The Pennsylvania Department of Revenue has ruled that the Federal excise tax imposed by Section 4051 of the Internal Revenue Code on certain commercial vehicles is not to be included in the taxable purchase price for sales tax purposes, if the excise tax is separately stated and identified on the invoice. Sales and Use Tax Ruling No. SUT-13-001.
Prior to the ruling, there was some confusion regarding the taxability of these Federal excise tax charges. The Department’s regulations relating to sales of motor vehicles specifically provide that “Federal Excise Tax” is included in the amount of the purchase price “since it is not a tax at the retail level.” 61 Pa. Code § 31.44(a)(1). The regulations which generally address the computation of the taxable purchase price of tangible personal property provide for inclusion in the taxable purchase price of “[c]harges, whether or not separately stated, representing reimbursement to the vendor for expenses paid by the vendor, such as manufacturer’s excise tax….” 61 Pa. Code § 33.2(a)(6). The Department determined that these provisions reflect a difference in tax treatment between a Federal excise tax imposed at the manufacturer’s level and a Federal excise tax imposed at the retail level. That is, the regulations imply that Federal excise taxes imposed at the manufacturer’s level are included in the taxable purchase price, while Federal excise taxes imposed at the retail level are not included in the taxable purchase price. Since the Department determined that the excise tax imposed under Section 4051 is a tax imposed on the purchaser at the retail level, it determined that such taxes are not subject to sales tax as long as they are separately stated and identified on the invoice. If the Federal excise tax is not separately stated and identified, but is included in the total purchase price paid by the buyer, the amount of the Federal excise tax included in the single charge is subject to sales tax under the Department’s ruling.