CHAPTER 31. IMPOSITION

§ 31.1. Persons and sales subject to tax.

 An excise tax shall be imposed upon the sale at retail or the use within this Commonwealth of tangible personal property and certain services, unless otherwise exempted.

   (1)  Sale at retail includes a transfer for value of the ownership, custody or possession of tangible personal property. ‘‘Rentals or leases’’ of tangible personal property and the grant of a license to use or consume are sales at retail.

   (2)  Use includes the exercise of a right or power incidental to the ownership, custody or possession of tangible personal property and shall include, but not be limited to, transportation. Use also includes the obtaining of taxable services.

   (3)  The term tangible personal property includes, but is not limited to, the following:

     (i)   Goods, wares and merchandise, other than household supplies purchased from retail establishments for residential consumption.

     (ii)   Steam, electricity and fuel oil, when not purchased directly by the user solely for his own residential use.

     (iii)   Natural, manufactured or bottled gas when not purchased directly by the user solely for his own residential use.

     (iv)   Intrastate telephone and telegraph service for nonresidential use.

     (v)   Spirituous or vinous liquor.

     (vi)   Malt and brewed beverages.

     (vii)   Soft drinks.

   (4)  The following services are subject to tax:

     (i)   Cleaning, inspecting, lubricating, polishing, washing or waxing motor vehicles whether performed directly or by coin-operated equipment.

     (ii)   Wrapping or packaging tangible personal property.

     (iii)   Applying or installing tangible personal property as a repair or replacement part of personal property other than clothing or shoes.

     (iv)   Altering, cleaning, dry-cleaning, dyeing, fitting, laundering, mending, pressing or repairing tangible personal property other than clothing or shoes.

     (v)   The imprinting or printing of tangible personal property furnished by others.

     (vi)   The labor or services billed by the vendor for delivering, installing or applying tangible personal property sold by the vendor even if the services are contracted for separately.

 The tax shall be imposed on the purchase price at a rate of 6%.

   (1)  The purchase price is the total value of anything paid or delivered, or promised to be paid or delivered, whether it is money or otherwise, in complete performance of a sale, lease or purchase. Deductions from this total value may not be made on account of: the cost or value of the property sold; the cost or value of transportation; the cost or value of labor or service; interest or discount paid or allowed after the sale is consummated; and any other taxes imposed by the Commonwealth. A separately stated deposit charge for returnable containers shall be excluded from the determination of the purchase price.

   (2)  The tax shall be imposed according to the following schedule:

   (3)  The tax imposed shall be paid on each separate sale at retail. It shall be computed and collected on the basis of the total amount of taxable items in the transactions without regard to the value or price of the separate items making up the total amount of a single sales transaction. A vendor may neither advertise nor otherwise state that the tax or any part thereof will be absorbed by the vendor or not be charged.

   (4)  When referred to in advertising or other price quotations, the tax shall be separately stated. For example, an article selling for 99¢ may not be advertised at ‘‘$1.05’’ or ‘‘$1.05 including tax’’ but shall be advertised at ‘‘99¢ plus tax,’’ ‘‘99¢ plus 6¢ tax’’ or ‘‘99¢.’’ Credit shall be allowed for taxes paid to another state on tangible personal property purchased for use therein and later brought into this Commonwealth if the other state allows similar credit to this Commonwealth residents.

   (5)  When a purchaser fails to pay the tax to the vendor, the Commonwealth may collect the tax from the purchaser or the vendor.

 The tax does not apply to the following:

   (1)  Sales of tangible personal property or rendition of services for resale. Resale includes incorporation of property as an ingredient into other tangible personal property which is either sold in the regular course of business or transported in interstate commerce to out-of-State destinations for use outside of this Commonwealth.

   (2)  Isolated transactions other than: sales of inventory and stock in trade; and sales of motor vehicles, trailers and semitrailers, motor boats, aircraft or other similar tangible personal property required under either Federal law or the laws of the Commonwealth to be registered or licensed.

   (3)  Gasoline and other motor fuels subject to The Liquid Fuels Tax Act (72 P. S. § §  2611a—2611c) and The Fuel Use Tax Act (72 P. S. § §  2614.1—2614.24).

   (4)  Tangible personal property used but not consumed within this Commonwealth if it is purchased outside of this Commonwealth and then brought into this Commonwealth for the following purposes:

     (i)   Temporary use not to exceed 7 days by a nonresident.

     (ii)   A period by a nonresident vacationer or tourist.

