Title 61--REVENUE DEPARTMENT OF REVENUE [61 PA. CODE CHS. 9 AND 47] Public Transportation Assistance Fund Taxes and Fees [28 Pa.B. 5488] The Department of Revenue (Department), under the authority contained in section 506 of The Administrative Code of 1929 (71 P. S. § 186), by this order adopts amendments by adding § 47.19 (relating to Public Transportation Assistance Fund taxes and fees) and by deleting § 9.4 (relating to Public Transportation Assistance Fund taxes and fees).
Purpose of Amendments
Currently, the Department's interpretation of section 3 of the act of July 1, 1994 (P. L. 413, No. 67) section 2301 of the Tax Reform Code of 1971 (TRC) (72 P. S. § 9301), which replaced 74 Pa.C.S. § 1314 (repealed by the act of June 16, 1994 (P. L. 279, No. 48)) relating to Public Transportation Assistance Fund taxes and fees, is set forth as a pronouncement and codified in § 9.4. Under the notice of proposed rulemaking, the Department received a comment from an interested party and the Independent Regulatory Review Commission (IRRC). As set forth in greater detail as follows, the Department has addressed the comments, and several revisions are reflected in this final rulemaking. Therefore, in addition to adopting § 47.19, the Department is deleting the pronouncement which appears in § 9.4.
Explanation of Regulatory Requirements
Subsection (a) provides general information regarding the authorizing tax statute; registration; returns; payment of taxes and fees; imposition of tax; exemption certificates; direct payment permit and applicability of the TRC.
Details regarding the tire fee are explained in subsection (b). Paragraph (1) provides definitions for use in the subsection of the terms ''highway use'' and ''sale.'' Paragraph (2) establishes the scope of taxation effective October 1, 1991. Paragraph (3) enumerates transactions that are excluded from tax. Paragraph (4) sets forth examples of sales subject to the tire fee and paragraph (5) sets forth examples of sales not subject to the tire fee.
Subsection (c) provides information regarding motor vehicle lease tax. Paragraph (1) provides definitions for use in the subsection of the terms ''lease,'' ''lease price'' and ''motor vehicle.'' Paragraph (2) details the scope of taxation effective October 1, 1991. It also provides that lease payments made on or after April 1, 1995, for the use of trucks in Class 4 or higher as defined in 75 Pa.C.S. § 1916(a)(1) of the TRC are not subject to the tax. Paragraph (3) relating to exclusion provides that if the lease of a motor vehicle is exempt from Sales and Use Tax imposed by section 202 of the TRC (72 P. S. § 7202), the lease is exempt from the tax imposed under this subsection.
Information regarding motor vehicle rental fee is in subsection (d). Definitions of ''motor vehicle'' and ''rental'' for use in this subsection are in paragraph (1). Paragraph (2) provides the scope of taxation effective October 1, 1991. If the rental of a motor vehicle is exempt from salesand use tax imposed by 72 P. S. § 7202, paragraph (3) relating to exclusions, provides that the rental is exempt from the fee imposed under this subsection. Examples of rentals subject to the rental fee are enumerated in paragraph (4).
Comment and Response Summary
Notice of proposed rulemaking was published at 26 Pa.B. 2919 (June 22, 1996). This rulemaking is being adopted with changes to the proposed rulemaking to read as set forth in Annex A.
The Department received one comment from the public during the public comment period. The Department also received comments from IRRC. No comments were received from the House or Senate Finance Committees.
The amendments to the proposed rulemaking in response to comments are as follows:
(1) IRRC's initial comment stated that general citations to Article II of the TRC (72 P. S. §§ 7201--7282) that reference numerous sections do not provide sufficient guidance to the public and that where possible, the Department should reference only the specific applicable statutory citation. The Department has amended the statutory references in § 47.19(a)(2), (b)(1), (c)(2) and (3), (d)(2) and (3) and (e)(1)--(4) accordingly.
(2) In its comments, IRRC stated that the phrase, ''unless otherwise specifically noted'' as it is used in § 47.19(a)(8) and (e)(4) is unnecessary and in as much as there is nothing that is specifically noted as an exception to these Articles of the TRC, the phrase should be deleted. The Department agrees with IRRC's comment and has deleted the phrase from both paragraphs.
(3) IRRC's comments suggested that a more specific citation to the Vehicle Code in § 47.19(b)(1) would be more helpful to the public. The Department has therefore amended the citation to specifically reference the appropriate chapter of the Vehicle Code.
