Recently, you may have received a letter from the Pennsylvania Department of Revenue regarding a new requirement to begin making a monthly pre-payment for your PA sales and use tax. Below are the details of the new pre-payment requirements.

Beginning with the June 2011 filing period, if you reported $25,000 or more in sales, use and/or hotel occupancy tax payments in the 3rd quarter of 2010 (or if no return was filed, the tax that should have been reported was $25,000 or more), you will be required to make monthly pre-payments of your sales and use tax.

The initial pre-payment will be due on or before June 20, 2011. The pre-payment should equal the sales tax collected from June 1 to June 15 or, if the administrative burden is too great, you may remit a payment equal to 55% of the tax due from the June 2010 period.

After the initial month, pre-payments should equal either the sales tax collected from 1st through the 15th of the month or 50% of the amount due from the same month of the previous year. They will also be due on or before the 20th of the month.

These pre-payments are in addition to the normal sales and use returns and payments due the 20th of the month. For example, in June you will have to make a pre-payment for the current month (June) and also file and pay for the May filing period.

All businesses making pre-payments should register to file and remit online using e-Tides.

Separate payments must be remitted for the current month's pre-payment and the previous month's tax due. The credit for the pre-payment will be applied when that month's sales and use return is filed.
If your business is located in an area with an additional local sales and use tax (Philadelphia or Allegheny County), according to the PA Sales Tax Division, this local tax will also have to be pre-paid when submitting the state pre-payment.

If you will be using the previous year's month to determine the amount you need to pre-pay, please note that you will use the actual amount due after any discounts are taken. This is also directly from the PA Sales Tax Division.

As of the date of this memo, the e-Tides website has not been updated to reflect the new pre-payment requirements. If you have any additional questions you may want to speak to your CPA.

Background
The House Finance Committee this last week advanced legislation (H.B. 1334 - Semi-Monthly Sales Tax Remittance Legislation) that would fix a burdensome sales tax remittance process established by Act 48 of 2009 as a way to provide accelerated revenue to the Commonwealth. The law took effect on May 21, 2011.

HB 1334 was voted out of the House Finance Committee on Monday, May 23, 2011. The legislation would replace the semi-monthly sales tax return requirement established by Act 48 of 2009 with a single monthly return that includes both an estimated tax for the current month based on the previous year's remittance and a true-up payment for the prior month tax. This new process would alleviate the costly and burdensome method created by Act 48, which made Pennsylvania the only state in the country to require two sales tax returns per month.

By way of background, under Act 48, the semi-monthly sales tax return system took effect on May 21, 2011. Now, Pennsylvania businesses have the shortest deadline of any state to file and remit sales tax, just 10 days to file each return. Further, the Department of Revenue and businesses will perform double the work to process semi-monthly returns. Lastly, larger companies will incur substantial expenses to create new data retrieval and reporting systems just for their Pennsylvania operations.

Several states have adopted remittance systems that require a filer to remit one payment that includes the estimated tax for the current month and a true-up payment for the prior month. These “estimated payment” systems have been adopted by Ohio, Alabama, Florida, Georgia, Kansas, New York, Oklahoma and Texas.

Act 48's semi-monthly remittance requirement is expected to increase state revenue collections because of the accelerated timeline of remittance. An “estimated payment system” as provided in HB 1334 will continue to provide the state with accelerated and increased revenue collections.

This new process would alleviate the costly and burdensome method created by Act 48, which made Pennsylvania the only state in the nation to require two sales tax returns per month.

While all businesses now have double the work to process semi-monthly returns, larger companies with multiple locations will incur substantial expenses to create new data retrieval and reporting systems just for their Pennsylvania operations. H.B. 1334 would eliminate these burdens.

PTLA's Tax Committee will be meeting to discuss this issue and make any further recommendations. Please share any feedback with us for discussion Committee discussion.