   (5)  Wrapping paper, wrapping twine, bags, cartons, tape, rope, labels, nonreturnable containers and other wrapping supplies, when the use is incidental to the delivery of tangible personal property. Charges for wrapping or packaging are subject to tax.

   (6)  Prescription or nonprescription medicines, drugs or medical supplies; crutches and wheelchairs; artificial limbs; artificial hearing devices; false teeth, materials used by a dentist in dental treatment; prescription eyeglasses for the personal use of the owner or purchaser; artificial braces and supports designed solely for persons with disabilities.

   (7)  Coal.

   (8)  Sales of motor vehicles, trailers, and semitrailers or bodies attached to the chassis thereof to a nonresident of this Commonwealth, to be used outside of this Commonwealth and which are registered in a state other than this Commonwealth within 20 days after delivery to the vendee.

   (9)  Water.

   (10)  Wearing apparel and footwear, and other articles of clothing carried on or about the human body. This exclusion does not include the following:

     (i)   Accessories.

     (ii)   Ornamental wear.

     (iii)   Formal wear.

     (iv)   Sporting goods and clothing normally used or worn when engaged in sports.

     (v)   Real or imitation fur articles if the fur is more than three times the value of the next most valuable component material.

   (11)  Charges for repairing, altering or cleaning clothing or shoes. Charges for cleaning household goods remain taxable except when performed by coin-operated, self-service laundry equipment.

   (12)  Food and nonalcoholic beverages for human consumption. This exemption does not apply to purchases from caterers or eating places when the purchase price of the total transaction exceeds 10¢. Spirituous and vinous liquors are subject to tax when purchased from a Pennsylvania Liquor store. Malt beverages are subject to tax when purchased from a brewer or distributor. Soft drinks are subject to tax when sold at the retail level by anyone for a price more than 10¢. Food and beverages purchased at or from a school or church in the ordinary course of its activities are exempt from tax.

   (13)  Caskets, burial vaults, markers and tombstones for human graves.

   (14)  The sale at retail or use of textbooks for use in schools, colleges and universities when the following are met:

     (i)   The textbooks are used in public or private schools, colleges and universities.

     (ii)   The textbooks are purchased on behalf of or through these schools, colleges and universities.

     (iii)   The schools, colleges and universities are recognized by the Department of Education.

   (15)  Vessels designed for commercial use of registered tonnage of 50 tons or more when produced on special order of the purchaser and property or services used or consumed in building, rebuilding and repairing these vessels.

   (16)  Sales or use of property or services to be used for ship cleaning, maintenance, fuel supplies, ships’ equipment, ships’ or sea stores, to be used or consumed by vessels to be operated principally outside of this Commonwealth.

   (17)  Motion picture film rented or licensed from a distributor for commercial exhibition.

   (18)  The sale at retail or use of mail order catalogs and direct mail advertising materials.

   (19)  Property upon which work or services are performed for the sole purpose of transporting the property in interstate commerce to a destination outside of this Commonwealth for exclusive use outside of this Commonwealth.

   (20)  Tangible personal property purchased outside of this Commonwealth by a nonresident and brought into this Commonwealth in connection with the establishment of a permanent business or residence herein, if the property was purchased more than 6 months prior to the date it was brought into this Commonwealth or more than 6 months prior to the establishment of the business or residence, whichever is earlier. This paragraph is not applicable to property temporarily in this Commonwealth for the performance of real estate construction or maintenance contracts.

   (21)  Sales to or use of tangible personal property or services by: charitable organizations; volunteer firemen’s organizations; nonprofit educational institutions; or religious organizations for religious purposes.

     (i)   This exclusion does not apply to property or services used in an unrelated trade or business carried on by this type of organization or institution. This exclusion does not apply to materials, supplies and equipment used in the construction, reconstruction, remodeling, repair and maintenance of real estate, other than materials and supplies used in routine maintenance and repairs of real estate.

     (ii)   Equipment used in the routine maintenance and repair of real estate is subject to tax.

   (22)  Property or services purchased by the United States, the Commonwealth or its political subdivisions, or instrumentalities thereof.

   (23)  Flags of the United States and the Commonwealth.

   (24)  The sale at retail or use of rail transportation equipment used in the movement of personalty.

   (25)  The sale at retail of horses, if at the time of purchase, the seller is directed to ship or deliver the horse to an out-of-State location. The seller shall obtain a bill of lading from the carrier or purchaser, reflecting the out-of-State destination. The seller shall execute and retain a ‘‘Certificate of Delivery to Destination Outside of the Commonwealth’’ to justify the noncollection of sales tax. If a horse is sold and delivered to a domiciled person prior to out-of-State delivery the ‘‘Certificate of Delivery to Destination Outside of the Commonwealth’’ shall have both bills of lading attached.

