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Senator Pat Browne


Senate Appropriations Committee Report
December 2017

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(all tables and graphics can be viewed online)

**Earlier this week, the Fitch rating agency affirmed the Commonwealth's debt rating at AA– but assigned a Negative Outlook due to the use of non-recurring budget balancing items in recent years, a lack of reserves, continued cost pressures and modest revenue growth.


Change Coming Soon for Online Retailers

With the holiday shopping season in full swing, now is a good time to highlight a change included in Act 43 of 2017 that will help level the playing field for Pennsylvania’s brick-and-mortar retailers.  For decades, Federal Commerce Clause court decisions generally have prohibited states from requiring sellers to collect and remit their sales tax unless the seller has a bright line nexus, or connection, with a state.  The requisite connection establishing nexus is often in the form of a brick-and-mortar physical presence.  In the age of Internet shopping, many states, including Pennsylvania, are looking for ways to collect sales and use tax due on these purchases while not running afoul of the Federal prohibitions. 

For transactions occurring on or after April 1, 2018, online marketplace facilitators, sellers and referrers having aggregate sales into Pennsylvania of at least $10,000 in the previous calendar year must elect to either collect and remit sales tax or comply with notice and reporting requirements.  Notice and reporting requirements include the following:

  • Posting notice on its platform informing purchasers having a delivery location in PA that sales tax may be due on the purchase and that PA requires the purchaser to file a use tax return.
  • Providing a written notice to each purchaser at the time of sale stating that sales tax is not being collected and the purchaser may be required to remit use tax to PA.
  • Providing instructions for obtaining information from the Department of Revenue on how to remit use tax.
  • Prominently displaying this information on each invoice, order form, sales receipt or similar document.
  • Filling a report with the department no later than February 28 of each year providing the names of Purchasers, including mailing address, address to which the product was delivered, aggregate dollar amount of purchases, name and address of the remote seller, marketplace facilitator or market place seller.

Act 43 also includes substantial fines and penalties for failure to comply with the notice and reporting requirements.  These changes are expected to generate increased sales and use tax revenues of $8.2 million in fiscal year 2017-18 and $50.5 million in fiscal year 2018-19, when the provisions are effective for a full year.


Commonwealth Financing Authority Approves $1.5 Billion Securitization

On November 14, the Commonwealth Financing Authority unanimously approved a resolution to securitize $1.5 billion of tobacco settlement fund revenues.  Included as part of the FY 2017-18 budget, this revenue will be used to offset last year’s deficit, which was approximately the same amount.  The Commonwealth should receive the revenue in 60 to 90 days.


Economic Indicators: December 2017 

With Thanksgiving behind us and Christmas just weeks away, many of us do plenty of traveling to visit family, friends and loved ones.  AAA estimated that Thanksgiving 2017 would be the most heavily trafficked holiday since 2005, estimating that nearly 46 million Americans would be traveling more than 50 miles from their home via car.  This increase in travel coupled with strong fall consumer demand, and a market that continues to recover after a hurricane season that hit our Nation’s refining industry hard, has caused gasoline prices to be the most expensive since 2014.  The good news is prices are expected to decline through the month of December and into early 2018. 

With the holiday season, so too comes the colder weather.  The U.S. Energy Information Administration is forecasting an increase in expenditures for home heating this winter compared to last.  Mild winter weather over the past two years has resulted in a reduction of consumption across all heating utilities.  A forecast for a return to average winter weather, causing an increase in consumption, is the driving factor in the expenditure increase over last year.  Both electric and natural gas are expected to experience modest price increases.  An increase in the price of crude could cause residential customers to see an increase of $0.25 - $0.30 per gallon compared to last year.  The chart below shows the reduced consumption of heating alternatives over the past two winters due to more mild weather.


Official Revenue Estimate Certified in November 

General Fund revenue collections for the month ended November 2017 totaled $2.3 billion, which was $26.7 million, or 1.2%, above estimate.  Fiscal year-to-date collections total $11.4 billion, which is $26.1 million, or 0.2%, above estimate.  The 2017-18 Official General Fund Revenue Estimate was certified in November at $34.7 billion. The monthly distribution of the Official Estimate is now available.  Prior to November, revenue collections were being compared against the Independent Fiscal Office’s revenue estimate, which was prepared in June.

Total General Fund revenue for November 2017 was $318.6 million, or 16%, more than General Fund revenue collected in November 2016.  However, November 2016 revenues did not include a $100 million transfer of Liquor Store Profits, which did occur this November.  Also, last year’s statutory change made to corporate net income tax (CNI) filing dates took effect this year and resulted in approximately $60 million of additional CNI tax collections this November compared to last.  Last year, these collections were due in the month of October.   After adjusting for these differences, November 2017 revenues are still approximately $159 million, or 8%, more than November 2016.

For the fiscal year-to-date, total General Fund revenue is $577.8 million, or 5.3%, higher than FY 2016-17.   Total tax revenue growth for FY 2017-18 is 4.3% higher than it was through November of FY 2016-17.  The lower tax revenue growth of 4.3% as compared to total growth of 5.3% is mostly a result of the mismatched timing of the $100 million Liquor Store Profit transfer.

Motor License Fund collections were $24.3 million, or 10.2%, above estimate for the month of November. The Motor License Fund is $24 million, or 1.9%, above estimate for the year.  Motor License Fund revenues are 15.4% more than last year through November.
 


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Allentown
702 W. Hamilton Street
Suite 101
Allentown, PA 18101
610-821-8468
Toll-Free: 1-800-280-7728
FAX: 610-821-6798
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Friday
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Harrisburg, PA 17120
717-787-1349
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Upper Macungie Township Building
8330 Schantz Road
Breinigsville, PA 18031
610-366-2327
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Northern Lehigh County
North Whitehall Township Building
3256 Levans Road
Coplay, PA 18037
610-769-5566
FAX: 610-769-5568
By Appointment Only


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