Rehearsal and Tour Production Tax Credit, Video Game Production Tax Credit, Coal Refuse Energy and Reclamation Tax Credit, Waterfront Development Tax Credit, Manufacturing and Investment Tax Credit, Rural Jobs and Investment Tax Credit and Mixed-Use Development Tax Credit.
Please contact us if you have any questions related to these Pennsylvania tax law changes or the new tax credits enacted by Act 84.
ABOUT THE AUTHOR
Matthew S. Fox, CPA
Matt is a Senior Manager with Brown Schultz Sheridan & Fritz and a key member of the Firm’s Tax Department.