   (26)  The sale at retail or use of fish feed purchased by or on behalf of sportsmen’s clubs, fish cooperatives or nurseries approved by the Fish and Boat Commission.

   (27)  The sale at retail or use of supplies and materials to tourist promotion agencies, which receive grants from the Commonwealth, for distribution to the public as promotional material.

   (28)  The sale or use of brook trout, brown trout or rainbow trout.

   (29)  The sale at retail or use of buses to be used exclusively for the transportation of children for school purposes.

   (30)  The sale at retail or use of firewood cut into proper lengths for burning and used for fuel for cooking, hot water production or to heat residential dwellings.

   The provisions of this §  31.3 amended under section 270 of the Tax Reform Code of 1971 (72 P. S. §  7270).

   The provisions of this §  31.3 amended January 20, 1984, effective January 21, 1984, 14 Pa.B. 222; amended September 14, 1984, effective September 15, 1984, 14 Pa.B. 3366; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322; amended March 24, 2000, effective March 25, 2000, 30 Pa.B. 1654. Immediately preceding text appears at serial pages (179189) to (179192).

 (a)  Imposition. Transfers of possession or of custody of tangible personal property for consideration, by whatever means effected and irrespective of the terms employed by the parties to describe the transaction, are taxable. The rental, lease or license to use or consume tangible personal property is subject to tax. For example, when a machine shop grants to another the right to use its machinery on weekends for a fee, the transaction is taxable. Similarly, the grant of a right to use an electronic computer for a fee is subject to tax. If a transferee fails to pay the tax to the transferor in connection with a taxable transaction, the Commonwealth may collect the tax from the transferor or transferee.

   (1)  If the equipment is furnished with the services of an operator, it shall be presumed that the transaction involves a transfer of the right to use or direct the use of the equipment. This presumption may be rebutted by establishing that the work to be accomplished is exclusively under the control of the person who furnished the equipment and operator.

   (2)  If the equipment furnished with an operator consists of tools of the operator’s trade and the value of the use of the tools is insignificant in relation to the operator’s services performed, a taxable transfer will not be presumed or deemed to have occurred. For example, if a neighborhood gardener cuts lawns and provides other gardening services, the rakes, shears and other hand tools used will not be deemed to be transferred.

 (b)  Exemptions. Persons who purchase tangible personal property for the predominant purpose of renting or leasing it to others are entitled to claim the resale exemption. Purchases of repair parts or otherwise taxable services for the property are similarly entitled to exemption. Purchases of equipment or supplies used in conjunction with the service or care of rental property are subject to tax since the materials are not considered to be resold.

   (1)  If a purchaser uses or consumes property purchased for resale or disposes of property purchased for resale in a manner other than for resale, the purchaser becomes the ultimate consumer or user of the property and shall pay use tax with respect to the taxable use. When the property is used or consumed in a manner other than for resale, the purchaser shall also pay use tax on otherwise taxable services which were performed on the property if the purchaser purchased the services exempt from tax by claiming the resale exemption.

   (2)  The TRC grants certain purchasers an exemption from tax not only on tangible personal property purchased for use in exempt activities, but also on rentals of the tangible personal property. Persons engaged in activities such as farming, dairying, manufacturing and mining, may, on renting or leasing tangible personal property, use an Exemption Certificate applicable to their particular activity.

   The provisions of this §  31.4 amended October 24, 1975, effective October 25, 1975, 5 Pa.B. 2843; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (94350) to (94351) and (40191).

 (a)  Imposition. The following services rendered upon tangible personal property are ‘‘taxable services’’ whether or not tangible personal property is transferred in conjunction with the rendition of the services:

   (1)  Repairing, altering, mending, pressing, fitting, dyeing, laundering, drycleaning or cleaning tangible personal property other than clothing or footwear. Effective July 1, 1971, charges for repairing, altering, mending, pressing, fitting, dyeing, laundering, drycleaning or cleaning clothing or footwear are exempt from tax. For example, if a bookcase is taken to a carpenter to have a defective shelf repaired, the charge for the repair is subject to tax. However, if a shoe is taken to a shoe repairperson to have a heel fixed, the charge for the repair is not subject to tax.