(4) The definition of ''rental'' in § 47.19(d)(1) provides in part, ''. . . and the rental payments continue to be subject to the tax until the rental contract is terminated.'' IRRC suggested that the Department use the term ''fee'' instead of ''tax'' to more closely tract the statute. The Department has amended the section accordingly. In addition, IRRC believed that the second sentence in the definition of ''rental,'' is a substantive provision. The Department agrees with this comment and has moved the sentence to § 49.19(d)(2). IRRC also suggested the addition of an example at § 47.19(d)(4) which mirrors the practice in the car rental industry of treating the rental period that extended beyond the original period as a separate contract. The Department has added an example in subsection (d)(4)(iii) to address this type of situation.
(5) In § 49.19(e)(1), IRRC noted that the subsection does not define the specific entities covered by the regulation. To address this concern, the Department has amended the paragraph by replacing the term ''entity'' with ''public utility, as defined in section 1101-A of the TRC (72 P. S. § 8101-A).'' As referenced, the Department amended statutory references in paragraphs (1)--(4) to reference specific statutory sections.
(6) Both IRRC and the public comment questioned the need for the provision set forth in subsection (f) relating to periodicals. When the Department initially drafted the proposal, there was a concern that the information should be preserved for historical and auditing purposes. The passage of time has diminished this need; therefore, the Department is deleting the subsection.
Comments that did not result in amendments to the regulation are as follows:
(1) IRRC indicated that part of the introductory phrase in § 47.19(b)(1), (c)(1) and (d)(1) ''unless the context clearly indicates otherwise'' promotes uncertainty and should be deleted. This phrase is from language that is set forth in all definition sections within the Pennsylvania Code. If the Department did not include the phrase in a regulation, it would be added by the Pennsylvania Code and Bulletin when the document was published.
(2) In its comments, IRRC indicated that it believes that the definition of ''lease price'' in § 47.19(c)(1) contains substantive information in subparagraphs (i)--(v) and the provisions should be removed from the definition. It is the Department's position that standing alone, the introductory paragraph is inadequate and would provide an incomplete definition to the public. The provisions in subparagraphs (i)--(v) further explain and define what a ''lease price'' is under subsection (c).
(3) In the definition of ''lease price'' in § 47.19(c)(1), IRRC questioned the Department's authority to state in subparagraph (v), ''If the lessor fails to separately state the lease price of other property, such as a trailer, from the lease of a motor vehicle, the total lease price is subject to tax.'' It is IRRC's opinion that the statute limits the tax to the lease of a motor vehicle and does not mention a tax on other properties.
It is the Department's position that statutory authority is found in 72 P. S. § 9301(d)(1) which provides that ''. . . an additional tax of three per cent of the total lease price charged.'' The key is that the tax is imposed on the total lease price not simply the lease of a motor vehicle.
(4) IRRC raised a number of concerns regarding § 47.19(d). The first concern related to the necessity of the second sentence in the definition of ''rental,'' which the Department has agreed is substantive and should be moved to § 49.19(d)(2). IRRC believed that there could be confusion if a rental goes beyond the 29-day period, in that the lessee could believe he would be subject to both the rental fee and the lease tax. It is not the Department's intention to tax a transaction as both a rental and a lease. If a rental goes beyond the 29-day period, the original rental contract remains controlling until it is terminated and the lessee remains liable for the $2 per day rental fee. To further clarify this point, the Department has added a sentence to § 47.19(d)(2).
IRRC also indicated that the Department needed to include an exclusion that provides a rental contract for more than 29 days is a lease contract by definition, and that such a contract is not subject to the daily fee; instead, it is subject to the 3% tax on motor vehicles. The terms ''rental'' and ''lease'' are clearly defined in the regulation; the Department does not ascertain a need to reiterate these definitions in a separate paragraph.
IRRC also wanted the Department to specifically exclude rentals from the lease tax when the rental contract was originally for less than 29 days and subsequently the vehicle was used for more than 29 days. This issue is addressed in the sentence that the Department is removing from the definition of ''rental'' and adding to paragraph (2); therefore, no further revision is necessary.
In its comments, IRRC asked that the Department explain the basis for the regulation's definitions of ''lease'' in subsection (c) and ''rental'' in subsection (d) since the enabling statute does not define either term. The Department relied on industry guidelines in formulating the subject definitions which were later confirmed by the passenger car rental tax legislation which defined the term ''rental.''
(5) In response to IRRC's suggestion that the Department amend § 31.29 (relating to books, printed matter and advertising materials), the Department notes that this section is currently being revised in a separate proposed rulemaking.
