Taxation

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If you have been paying attention to what is happening in the brewing industry in Pennsylvania, you’ve noticed that there has been much discussion about the imposition of sales tax on beer manufactured in Pennsylvania and how that might affect consumer prices.  There was a lot of uncertainty about how new regulations from the Department of Revenue will be instituted and how sales tax will be charged on beer produced within the state. You may have read my post Sales Tax on Breweries back in the fall when we knew that it was coming but nobody was certain how it would ultimately be implemented. Now we have some guidance. As part of the 2019-2020 budget for Pennsylvania, the General Assembly was able to include some language that clarifies from a legislative standpoint (as opposed to internal regulations that the Department of Revenue was applying) how sales tax will be charged.

The issue that made this particularly difficult was the potential for inconsistencies in the amount of tax imposed, based on how the beer was sold.  For instance, in my previous post, I used the example of a $40 keg of beer that is sold at wholesale.  For a restaurant or other brewery buying that keg at wholesale, sales tax is paid and remitted to the Department of Revenue based on the $40 wholesale price, so $2.40 would be remitted for sales taxes.  Contrast that with the same keg of beer that is sold on site by the brewery that produced it.  If that brewery does not wholesale beer, under the guidelines issued by the Department of Revenue, the brewery would have to impose sales tax on each pint of beer sold from that keg.  Assuming approximately 120 pints of beer are sold from that keg and each pint is sold for $5.00, the brewery would have to charge and remit a total of $36.00 in sales tax.   With this new legislation, there should now be some consistency in terms of how sales tax is charged, regardless of whether a brewery wholesales its beer or whether they sell it entirely at their own property.…
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Now that April 15th has passed, the dust is still settling about how tax changes impacted taxpayers and many of us were surprised at the effects. The effects of the new tax laws also changed child and spousal support payable in Pennsylvania.

As of January 1, 2019 new guidelines are now in effect. These have been put in place largely to deal with the issue that alimony and temporary alimony or support payments to a spouse are no longer tax deductible by the person paying support, nor includable as income by the recipient. These new guidelines pertain to any new orders after January 1, 2019, but not the modification of prior orders. So it’s important to understand whether your case will be calculated under the old or new guidelines, as it makes a difference.…
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The Internal Revenue Service has announced the 2019 optional standard mileage rates which are used to compute the deductible costs of operating a vehicle for business, charitable, medical or moving expense purposes.

Beginning on January 1, 2019, the standard mileage rate for use of a car, van, pickup or panel truck is 58 cents per mile driven for business use (up from 54.5 cents in 2018), 20 cents per mile driven for medical or moving purposes (up from 18 cents in 2018), and 14 cents per mile driven in service of charitable organizations.…
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The Pennsylvania Department of Revenue, somewhat quietly, has issued a sales tax bulletin recently setting forth some guidance which lays the groundwork for the Department of Revenue to begin imposing a 6% sales tax on products served by Pennsylvania breweries in their taproom to customers. This would include draft beers that are sold onsite and six packs and growlers which are sold for off premises consumption.

There didn’t appear to be a lot of buzz when this guidance was passed by the Department of Revenue. Central Penn Business Journal published an article highlighting the double hit that many breweries are currently taking given the tariffs  that have been imposed by the Trump Administration on steel. What is of particular concern is the seemingly unfair and inconsistent manner in which the sales tax would be imposed on the sales made by breweries when compared to a restaurant.…
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As we move through the last quarter of 2018 and approach the end of the tax year, many families begin to gather necessary information for tax filings.  For adoptive parents, the process of claiming their adopted child as a dependent on their annual income tax returns can be somewhat confusing when the adoption occurs later in a tax year and certain information and documentation cannot be obtained prior to tax filing deadlines.

When children are adopted, their legal status as dependents and their change of name are completed the day of their adoption finalization hearing.  Typically immediately following the adoption finalization hearing, the judge overseeing the hearing will execute an Adoption Decree and shortly thereafter, the County court office which is responsible for processing adoption paperwork will issue a Certificate of Adoption.  Those documents evidence an adoptive child’s new name and identify their legal parents.  That information should be sufficient to claim a child dependency exemption for an adopted child.  However, additional details are required in order to actually take an appropriate child dependency exemption for an adopted child. …
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If you’re thinking about starting a business in Pennsylvania, an important part of the financial side of your business plan is to evaluate the impact of taxes on your new business. Your lawyer and your accountant are key members of your business team that can help you evaluate what type of entity to form, how that entity should be taxed, and the taxes applicable to your business.