   (2)  Applying or installing tangible personal property as a repair or replacement part of other tangible personal property. For example, if a garage employe replaces a tire on an automobile with a new one, the installation charge plus the price of the new tire is subject to tax. If the garage employe merely replaces the old tire with a spare belonging to the car owner, the installation charge is nevertheless subject to tax.

   (3)  Labor or services billed by the vendor for delivering, installing or applying tangible personal property sold by the vendor even if the services are contracted for separately. The taxability of these services is effective March 4, 1971. For example, if a dealer delivers and installs a gas range which the dealer has sold, the charges for delivery and installation, as well as the price of the range, are taxable. The delivery and installation charges are taxable whether or not they are invoiced separately from the price of the range.

   (4)  Inspecting, altering, cleaning, lubricating, polishing, repairing or waxing motor vehicles.

   (5)  Printing or imprinting tangible personal property for persons furnishing the materials used in the operations. The services shall be taxable whether the person for whom they are rendered or the person’s agent supplies the materials. When the person for whom taxable services are rendered fails to pay the tax to the person rendering the taxable services, the Commonwealth may collect tax from either party.

 (b)  Services when performed by coin-operated self-service laundry equipment. Effective July 1, 1971, charges for the services of repairing, altering, mending, pressing, fitting, dyeing, laundering, drycleaning or cleaning of clothing and household goods by means of coin-operated self-service laundry equipment shall be exempt from tax. Laundry equipment includes washing and drycleaning machines. Included within this exemption are services performed on the following types of property: clothing, sheets, towels, rugs, drapes or other household goods. Charges for similar equipment for use in conjunction with motor vehicles are subject to tax. Charges by a laundry for the services in the subsection performed upon household goods are subject to tax.

 (c)  Tangible personal property subsequently affixed to real estate. The vendor shall collect and remit tax on the vendor’s rendition of services even though the tangible personal property upon which the taxable services are performed will later be affixed to the real estate so as to become a permanent part thereof. For example, when a lighting fixture is temporarily removed from a home and taken to a silversmith to be electroplated, tax shall be collected on the entire charge for the electroplating.

 (d)  Tangible personal property belonging to a third person. The vendor shall collect tax from persons paying the purchase price for taxable services even though the tangible personal property on which the services are performed belongs to another. For example, when an insurance company has a car repaired for an insured person the person rendering the service shall collect tax from the insurance company on the total charge.

 (e)  Application of tax to service or maintenance agreement. Persons who enter into ‘‘service’’ agreements to render a taxable service are making ‘‘sales at retail’’ and shall collect sales tax on the entire charge made under the agreement. The fact that the agreement may be designated ‘‘Inspection,’’ ‘‘Maintenance’’ or by any other name does not change this rule if, under the terms of the agreement, the persons shall be obligated to render taxable service upon the tangible personal property of their customers. For example, when a firm enters into agreements with a serviceman to have its office equipment inspected, repaired and cleaned, the entire charge, without any deduction for separately stated items, is subject to tax.

 (f)  Taxable services performed outside Pennsylvania on tangible personal property used in this Commonwealth. When taxable services are performed outside of this Commonwealth on tangible personal property brought into this Commonwealth for use in this Commonwealth, the services shall be subject to the use tax, based upon the entire charge made by the vendor. If the tax is not collected by the vendor, the purchaser of the services shall report and pay use tax directly to the Commonwealth. For example, when a resident of this Commonwealth has his automobile repaired outside of this Commonwealth, tax shall be paid directly to the Commonwealth by the person for whom the services were rendered, or alternatively to the person rendering the services if the person is ‘‘maintaining a place of business within the Commonwealth.’’ A tax credit shall be permitted for taxes paid to most other states. See §  31.7 (relating to use tax).

 (g)  Services performed in this Commonwealth on tangible personal property to be used by nonresidents outside of this Commonwealth. Services performed in this Commonwealth on tangible personal property to be used by nonresidents outside of this Commonwealth shall conform with the following:

   (1)  The vendor shall collect tax on services if the tangible personal property on which the services have been performed is delivered to the purchaser or the purchaser’s agent in this Commonwealth, even though the purchaser will subsequently use the services and tangible personal property outside of this Commonwealth. The fact that the purchaser is a nonresident and the services will be used outside of this Commonwealth does not in itself make the transaction exempt. For example, when a nonresident of this Commonwealth has his car repaired in this Commonwealth while vacationing, the garage employe shall collect tax on the entire charge. A person rendering a taxable service need not collect sales tax on the rendition of services for a nonresident when the agreement between the vendor and the purchaser requires the vendor to deliver or provide delivery of the tangible personal property at a destination outside of this Commonwealth for use outside of this Commonwealth, and when the delivery is in fact made. For example, when a laundry in this Commonwealth picks up soiled drapes from a Maryland customer and delivers the clean laundry in Maryland to the customer, the laundry is not required to collect tax. Similarly, when a nonresident has his car repaired while on vacation in this Commonwealth and directs the garage employe to deliver his car to his out-of-State residence, the garage employe is not required to collect tax.