During its final review of the regulation, the Office of Attorney General directed the Department to make the following revisions to the final-form regulation:
(1) The first sentence in § 47.19(b)(3) has been moved to (b)(2) because it modifies and further explains the scope of the regulation. The remaining sentence in paragraph (3) has been amended to more accurately introduce the examples that follow in subparagraphs (i)--(v).
(2) The definition of ''motor vehicle'' in § 47.19(c)(1) and (d)(1) has been amended to bring it into conformity with the definition of ''motor vehicle'' in the Statutory Construction Act, 1 Pa.C.S. § 1991.
(3) To make § 47.19(d)(2) consistent with the authorizing statute, the phrase ''lessor charges the lessee for rental of the vehicle'' has been deleted and replaced with ''vehicle is rented.''
(4) Subsection (e) of § 47.19 relating to utility realty additional tax is deleted because its placement in § 47.19, a regulatory section under 61 Pa. Code, Article II. Sales and Use Tax, is inappropriate because Public Utility Realty Tax is not a part of Sales Tax. Its inclusion in this regulatory section would, at a minimum, make the language difficult to find.
Fiscal Impact
The Department has determined that the amendments will have no significant fiscal impact on the Commonwealth.
Paperwork
The amendments will not generate additional paperwork for the public or the Commonwealth.
Effectiveness/Sunset Date
The amendments will become effective upon final publication in the Pennsylvania Bulletin. The amendments are scheduled for review within 5 years of final publication. No sunset date has been assigned.
Contact Person
The contact person for an explanation of the final-form regulations is Anita M. Doucette, Office of Chief Counsel, Department of Revenue, Dept. 281061, Harrisburg, PA 17128-1061.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on June 12, 1996, the Department submitted a copy of the notice of proposed rulemaking, published at 26 Pa.B. 2919 (June 22, 1996) to IRRC and the Chairpersons of the House and Senate Committees on Finance for review and comment. In compliance with section 5(c) of the Regulatory Review Act, the Department also provided IRRC and the Committees with copies of all comments received, as well as other documentation.
In preparing these final-form regulations, the Department has considered all comments received from IRRC, the Committees and the public.
These final-form regulations were deemed approved by the House and Senate Committees on March 23, 1998. IRRC met on March 26, 1998, and approved the final-form regulations in accordance with section 5.1(e) of the Regulatory Review Act (71 P. S. § 745.5a(e)).
Findings
The Department finds that:
(1) Public notice of intention to adopt the regulations has been given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The regulations are necessary and appropriate for the administration and enforcement of the authorizing statute.
Order
The Department acting under the authorizing statute, orders that:
(a) The regulations of the Department, 61 Pa. Code Chapters 9 and 47, are amended by adding § 47.19 and deleting § 9.4 to read as set forth in Annex A.
(b) The Secretary of the Department shall submit this order and Annex A to the Office of General Counsel and the Office of Attorney General for approval as to form and legality as required by law.
(c) The Secretary of the Department shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(d) This order shall take effect upon publication in the Pennsylvania Bulletin.
ROBERT A. JUDGE, Sr.,
Secretary(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 28 Pa.B. 1806 (April 11, 1998).)
Fiscal Note: Fiscal Note 15-373 remains valid for the final adoption of the subject regulations.
Annex A TITLE 61. REVENUE PART I. DEPARTMENT OF REVENUE Subpart A. GENERAL PROVISIONS CHAPTER 9. REVENUE PRONOUNCEMENTS--STATEMENTS OF POLICY § 9.4. (Reserved).
Subpart B. GENERAL FUND REVENUES ARTICLE II. SALES AND USE TAX CHAPTER 47. RENTALS § 47.19. Public Transportation Assistance Fund taxes and fees.
(a) General provisions.
(1) General. This section is promulgated to administer section 2301 of the TRC (72 P. S. § 9301).
(2) Registration. A person who makes sales, rentals or leases subject to a tax or fee under subsection (b), (c) or (d) is required to apply for a Public Transportation Assistance Tax License Number on a form prescribed by the Department. The registration is separate from sales tax registration required under section 208 of the TRC (72 P. S. § 7208).
(3) Returns. The taxes and fees collected under subsection (b), (c) or (d) shall be reported on a return prescribed by the Department. The returns shall be filed under sections 217--220 of the TRC (72 P. S. §§ 7217--7220) and § 34.3 (relating to tax returns).
(4) Payment. Payment of the taxes and fees under subsection (b), (c) or (d) shall be made under sections 221--224 of the TRC (72 P. S. §§ 7221--7224).
