Pennsylvania Governor Tom Wolf has signed legislation raising approximately $1.3 billion in additional tax and other revenues required to balance the Commonwealth's 2016-17 budget, which was enacted earlier this month.
The new measures leave the personal income and state sales tax rates unchanged.
The new provisions include the following:
1. While the sales tax rate remained unchanged, the application of the sales tax was extended to apply to digital downloads effective August 1, 2016. Digital purchases now taxable will include e-books, games, music (including satellite radio subscriptions), photographs, and video (including streaming services such as Amazon and Netflix).
2. While the personal income tax rate has not changed, lottery winnings will now be subject to personal income taxation -- retroactive to January 1, 2016.
3. The new legislation includes a tax amnesty program which will allow taxpayers to pay outstanding taxes without penalty and with a 50% reduction of accrued interest on the unpaid balance. Details on the amnesty program will follow in a separate Client Alert. The legislation requires the Pennsylvania Department of Revenue to publish details on the amnesty program by mid-September, 2016.
4. Effective August 1, 2016, a $1.00 per pack tax increase on cigarettes will result in a total tax of $2.60 per pack.
5. A new tobacco tax on e-cigarettes and other vaping devices (40% of purchase price), smokeless tobacco, and roll-your-own tobacco purchases (55¢ per ounce) begins on October 1, 2016. The tax does not apply to cigars.
6. State casinos will now pay an additional 2% tax on table game revenues, beginning August 1, 2016.
7. Several new tax credits are included in the new legislation that will take effect in 2017. These include credits for investments in rural businesses, an increase to the film production tax credit, a credit for manufacturers that increases payroll over four consecutive quarters, credits for certain brewing operations, and credits for certain mixed-use developments and water front developments.
While personal income tax and sales rates remain unchanged, many individuals will see an increase in the taxes they pay as a result of the broadening of the bases on which these taxes are assessed.
Kevin F. Israel is a Partner in Meyer, Unkovic & Scott's Corporate Law and Tax and Succession Planning Groups. He can be reached at 412.456.2841 or firstname.lastname@example.org.
For more information about the tax measures, please contact Kevin or any of the attorneys in Meyer, Unkovic & Scott's Tax Group.