 (h)  Exemptions. The TRC grants certain purchasers an exemption from tax not only on tangible personal property purchased for use in exempt activities but also on services which may be performed on the exempt tangible personal property. Therefore, the fact that the TRC now imposes tax upon the full charge for taxable services rendered does not affect the use of the Exemption Certificate by purchasers who are entitled to an exemption from tax under the act. Thus, persons engaged in activities such as farming, dairying, manufacturing and mining may, upon their purchases of services on exempt tangible personal property, use an exemption certificate applicable to their particular activity. For example, when a manufacturing firm has a machine repaired which is directly used in its manufacturing operations, the charge for the rendition of such service is not subject to tax. When the same firm has a filing cabinet repaired, the charge for the repairs is subject to tax, since the filing cabinet is not directly used in manufacturing.

 (i)  Purchase of equipment and materials used in taxable services. Persons rendering taxable services shall be considered the consumers of all tangible personal property which they use but do not transfer to their customers. Therefore, all machinery, equipment, tools, supplies, materials or other tangible personal property, or services performed thereon, purchased for this type of use is subject to tax. They are entitled to use the ‘‘resale’’ exemption with respect to purchases of tangible personal property or services which they will transfer to their customers. The following examples illustrate these rules:

   (1)  A furniture repair shop purchases sand paper and paint brushes to be used in refinishing the furniture. The shop cannot claim a ‘‘resale’’ exemption for the purchases but shall pay tax thereon. When a furniture repair shop purchases finishing nails and varnish to be incorporated into its customer’s furniture in connection with the rendition of repair services, the shop may give a ‘‘resale’’ exemption certificate on its purchases of such materials.

   (2)  An auto repair shop shall pay tax on purchases of brushes, sandpaper, masking tape and other equipment and supplies used in rendering its repair services but not transferred to its customers. On paint, parts and other property which is transferred to the customer as part of the repair service, the shop may give a resale exemption to its suppliers.

   The provisions of this §  31.5 amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (40191) to (40194) and (54477).

 (a)  Application of tax. Under the TRC, taxable services include services constituting a ‘‘sale at retail,’’ and services made taxable because of the broad definition of ‘‘purchase price’’ contained in the TRC. See section 201(g) and (k)(4) of the TRC (72 P. S. §  7201(g) and (k)(4)). See also § §  31.1—31.3, 31.5 and 33.2. Persons rendering nontaxable services are consumers of the taxable personal property and services used in their business, and shall pay tax upon their purchase or use thereof. Following are examples of services upon which the person rendering the service does not collect tax but is liable for payment of tax on the purchase of taxable personal property and services used in the person’s business:

   (1)  Services rendered by the learned professions.

   (2)  Barber-beautician services. Services performed on wigs, falls or other hair-pieces are subject to tax.

   (3)  Funeral director services.

   (4)  Stenographic services.

   (5)  Construction or repair services to realty.

   (6)  Hauling and transportation services.

 (b)  Sales at retail of tangible personal property or services subject to tax. If, in addition to the rendition of the nontaxable services, the person rendering the service regularly sells, rents or otherwise transfers or grants the customer a license to use or consume taxable personal property or performs taxable service the person is, with regard thereto, a vendor and shall register for a license and collect and remit sales tax thereon to the Department.

   The provisions of this §  31.6 amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (54477) to (54478).

   Although creation of art work necessarily entails services by skilled professionals, purchase of tangible products of their efforts, such as material prepared for reproduction into printed manuals, is not the purchase of a nontaxable service, Westinghouse Electric Corp. v. Board of Finance and Revenue, 417 A.2d 800, 802 (Pa. Commw. 1980).

 (a)  Imposition. Imposition of use tax shall conform with the following:

   (1)  A person who purchases taxable tangible personal property or services outside of this Commonwealth incurs a use tax liability at the rate of 6% of the purchase price if the property or services are subsequently used or consumed in this Commonwealth and Commonwealth tax is not paid to the vendor. The use tax is also incurred by a purchaser of taxable tangible personal property or services within this Commonwealth if tax is not paid to the vendor.