(5) Imposition of tax. The taxes and fees imposed under subsection (b), (c) or (d) are in addition to Sales or Use Tax and are excluded from the computation of tax for Sales and Use Tax purposes.
(6) Exemption certificates. Claims for exemption from the taxes and fees imposed under subsection (b), (c) or (d) shall be supported by the use of a valid Pennsylvania Exemption Certificate.
(7) Direct payment permit. A direct payment permit issued under § 34.4 (relating to direct payment permit) may be used in conjunction with the taxes and fees imposed under this section.
(8) Applicability of TRC. Article II of the TRC (72 P. S. §§ 7201--7282) and regulations promulgated thereunder apply to the taxes and fees imposed under subsection (b), (c) or (d).
(b) Tire fee.
(1) Definitions. The following words and terms, when used in this subsection, have the following meanings, unless the context clearly indicates otherwise:
Highway use--The use of a tire on a vehicle which is required to be licensed for highway use. If a tire is of the type used on a vehicle normally required to be licensed for highway use under 75 Pa.C.S. §§ 1301--1318 (relating to general provisions), the tire shall be presumed to be for highway use.
Sale--A transfer of the ownership of new tires for a consideration whether the transfer is absolute or conditional and by whatever means the transfer has been effected. The term does not include a rental or lease.
(2) Scope. Effective October 1, 1991, the sale of a new tire which is delivered to a location in this Commonwealth for highway use is subject to a $1 fee. The fee shall be collected by the vendor from the purchaser. If the vendor fails to collect, report or remit the tire fee, the vendor shall be assessed the fee. If the purchaser does not pay the fee to the vendor, the purchaser shall be assessed the tire fee. The sale of new tires in conjunction with the sale of other property shall be subject to the tire fee. There is no exclusion for exempt organizations or businesses engaged in manufacturing, processing, farming, dairying, printing, mining or rendering a public utility service.
(3) Exclusions. The following transactions are excluded from tax:
(i) The sale of tires not for highway use.
(ii) The sale of new tires to governmental entities.
(iii) The rental or lease of new tires. The lessor is required to pay the tire fee on the purchase of tires to be rented or leased.
(iv) The sale of used tires including retreads or recaps.
(v) The sale of tires when delivered to the purchaser at an out-of-State location. The subsequent use of the tires within this Commonwealth is not subject to the tire fee.
(4) Examples of sales subject to the tire fee.
(i) A purchaser buys a new or used automobile with four new tires and one spare tire. A tire fee of $5 is due on the sale of five new tires.
(ii) A leasing company buys new tires to use as replacements on its leased licensed vehicle fleet. Since the tires are for highway use, the purchase of the tires by the leasing company is subject to the tire fee.
(iii) A church buys a new tire to replace a tire on a vehicle registered in the name of the church. The purchase of the tire by the church is subject to the tire fee.
(iv) A trucking company buys tires from an out-of-State vendor. The tires are delivered to the trucking company in this Commonwealth. The sale of the tires is subject to the tire fee.
(v) A new car dealer withdraws an automobile from inventory and makes a taxable use of the automobile for sales and use tax purposes. The dealer is required to pay the tire fee directly to the Department.
(vi) A garage replaces a tire in connection with the repair of a damaged motor vehicle. The sale of the tire is subject to the tire fee regardless of whether the cost of the repair is covered by an insurance contract.
(5) Examples of sales not subject to the tire fee.
(i) A used car dealer buys new tires to place on a vehicle to be resold. The purchase of tires by the dealer is not subject to the tire fee. The subsequent sale of the vehicle with the new tires to a purchaser for highway use is subject to the tire fee.
(ii) A lessee rents a vehicle with new tires from a leasing company. A tire fee is not due on the rental. The lessor is liable for paying the tire fee on the purchase of the tires.
(iii) A manufacturer purchases new tires for use on forklifts not required to be licensed for highway use. The purchase is not subject to the tire fee.
(iv) A trucking company buys new tires from an out-of-State vendor. The tires are delivered to the trucking company at an out-of-State location. The sale or use of the tires is not subject to the tire fee even though the tires are subsequently used in this Commonwealth.
(v) A retail tire dealer purchases tires from a tire manufacturer for resale. As the retail tire dealer is not purchasing the tires for highway use, the purchase is not subject to the tire fee. The retail tire dealer's subsequent sale of the tire to a customer for highway use is subject to the tire fee.
(c) Motor vehicle lease tax.
(1) Definitions. The following words and terms, when used in this subsection, have the following meanings, unless the context clearly indicates otherwise:
Lease--A contract for the use of a motor vehicle for 30 days or more.
