The Pennsylvania Department of Revenue recently issued Corporation Tax Bulletin 2011-02. The Bulletin provides some general guidance on the accounting method that must be used for computing the gross receipt taxes that Pennsylvania imposes on electric companies, telecommunications providers, transportation companies and certain other taxpayers. Of most interest to taxpayers, however, is the guidance that the Bulletin also provides on what has recently been a hot topic in Pennsylvania, the deductibility of bad debts for purposes of the gross receipts tax.
Pennsylvania's gross receipts tax is imposed upon each dollar of gross receipts "received" by certain specified utility-type businesses, including electric companies, telecommunications providers, and transportation companies.1 There is no specific provision in the gross receipts tax statute or regulations providing for a deduction for bad debts, but taxpayers have long argued that to the extent gross receipts tax is remitted for sales to customers that were ultimately written off as bad debt, that tax should be refundable because it was based on amounts that are not "receipts" includable in the tax base. In Popowsky v. Pennsylvania Public Utility Commission, the Commonwealth Court blessed such an adjustment by acknowledging that gross receipts tax was not due on amounts billed that proved uncollectible.2
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