PA Notes

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Sales Tax - Drop Shipments: A Virginia retailer, which otherwise had nexus with Pennsylvania, was required to collect Pennsylvania sales tax from a Massachusetts customer when that customer instructed the retailer to ship goods to Pennsylvania. This would include deliveries to the Massachusetts company’s Pennsylvania customer unless the Massachusetts company tendered a “resale” exemption certificate. PA Ruling No. SUT-99-134, reissued February 16, 2010.

Personal Income Tax - Military Spouses Residency Relief Act: Under certain conditions, a service member’s nonmilitary spouse can maintain out-of-state residency so that his/her compensation income will not be subject to Pennsylvania’s Personal Income Tax. However, non-compensation income from Pennsylvania sources (e.g. from a Pennsylvania trade or business) will be subject to tax. Personal Income Tax Bulletin 2010-1, issued March 17, 2010.

Sales & Use Tax - Printing Exclusion: The Pennsylvania Supreme Court has affirmed, per curiam, the Commonwealth Court’s 2009 decision in EUR Systems, Inc. v. Commonwealth, 965 A.2d 319, in which the court ruled that a provider of fulfillment services could not claim the printing exclusion for equipment and supplies used in producing telephone bills. While some degree of individualization of documents is permissible, each telephone bill was so different from the others that they did not satisfy the regulation’s requirement of “substantial[ly] similar printed matter.” EUR Systems, Inc. v. Commonwealth, No. 48 MAP 2009, March 24, 2010.

Realty Transfer Tax - Transfer to Irrevocable Living Trust: In a 2-1 decision, a panel of the Commonwealth Court has ruled that an irrevocable trust may be treated as a “living trust” for purposes of exemption from realty transfer taxes where the settlors (husband and wife) designated themselves and their only child as the beneficiaries and retained substantial lifetime rights of dominion and enjoyment of the trust corpus (farmstead), including the right to sell the property. The dissent agreed with the Department of Revenue and the appeals board that only a revocable trust can qualify as “will substitute,” which is one of the statutory requirements to constitute a living trust. Miller & Miller v. Commonwealth, No. 757 F.R. 2007, April 8, 2010.

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