Lease price--Full consideration paid or delivered or promised to be paid or delivered to the lessor for a lease period under a lease agreement, whether it is money or otherwise, even though the consideration is separately stated and designated as a payment for downpayment, service, maintenance, insurance, repairs, depreciation, excess mileage fees or similar charges.
(i) The term also includes an accelerated lease payment or buy out purchase price whether or not made in connection with the termination of the lease.
(ii) The term does not include the option purchase price, penalty fees for early termination of lease, damage fees or similar charges.
(iii) The term does not include Sales Tax imposed on the lease price.
(iv) Credits or refunds which reduce the lease price reduce the amount subject to tax even though the credits or refunds are issued after termination of the lease.
(v) If the lessor fails to separately state the lease price of other property, such as a trailer, from the lease of a motor vehicle, the total lease price is subject to tax.
Motor vehicle--A self-propelled device in, upon or by which a person or property is or may be transported or drawn upon a public highway, except tractors, power shovels, road machinery, agricultural machinery and vehicles which move upon or are guided by a track or trolley. The term does not include trucks in Class 4 or higher as defined in 75 Pa.C.S. § 1916(a)(1) (relating to trucks and truck tractors). Title 75 Pa.C.S. § 1916(a)(1) currently defines trucks in Class 4 as those having a registered gross or combination weight between 9,001 and 11,000 pounds.
(2) Scope. Effective October 1, 1991, each lease of a motor vehicle subject to the tax imposed by section 202 of the TRC (72 P. S. § 7202) is subject to an additional tax of 3% of the total lease price charged. This tax will be imposed upon lease payments due on or after October 1, 1991, regardless of the date upon which the lease was executed. Lease payments made on or after April 1, 1995, for the use of trucks in Class 4 or higher as defined in 75 Pa.C.S. § 1916(a)(1) are not subject to the tax. The tax shall be collected by the lessor from the lessee. If the lessor fails to collect, report or remit the tax, the lessor shall be assessed the tax. If the lessee does not pay the tax to the lessor, the lessee shall be assessed the tax.
(3) Exclusions. If the lease of a motor vehicle is exempt from Sales and Use Tax imposed by section 202 of the TRC, the lease is exempt from the tax imposed under this subsection.
(d) Motor vehicle rental fee.
(1) Definitions. The following words and terms, when used in this subsection, have the following meanings, unless the context clearly indicates otherwise:
Motor vehicle--A self-propelled device in, upon or by which a person or property is or may be transported or drawn upon a public highway, except tractors, power shovels, road machinery, agricultural machinery and vehicles which move upon or are guided by a track or trolley.
Rental--A contract for the use of a motor vehicle for less than 30 days.
(2) Scope. Effective October 1, 1991, each rental of a motor vehicle subject to the tax imposed by section 202 of the TRC is also subject to a fee of $2 for each day or part of a day for which the vehicle is rented. The fee shall be collected by the lessor from the lessee. If the lessor fails to collect, report or remit the fee, the lessor shall be assessed the fee. If the lessee does not pay the fee to the lessor, the lessee shall be assessed the fee. If a motor vehicle is rented for less than 30 days, and the use of the motor vehicle subsequently extends beyond a 29-day period, the transaction remains a rental, and the rental payments continue to be subject to the fee until the rental contract is terminated. With respect to lease payments paid in accordance with a lease contract, lease payments are subject to tax at the rate of 3%.
(3) Exclusions. If the rental of a motor vehicle is exempt from Sales and Use Tax imposed by section 202 of the TRC (72 P. S. § 7202), the rental is exempt from the fee imposed under this subsection.
(4) Examples of rentals subject to the rental fee.
(i) A lessee rents a motor vehicle from a rental company for 5 hours. The rental is subject to a $2 rental fee.
(ii) A lessee rents a motor vehicle from a rental company for 1 day. The vehicle is returned to the lessor 5 hours after the end of the rental period. If the lessee is charged the daily rental rate plus an additional charge for the period after the end of the rental period, a rental fee of $4 is due.
(iii) A lessee rents a motor vehicle from a rental company under a daily rental contract. The rental is subject to a $2 per day rental fee. The lessee returns the motor vehicle to the lessor at the end of the 15th day and enters into a lease contract. During the first 15 days, the lessee is required to pay a rental fee of $2 per day. For the period after the 15th day, the lessee is required to pay a tax of 3% of the lease payment.
[Pa.B. Doc. No. 98-1792. Filed for public inspection October 30, 1998, 9:00 a.m.]
