Pennsylvania clarifies telecom/electric tax rules


Resale exemption certifications announced for industry gross receipts taxes


On Jan. 23, 2020, the Pennsylvania Department of Revenue (Department) issued Corporation Tax Bulletin 2020-01, announcing new resale exemption certification requirements for purposes of the Telecommunications Gross Receipts Tax (TGRT) and the Electric Gross Receipts Tax (EGRT), applicable to sales of telecommunications and electricity after July 1, 2020.1 The Bulletin follows a recent trend by the Department to closely scrutinize gross receipts tax (GRT) exemptions. Obtaining the approved resale form from all resellers is imperative. All resellers should ensure they have the approved forms from the Department before July 1, 2020.






GRTs are imposed on the total receipts earned by a business in an enumerated industry without taking into consideration losses or any deductions such as operating expenses or depreciation. Pennsylvania first adopted the GRT during the late 1800s, and the tax originally applied to the gross receipts of Pennsylvania’s railroad, canal, and transportation companies.2 As the economy evolved, Pennsylvania continually updated the statute to include emerging technologies, leading to a unique collection of taxed industries. The GRT is currently imposed on industries including pipeline, conduit, steamboat, canal, slack water navigation, and transportation companies; telephone, telegraph and mobile telecommunications companies; electric light, water power, and hydroelectric companies; express companies; palace car and sleeping car companies; and freight and oil transportation companies.3


The TGRT and the EGRT


The TGRT applies to gross receipts received from telegraph or telephone messages transmitted within Pennsylvania, including gross receipts from mobile telecommunications services and interstate landline calls either originating or terminating in Pennsylvania and billed to a service address in Pennsylvania.4 The gross receipts from these transmissions are taxed at a rate of 50 mills, or 5%.5

The EGRT applies to electric companies doing business in Pennsylvania and engaging in the electric light and power business. The tax is imposed on the gross receipts from intrastate sales of electric energy.6 The gross receipts from electricity sales are taxed at a rate of 59 mills, or 5.9%.7

Both the TGRT and the ERGT provide for various exclusions, including sales for resale made to otherwise taxable entities.8 It is important to note that unlike sales tax, the GRT is imposed on the seller and con not be directly passed through to the customer.




Corporation Tax Bulletin 2020-01


The Bulletin states that taxpayers claiming a resale exemption from GRT must be able to substantiate that their counterparty actually resold the commodity in a transaction that ultimately results in GRT being paid. The Department relies on American Electric Power Supply Corporation v. Commonwealth for the proposition that a reseller subject to the GRT must prove that the transaction qualifies for the resale exemption.9 In recognition of this rule, the Department announced the creation of a Sale for Resale Acknowledgment Form for resellers to provide to suppliers, applicable to sales of telecommunications and electricity after July 1, 2020.

The Bulletin provides that the Department will issue annual Acknowledgment Forms to resellers reporting both taxable sales and sales for resale to confirm that they are subject to GRT and reporting GRT under Pennsylvania law. Suppliers claiming a GRT sale for resale exemption will be required to obtain a copy of the Acknowledgment Form from the reseller. All resale exemptions are subject to Departmental review and verification. Telecommunications and electricity suppliers are required to maintain copies of each Acknowledgment Form in order to support their resale exemption claims.

According to the Bulletin, the Department will supply an Acknowledgment Form to each qualified reseller by June 15, 2020. The form will be applicable through June 30, 2021, with new Acknowledgment Forms to be supplied in June of each year. Resellers that do not receive a form by June are encouraged to contact the Department.10






Applicable to sales of telecommunications and electricity after July 1, 2020, the Bulletin comes in response to the Commonwealth Court’s American Electric decision, which clarified that companies claiming a resale exemption on sales of commodities must verify that the commodity was resold and that tax was paid. The Bulletin follows the Department’s attempts to audit telecommunications and electricity suppliers and tax resale sales lacking the proper documentation provided by resellers. The new rule is likely to reduce audit exposure for compliant suppliers having sound resale certificate collection and retention procedures in place, and require other suppliers to improve their efforts in this area in the coming months.

