Pennsylvania: Department Addresses Sales Tax Absorption and Direct Payment Permits

The Pennsylvania Department of Revenue has issued two bulletins addressing the vendor sales tax absorption statute and the use of direct payment permits. In SUT Bulletin 2019-03, the Department explains the conditions that must be met for a vendor to absorb the applicable sales tax on a transaction as authorized by Pennsylvania law. These conditions are: (1) the vendor must expressly state that they will pay the tax on behalf of the purchaser and cannot imply or indicate the transaction is exempt from tax; 2) any receipt or documentation given to the purchaser must separately state the amount of tax; 3) the vendor must record the tax separately in its books and records; and 4) the tax must be calculated by multiplying the total purchase price by the statutory tax rate.

In SUT Bulletin 2019-04, the Department clarifies that purchasers seeking to use direct payment permits (DPP) must properly complete a Pennsylvania Exemption Certificate when issuing the DPP. The Exemption Certificate must indicate that the certificate applies to state and local sales and use taxes and whether the certificate is a “Unit” or “Blanket” exemption, as well as providing the name and address for both the vendor and taxpayer. Finally, purchasers should also check box 4 on the certificate and insert the purchaser’s DPP number and the phrase “Direct Pay Permit.” The bulletin notes that for a vendor to not charge tax, the purchaser must provide the accompanying exemption certificate with the DPP. For more information, please contact Mark Balistrieri at 412-232-1556.