If you have been following this story for a while, you are keenly aware that the Pennsylvania Department of Revenue planned a change in policy for breweries’ direct sales to consumers.
The story started in 2015 when this author obtained a letter from the Department of Revenue that suggested that breweries were exempt from paying tax on sales to consumers. When the Department of Revenue signaled a change was coming, the Brewers of Pennsylvania and I were summoned to Harrisburg.
After a year and-a-half of discussions with the Department of Revenue and working directly with the Governor’s team and the Pennsylvania Legislature, a new tax law was enacted specifically addressing a brewery’s sale to its customers which goes into effect next month. Starting for sales October 1, 2019, Pennsylvania breweries, taprooms (storage locations) and couplets (breweries with a Retail License or “GP License”) must collect a “use tax” on all direct sales to consumers, whether those sales are for on-or off-premise consumption.
This new tax replaces a more onerous tax which the Brewers of Pennsylvania successfully delayed and, ultimately, avoided. For most of the Commonwealth, the new tax will result in reporting and paying 1½% of the retail sales to consumers to the Department of Revenue. Additional local taxes are due in Philadelphia and Allegheny Counties at the rate of 2% and 1% of 25% of the retail sale.
The important points are as follows:
- You cannot pass this tax on to the consumer, i.e., while you are free to raise your price you cannot show this tax on your receipt to the consumer.
- The tax is applied by multiplying 25% of the total retail sale and, then, multiplying by your applicable local sales tax: 6% for most of the Commonwealth, 8% in Philadelphia, and 7% in Allegheny.
- I urge you to follow this simple “how-to” using the below Sales and Use Tax Form to report and pay this tax (it is the same form currently used, with additional instructions in the margin).
There is also a Tax Bulletin issued by the Department of Revenue posted on its website and soon there will be an FAQ which yours truly worked on with the Department of Revenue that will be posted on the Department of Revenue website.