Part three of this series discusses taxes associated with ownership of real estate and employment taxes. Part one discussed sales and use taxes and others that may apply based on the nature of the goods you sell or the services you provide. Part two discussed taxes that may apply depending on the way your business is organized.

This post is not intended to be a substitute for legal or tax advice from your lawyer or accountant – you should talk to them in order to obtain advice to address your specific situation. Need a lawyer or an accountant? We might be able to help you with that!…
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If you’re thinking about starting a business in Pennsylvania, an important part of the financial side of your business plan is to evaluate the impact of taxes on your new business. Your lawyer and your accountant are key members of your business team that can help you evaluate what type of entity to form, how that entity should be taxed, and the taxes applicable to your business.

Part two of this series is a high level overview of the common taxes that you may be subject to depending on the way your business is organized. Part one discussed sales and use taxes and others that may apply based on the nature of the goods you sell or the services you provide.

This post is not intended to be a substitute for legal or tax advice from your lawyer or accountant – you should talk to them in order to obtain advice to address your specific situation. Need a lawyer or an accountant? We might be able to help you with that!…
Continue Reading

If you’re thinking about starting a business in Pennsylvania, an important part of the financial side of your business plan is to evaluate the impact of taxes on your new business. Your lawyer and your accountant are key members of your business team that can help you evaluate what type of entity to form, how that entity should be taxed, and the taxes applicable to your business.

Part one of this series is a high level overview of the common taxes that you may be subject to depending on the nature of the goods or services your business provides.

This post is not intended to be a substitute for legal or tax advice from your lawyer or accountant – you should talk to them in order to obtain advice to address your specific situation. Need a lawyer or an accountant? We might be able to help you with that!…
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In the summer of 2017, property tax assessments and assessment appeals were a big topic of discussion.  That is because 2017 marked the countywide reassessment for all properties.  The County Tax Assessment Appeal Board heard tens of thousands of assessment appeals.  Some of the appeals resulted in substantial savings for the property owners.

This blog…

We have written a few articles about the changes to the Tax Code.  The change that many professionals are trying to figure out is the 20% deduction for individuals using a pass-through business entity such as a partnership, LLC, “S” corporation or sole proprietorship.  Code Section 199A is not just a minor change in already settled law.  It is a brand new concept.  Even the AICPA has requested – twice – that the IRS and Department of the Treasury provide guidance on the pass-through deduction.

There are a couple of key concepts that are building blocks to understanding Section 199A.  Some of these are:

  • The business must be a “qualified business.” A qualified business is anything that is not a “specified service trade or business.”  This means that service businesses such as accounting, actuaries, brokers, consultants and lawyers are not qualified businesses and cannot take advantage of the deduction.  Engineers and architects are qualified businesses, and the owners may use the deduction.

Of course, this exclusion has an exception.  If a business would otherwise be disqualified, but the taxpayer has a taxable income less than $207,500.00 for an individual ($415,000.00 for taxpayers filing a joint return), then the taxpayer may be eligible for the deduction.  In this case the deduction is phased out depending on how close the income is to that threshold amount.

  • The deductible amount requires a lot of calculation. The deduction that a taxpayer can take is the lesser of (A) 20% of the taxpayer’s business income or (B) the greater of either:  (i) 50% of the W-2 wages paid by the business; or (ii) the sum of 25% of the W-2 wages paid by the business plus 2.5% of the unadjusted basis of qualified property of the business.

But even this confusing definition has different qualifiers.  For example, qualified business income excludes net capital gain.  This means that the higher the ratio of net capital gain to taxable income, the lower the pass-through deduction.  The deduction favors companies with employees because 50% of the W-2 wages paid could be deductible.  On the other hand, if a company has few employees, but creates income through its depreciable assets (such as landlords), they can deduct up to 2.5% of the unadjusted basis of the property.…
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