One nuance of the Bulletin is that the Department will determine which telecommunications or electricity resellers are eligible to receive the Sale for Resale Acknowledgement Form. In other words, the form will not be made publicly available. An open question is whether resellers not previously registered for GRT will now be required to register for GRT in order to provide their suppliers with the appropriate Acknowledgment Form. Resellers should be cognizant of the June 15, 2020, date by which Acknowledgment Forms will be issued. If resellers do not receive an Acknowledgement Form by this date, they will have 15 days to contact the Department directly to obtain the form. Given that Acknowledgment Forms are applicable through June 30 of each year, it is unclear whether wholesalers will need to collect two Acknowledgment Forms from the same reseller in order to cover sales occurring during the first and second half of the calendar year.

Suppliers will be required to remit the applicable GRT in the absence of a valid Acknowledgement Form. Therefore, it is possible that multiple instances of tax may occur where there are multiple resale transactions and if all Acknowledgement Forms are not obtained. Further, contracts may be in place establishing the sale price for commodities, or market pricing may not consider potential taxes imposed. These factors may limit the ability to recover the GRT imposed on resale transactions.

For these reasons, it is important for suppliers to understand all resellers to whom commodities are sold to ensure the appropriate Acknowledgment Forms are received in advance of July 1, 2020, or to adjust pricing accordingly.


1 Corporation Tax Bulletin 2020-01, Telecommunications and Electric Gross Receipts Tax – Sales for Resale, Pennsylvania Department of Revenue, Jan. 23, 2020.
2 As described in Verizon Pennsylvania, Inc. v. Commonwealth, 127 A.3d 745 (Pa. 2015).
3 72 PA. STAT. § 8101(a), (b); Pennsylvania Tax Compendium, Pennsylvania Department of Revenue, Feb. 2019.
4 72 PA. STAT. § 8101(a)(2).
5 The TGRT rate consists of a base rate of 45 mills plus a surtax of 5 mills. 72 PA. STAT. § 8101(a).
6 72 PA. STAT. § 8101(b), (b)(1).
7 The EGRT rate consists of the standard utility GRT rate (44 mills) plus the Revenue Neutral Reconciliation (RNR) mechanism for adjusting the base rate on sales of electric energy, which was determined by the Department through the 2002 tax year. Act 89 of 2002 set the permanent RNR tax rate paid by electric companies at 15 mills for tax years 2003 and after. 72 PA. STAT. § 8101.2; 66 PA. CONS. STAT. § 2810(c); Pennsylvania Tax Compendium, Pennsylvania Department of Revenue, Feb. 2019.
8 72 PA. STAT. § 8101(a)(2)(ii), (b)(1).
9 American Elec. Power Supply Corp. v. Commonwealth, 160 A.3d 950 (Pa. Cmwlth. 2017), aff’d, 199 A.3d 880 (Pa. 2018). In American Electric, the Pennsylvania Commonwealth Court ruled that an electric energy company did not qualify for the GRT resale exemption and was therefore liable for prior period taxes. The taxpayer sold electricity to the Letterkenny Industrial Development Authority (LIDA), an industrial development authority organized under state law to operate an electrical distribution system. LIDA resold the electricity to its own customers. The taxpayer argued that it was not subject to the EGRT and, in the alternative, that its sales to LIDA were exempt under the resale exemption. The taxpayer claimed it did not qualify as an electric light company as defined under the statute and was not in the business of selling electricity because it was an electricity wholesaler. Broadly interpreting the statute, the court concluded that the taxpayer was subject to GRT because selling electricity at wholesale qualifies as the business of selling electricity. Alternatively, the taxpayer argued that its sales to LIDA qualified under the resale exemption, because it was making sales to a political subdivision as defined under the statute. The Court found that the term “political subdivision” did not apply to a board created by the government because it was one step removed from the government. Finding that the taxpayer’s sales did not qualify for the resale exemption, the court concluded that American Electric was liable for EGRT owed on the sale of electricity.
10 Resellers may contact the Department at or (717) 772-2960.







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