On January 31, 2020, the Pennsylvania Department of Revenue (“Revenue”) issued Letter Ruling No. SUT-20-001, which concluded that the taxability of a membership fee in a professional association depends upon what a member receives in exchange for the membership.  If the member does not receive any taxable tangible personal property or taxable services in exchange for the fee, then the fee is not taxable.  However, if a member receives taxable tangible personal property or taxable services in exchange for the membership fee, then the fee is taxable.  Revenue notes that a membership fee in and of itself is not taxable because it is not an enumerated taxable service.  However, if the membership fee includes the transfer of taxable tangible personal property, in addition to nontaxable services, the entire charge for the membership fee is subject to tax if it is not separately stated from the taxable tangible personal property under Downs Racing, LP v. Commonwealth, 196 A.3d 603, 611 (Pa. 2018).  In the fact pattern contained in the Letter Ruling, Revenue determined that the membership fees were subject to Pennsylvania sales tax on members located in Pennsylvania because the members received taxable tangible personal property (published guide, tools and templates, on demand webinars, and publications) along with nontaxable services (networking opportunities, discounts on certifications, and certification tracking).  Additionally, Revenue nixed application of the “essence of transaction test,” by pointing out that the Pennsylvania Supreme Court has never endorsed that test.

This Letter Ruling has the potential to cause a host of problems for professional associations that charge membership fees.  If you are a professional association charging membership fees, it is in your best interest to determine what is included with your paid membership and whether or not any of those membership benefits are taxable.  However, if they are taxable, how do you quantify the separate value for taxability purposes?  If you haven’t been separately stating taxable and nontaxable membership fees, what is your potential audit risk?

If you have questions about the Letter Ruling or any state tax matter, please feel free to contact a member of the McNees State and Local Tax team.

Click here for Letter Ruling



Effective January 1, 2020 to December 31, 2020, the rate of interest on underpayments of Pennsylvania taxes will be 5% per annum.  Additionally, the rate of interest on overpayments of tax will be 3% per annum (except for personal income tax overpayments, which accrue interest at the same rate as for underpayments).  See Interest Rate Notice, Pa. Dept. Rev., PA. Bull. Doc. No. 19-1949, Pa. Bull. Vol. 49, No. 52, 12/28/19.  For perspective purposes, the interest rates for 2019 were 6% for underpayments and 4% for overpayments.

For any questions related to interest calculations or just Pennsylvania state and local tax questions in general, please contact Paul Morcom at 717-237-5364 or Sharon Paxton at 717-237-5393.

On September 30, 2019, the Pennsylvania Department of Revenue issued Corporation Tax Bulletin 2019-4 giving guidance on nexus for Corporate Net Income Tax purposes (“Bulletin”).

The Bulletin recites constitutional underpinnings of nexus, noting that the federal underpinnings of a state’s jurisdiction to tax is based on both the Due Process and the Commerce Clauses of the United States Constitution. A state’s jurisdiction to tax under the Due Process Clause “requires some definite link, some minimum connection, between and state and the person, property or transaction it seeks to tax.” Quill Corp. v. North Dakota, 504 U.S. 298, 306 (1974). Traditionally, the Bulletin states, this standard is met by showing that the entity has purposefully directed its activity into a jurisdiction. In the case of sales taxes, the Quill decision made clear that physical presence was a requirement.

For Commerce Clause purposes, a more rigorous standard has been set by precedent. In Complete Auto Transit v. Brady, 430 U.S. 274 (1977), the United States Supreme Court held that in order for a state tax to be valid under the Commerce Clause, it must:

(1) Apply to an activity with a substantial nexus to the taxing state;

(2) Be fairly apportioned;

(3) Not discriminate against interstate commerce; and

(4) Be fairly related to the services the state provides.


Building upon that foundation, in June 2018, the United States Supreme Court handed down Wayfair v. South Dakota, 138 S.Ct. 2080 (2018). The Bulletin focuses on the Wayfair discussion of “physical presence” not being a necessary factor for nexus. While the Bulletin notes that whether the “physical presence” standard also applied to net income tax (the Quill case dealt with sales tax) was an open question, the Bulletin sets forth the Department’s position that “at least prospectively, no physical presence standard exists for purposes of limiting the ability of a state to impose a net income tax on an out of state taxpayer as long as the constitutional requirements under the Due Process and Commerce Clauses of the United States Constitution are satisfied.” Bulletin, p.2.

