State and Local Taxation: Franchise Fees Must Be Apportioned for Purposes of a Business Privilege Tax

PA State and local taxIn Pennsylvania, the Local Tax Enabling Act authorizes a variety of municipalities to impose a tax “on the privilege of doing business in the jurisdiction of the local taxing authority.” 53 P.S. § 6924.301.1(a.1)(1). As with any state or local tax, the tax cannot violate the Commerce Clause; as a consequence, a local business privilege tax may only be imposed “when the tax is applied to an activity with a substantial nexus with the taxing State, is fairly apportioned, does not discriminate against interstate commerce, and is fairly related to the services provided by the State.” Complete Auto Transit, Inc. v.Read More

State and Local Taxation: Business Privilege Taxes and the Utility Exception in Pennsylvania

logistics, taxation, pennsylvaniaThe Local Tax Enabling Act authorizes municipalities in Pennsylvania to enact business privilege taxes; it applies throughout the Commonwealth, with the exception of Philadelphia, which is governed by separate legislation. While the scope of the act is quite broad, it does include an exclusion associated with utilities. The exclusion bars the following types of taxes:

  • “a tax on the gross receipts from utility service of any person or company whose rates and services are fixed and regulated by the Pennsylvania Public Utility Commission” (PUC); or
  • a tax on the gross receipts from “any public utility services rendered by any such person or company”; or
  • a tax on the gross receipts from “any privilege or transaction involving the rendering of any such public utility service.” See 53 P.S.
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State and Local Taxation: What’s in a Name? That Which We Call a Privilege Can Be Taxed

state and local taxJust before Christmas 2015, the Supreme Court of Pennsylvania addressed the scope of a business privilege tax imposed by Lower Merion Township; the case was brought by a group of landlords, who contended that the township could not tax revenue generated from leasing property, and a divided Court sustained the tax. Fish v. Township of Lower Merion, No. 29 MAP 2015, 2015 Pa. LEXIS 2979 (Pa. Dec. 21, 2015).

Under the Local Tax Enabling Act, various municipalities are entitled to impose a tax “on persons, transactions, occupations, privileges, subjects and personal property within the limits of such political subdivisions, and upon the transfer of real property, or of any interest in real property, situate within the political subdivision levying and assessing the tax .… Read More