Pa.'s quirky sales tax: soft drinks taxed but not candy – Pocono Record

Chances are good you’re keenly aware when the warm woolen mittens, diamond pendant or other important gifts on your holiday shopping list go on sale. But do you know which items are subject to Pennsylvania sales tax?
Did you know leather clothing is exempt, but items made of fur — even imitation fur — are taxable? Or that swimwear is taxable while lingerie gets a pass?
If you need a toothbrush, toothpaste or dental floss, you won’t pay the state sales tax. Yet mouthwash, shampoo and antiperspirant are taxable.
Uneven, unfair, bewildering. Those are all words that could be used to describe Pennsylvania’s decades-old sales tax system created in 1954. Back then, the tax was 1 percent vs. today’s 6 percent.
Sales tax is a major source of revenue for the state, bringing in some $8.6 billion in the 2016-17 fiscal year, which gets deposited into the general fund. Sales tax on motor vehicles netted another $1.4 billion that year. 
Gov. Tom Wolf has looked at broadening the tax, chiefly to help balance the budget. But figuring out how the system of oddities has developed over the years is challenging. 
The Pennsylvania Department of Revenue declined to comment for this article, saying its job was to administer the sales tax program, not write the rules.
Mr. Wolf’s office also declined to comment.
Sparing the necessities
In the beginning, the idea was to exempt so-called necessities to ease the burden on lower-income residents. That’s why most food, clothing and medicines are nontaxable.
But the difference between what is considered essential or a luxury can be murky. 
“Many exceptions arose as a result of politically connected industries or demographic groups being able to demand carve-outs,” said economics professor Antony Davies, who studies such things at Duquesne University’s Palumbo-Donahue School of Business.
Odd exceptions also can be the result of “politicians who think it’s their business to tell the rest of us how to live,” he said.
“What’s left is not something that is a product of logic anymore,” he said.  “You’ll blow your mind trying to make sense of it.”
Consider that in the home state of The Hershey Co., candy and gum don’t get taxed, while soft drinks and fruit drinks with “less than 25 percent natural fruit juice” are taxable. Apparently that Kit Kat bar is a necessity, while an ice-cold Coke isn’t.
It’s not hard to find other seemingly illogical applications of the sales tax. Gardening gloves are exempt, but rubber gloves are taxable. Bottled water and vitamins aren’t taxed, but vitamin water is taxed.
Generally, clothing is not taxed — something that has helped Pennsylvania retailers bring in customers from nearby states such as Maryland, Ohio and West Virginia by the busload.
One of the major exceptions to that rule is sporting goods and clothing “normally worn or used when engaged in sports,” according to the state’s sales tax guide. That could explain, for example, why baseball gloves, helmets and football uniforms are taxable.
But why is “blaze orange” hunting wear nontaxable? Isn’t it normally worn when engaged in hunting? You don’t often see people donning neon orange vests around the office or grocery store. The Pennsylvania Game Commission, which issued some 900,000 hunting licenses last year, said it had no explanation.
On the other hand, swimwear is taxed. Millions of sunbathers and recreational swimmers apparently are in need of a good lobbyist.
It’s not just clothing that gets complicated. There are food items that if purchased at a grocery or convenience store are nontaxable, but if purchased at a restaurant, cafeteria or the like are subject to tax.
For example, a bag of chips or package of cookies would not be taxed at the supermarket but would be taxed along with that cup of soup at a lunch counter.
Restaurants and most other places that serve ready-to-eat food are required to charge sales tax on meals and virtually everything else, including prepackaged foods and snacks sold tax-free at a grocery store, convenience store or vending machine.
The exceptions — there always seem to be exceptions — include bottled water, ice and, of course, candy and gum.
Tax on a Steelers ticket?
Marc Stier, director of the Pennsylvania Budget and Policy Center in Philadelphia, a left-leaning think tank and research center, said the state’s quirky, often illogical sales tax system isn’t unique.
“We aren’t alone. [Sales tax programs] are odd from state to state,” he said. Five states — Alaska, Delaware, Montana, New Hampshire and Oregon — don’t even have a sales tax.
Mr. Stier believes the most inequitable part of Pennsylvania’s system is that it generally taxes goods but not services.
Hair salon services, dry cleaning services and personal services including pet care, personal trainers, dating services and body tattooing are nontaxable.
Tickets to movie theaters, sporting events and amusement parks also are exempt.
“If you buy a washing machine, you pay sales tax. If you buy detergent to put into it, you pay sales tax. But if you send your clothing to a dry cleaner, you don’t pay sales tax because that’s a service,” Mr. Stier said.
“We don’t tax business services,” he said. “If you buy a computer program in a box, it’s a good and it’s taxed. If a business buys custom-made software, there’s no tax on that.”
Mr. Stier thinks that if sales tax were applied to services, the overall rate could be lowered and would be less of a burden on lower-income families who tend to use fewer services.
“If someone can buy a $150 theater ticket or spend even more to see the Eagles play, they ought to pay a sales tax,” he said.
Grab the toilet paper
Pennsylvania’s sales tax reached the current level of 6 percent in 1968 — the year Lyndon Johnson was president and Martin Luther King Jr. and Sen. Robert F. Kennedy were assassinated. Since 1994, residents of Allegheny County have had the pleasure of paying an additional 1 percent sales tax.
Mr. Wolf has tried to expand the tax to business software, Mr. Stier said. “But the people who write business software go crazy. They lobby legislators. They say, ‘You undermine our ability to compete with other states’ and they fight back.”
The governor also has unsuccessfully pushed to eliminate other exemptions to include a host of other services and products, such as movie tickets, sporting events, personal services, over-the-counter drugs, and candy and gum to help balance the budget.
In 2015, his office estimated that taxing cable television programming would bring in $260 million a year; hair, nail and skin care services, $157 million; over-the-counter drugs and vitamins, $152 million; candy and gum, $108 million; movie tickets and postproduction services, $96 million; and spectator sports, $89 million. 
At the same time, Mr. Wolf proposed raising the rate from 6 percent to 6.6 percent.
Even if those ideas didn’t get much traction, Mr. Stier thinks the system is overdue for an overhaul.
“In the 1950s, someone must have said mouthwash was a luxury. It’s weird,” he said. 
For now, the next time you reach for a Kleenex to catch a sneeze or dab your eyes, consider using toilet tissue instead. Toilet paper isn’t taxable. But you’ll pay the toll on facial tissue, paper towels, paper napkins — and paper toilet seat covers.
A guide to taxable and nontaxable items in Pennsylvania is available at www.revenue.pa.gov

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