The Bulletin states that Wayfair has confirmed that out of state corporations are considered to be doing business in Pennsylvania and/or carrying on activities in Pennsylvania to the extent they are taking advantage of the economic marketplace of the Commonwealth regardless of whether they are physically present in Pennsylvania. Therefore, the Bulletin makes clear the Department will require such taxpayers to begin filing Corporate Tax Reports if they meet the minimum thresholds for nexus under the United States Constitution. In fact, the Department will deem there to be a rebuttable presumption that those taxpayers having $500,000 or more of direct or indirect gross receipts from any combination of the following, sourced to Pennsylvania pursuant to the sales factor rules contained in 72 P.S. §7401, have nexus:

(1) Gross receipts from the sale, rental, lease or licensing of tangible personal property;

(2) Gross receipts from the sale of services; and/or;

(3) Gross receipts from the sale or licensing of intangibles, including franchise agreements.

The Bulletin recognizes that taxpayers without physical presence in the Commonwealth still may have the protection of P.L. 86-272. In that case, taxpayers should continue to file an RCT-101 and compete the necessary schedules to claim the exemption.

Finally, the Bulletin notes that the taxpayers with nexus as provided for in the Bulletin should file Corporate Tax Reports starting on or after January 1, 2020.

If you have questions about the Bulletin or any state tax matter, please feel free to contact a member of the McNees State and Local Tax team.



Our annual SALT seminar is attended by over 100 people interested in learning about the latest development in Pennsylvania state and local taxes.  Once again, the 2019 McNees SALT Seminar will be held at the Hollywood Casino in Grantville, Pennsylvania.  We are now in the process of planning a seminar that will provide valuable content.   More details will follow, but for now, please save the date of Friday, November 1, 2019!  We look forward to seeing you on November 1!

The Pennsylvania General Assembly recently passed an amendment to the state’s sales tax law that will be of interest to breweries operating taprooms in Pennsylvania. Effective October 1, 2019, breweries must begin collecting sales tax on each individual retail sale to patrons, but on a reduced tax base intended to approximate the amount of tax due at the wholesale level. The change in the law is a compromise measure intended to place breweries and other retail establishments on equal footing. While breweries will have to begin collecting sales tax on their products sold at taprooms, the special tax base makes for a much easier pill to swallow than what was initially floated by the Pennsylvania Department of Revenue (“DOR”).

Generally, Pennsylvania imposes sales tax on the sale of liquor and malt or brewed beverages at the wholesale level.  The sale of alcoholic beverages to patrons by bars and restaurants with retail liquor licenses is not subject to tax. A plain reading of the sales tax statute could have permitted the DOR to require the collection of tax on all sales of beer by a manufacturer without a “retail” liquor license. (Brewery and brewery pub licenses are not considered “retail” liquor licenses.) However, sales tax historically was not collected on taproom sales.

Then, in July 2018, the DOR issued Sales Tax Bulletin No. 2018-02, which indicated that, effective January 1, 2019 (later extended to July 1, 2019), Pennsylvania breweries would be required to collect sales tax on all product sold to the public for on-premises or off-premises consumption. Breweries were given an option to include the sales tax in the advertised price of their product or to separately state and charge sales tax on each individual sale.

The sales tax on taproom sales was going to be imposed on the full retail price of the beer.  Thus, taproom sales would have been subject to a much higher effective tax rate than the tax rate imposed on traditional beer sales at the wholesale level. The craft beer industry fought for “tax parity,” and the result was an amendment to the tax code whereby sales tax will be imposed on only 25% of the retail sales price of malt or brewed beverages sold by a manufacturer directly to the ultimate consumer for consumption on or off the premises. This is intended to approximate the amount of tax that would be due at the wholesale level. The tax code amendment is effective for sales occurring after September 30, 2019. The delayed effective date will allow breweries time to update their systems to comply with the new sales tax rules.



The Pennsylvania State Tax Equalization Board (“STEB”) has released the Common Level Ratio (“CLR”) real estate valuation factors for 2018.  The common level ratio is the ratio of assessed value to market value used to value properties in a particular county for property tax purposes, and is used for purposes of appealing property tax assessments effective for tax year 2020.  Click here to see the 2018 CLR list.  To determine if your property is currently over-assessed – take the properties current assessed value and divide it by the CLR listed for your county.  This will give you your property’s current implied fair market value.  If you know that your property’s current fair market value is for example $100,000 (based on a recent appraisal value) and the current implied fair market value is $200,000, then your property is over-assessed and an annual assessment appeal should be filed to lower your assessed value and consequently your real estate taxes.  If you have any questions regarding the CLR and how to determine if your property is over-assessed, please call Paul Morcom (717-237-5364) or Randy Varner (717-237-5464) to discuss.

The annual assessment appeal deadline of August 1, 2019 for assessed values effective for tax year January 1, 2020 is quickly approaching for the following Pennsylvania Counties:

Adams, Bucks, Butler, Cambria, Chester, Dauphin, Delaware, Erie, Fayette, Franklin, Indiana, Lancaster, Lawrence, Lehigh, Luzerne, Monroe, Montgomery, Northampton and York.

The annual assessment appeal deadline of September 1, 2019 for assessed values effective for tax year January 1, 2020 is on the horizon for the following Pennsylvania Counties:

Armstrong, Beaver, Bedford, Blair, Bradford, Cameron, Carbon, Centre, Clarion, Clearfield, Clinton, Columbia, Crawford, Cumberland, Elk, Forest, Fulton, Greene, Huntington, Jefferson, Juniata, Lackawanna, Lebanon, Lycoming, McKean, Mercer, Mifflin, Montour, Northumberland, Perry, Pike, Potter, Schuylkill, Snyder, Somerset, Sullivan, Susquehanna, Tioga, Union, Venango, Warren, Washington, Wayne and Westmoreland.

There are a few oddball counties that have to be different and thus the annual assessment appeal deadline for Berks County is August 15, 2019 and Wyoming County is August 31, 2019.  Philadelphia County is not a specific date, but instead the annual appeal deadline is the first Monday in October, which is the 7th this year. Allegheny County is the only county that has a deadline, March 31, that is actually during the year that you are appealing. Thus, the appeal deadline for assessed values effective for tax year January 1, 2020 in Allegheny County is March 31, 2020.

Each county has its own separate set of local rules pertaining to assessment appeals that need to be navigated in order to successfully file an annual assessment appeal.  If you own or lease commercial or industrial properties in Pennsylvania, please make sure that you are aware of these appeal deadlines. Additionally, if you are not sure if you should file an appeal on your property, please contact either Paul Morcom at 717-237-5364 or Randy Varner at 717-237-5464 to determine if an appeal is warranted for tax year 2020.

On July 26th from 12:30 – 1:30 p.m., McNees State and Local Tax team members Randy Varner and Paul Morcom will conduct a webinar for the Pennsylvania Society of Tax and Accounting Professionals.  The webinar will focus on reverse audits and recovering overpaid sales tax.  For more information, go to https://www.pstap.org/professional-education-events/cpe-catalog/?eventid=1389


The City of Philadelphia’s Office of Property Assessment has recently begun to send out Notices of Property Market Value for 2020.  If you think your proposed 2020 Market Value is incorrect, you may request an informal review by filing a First Level Review form by May 24, 2019.  If you choose to file a formal appeal, the appeal application must be submitted to the Board of Revision of Taxes on or before October 7, 2019.  Unlike most assessment appeal deadlines in Pennsylvania, which are either August 1 or September 1, Philadelphia’s assessment appeal deadline is the first Monday in October, which is October 7 this year.

Please contact Paul Morcom (717-237-5364) or Randy Varner (717-237-5464) if you have any questions regarding your 2020 Market value or Philadelphia’s appeal procedure.

Property owners in Allegheny County have until April 1, 2019 to file assessment appeals this year.  The usual appeal deadline in Allegheny County is March 31.  However, because March 31 falls on a Sunday the deadline is moved to the next business day, or April 1, 2019.

If you have any questions about appealing your property in Allegheny County, please contact Paul Morcom (717-237-5364) or Randy Varner (717-237-5464).