   (2)  Licensees shall report and pay use tax at the time their regular sales tax return is due. Nonlicensees shall report and pay use tax on or before the end of the month following the month during which the tax was incurred.

   (3)  Purchasers who are licensed by the Bureau of Sales and Use Tax (Bureau) or who reside outside of this Commonwealth shall pay the tax directly to the Bureau. Purchasers who reside in this Commonwealth, except those who reside in Philadelphia County, shall be given the option under the law of paying the tax either directly to the Bureau or to the treasurer of the county in which they reside. The following are illustrations of transactions which give rise to tax liability. It is assumed in each example that the vendor has not collected sales tax from his purchaser:

   Example 1. A resident of this Commonwealth purchases a radio from a New York supply house. The purchaser incurs use tax liability whether the purchaser brings it into the Commonwealth himself or has it shipped to him.

   Example 2. A resident of this Commonwealth purchases a radio from a Commonwealth vendor who fails to collect tax on the transaction. The purchaser is liable for use tax.

   Example 3. A company has offices in New York and this Commonwealth. It sends office equipment purchased in New York to its offices in this Commonwealth. The company incurs use tax liability on the equipment.

   Example 4. A New York firm has salespersons soliciting orders in this Commonwealth. It purchases advertising displays in New York which it uses for promotional purposes in this Commonwealth. The company incurs use tax liability on the displays.

   Example 5. A furniture manufacturer purchases lumber tax-exempt under a resale exemption certificate. It uses some of the lumber to repair its own office flooring. It incurs use tax liability on the lumber.

   Example 6. A resident of this Commonwealth has his truck repaired in New Jersey. The resident incurs use tax liability on the repair charges when he brings his repaired truck into the Commonwealth.

   Example 7. A contractor of this Commonwealth purchases plumbing materials from a New York manufacturer to install in houses the contractor is building in this Commonwealth. He incurs use tax liability on the materials.

   Example 8. An Ohio contractor brings equipment and materials into this Commonwealth to use or consume in constructing an office building. He incurs use tax liability on the equipment and materials.

 (b)  Credit against tax. A credit against use tax shall be granted with respect to tangible personal property purchased for use outside of this Commonwealth equal to the tax paid to another state by reason of the imposition, by the other state, of a tax similar to the tax imposed by the TRC, if credit will not be granted unless the other state grants substantially similar tax relief by reason of payment of the tax under the act. A current listing of the states can be obtained upon request from the Bureau.

 (c)  Alternate imposition. Use tax is generally imposed upon the original purchase price of tangible personal property. Exceptions to this general rule are as follows:

   (1)  Purchases made 6 months or longer prior to first taxable use—fair market value. For property purchased 6 months or more prior to its first taxable use in this Commonwealth, the taxpayer may elect to pay the tax on the fair market value of the property at the time of its first use in the Commonwealth rather than on its original purchase price. The fair market value is the prevailing market price of similar personal property at the time and place of its first taxable use. The election to use this alternative base shall be made within 1 year from the date the return for the taxable use is due by filing notice with the Bureau on Form PA-3 and by paying tax together with any accrued penalties and interest due.

   (2)  Vehicle dealer temporarily using inventory vehicle. An election may be made to pay an alternate use tax of 6% of the fair rental value on motor vehicles, trailers or semitrailers, other than wreckers, parts trucks, delivery trucks or courtesy cars, purchased by a dealer for resale and used for a period not exceeding 1 year. See § §  31.41—31.50 (relating to vehicles).

 (d)  Exemptions. The provisions of this section are applicable, with the following exceptions:

   (1)  General exemptions. The resale and isolated sale exemptions and limited exemptions applicable with respect to tangible personal property or services purchased by exempt business entities such as manufacturers, farmers, dairymen or other persons, organizations or institutions entitled to exemption under the TRC are applicable. Reference should be made to individual sections applicable to each particular exemption. Generally, if a purchaser is not subject to tax on the ‘‘sale at retail’’ to him of property or services, he is not subject to tax on their use. This general rule is not applicable to property or services purchased without payment of tax by a nonexempt purchaser from an out-of-State vendor or when an exempt purchaser makes a use inconsistent with his exemption.

   (2)  Establishment of permanent business or residence in this Commonwealth. When a nonresident natural person or business entity not actually doing business in this Commonwealth brings property into this Commonwealth in connection with the establishment of a permanent business or residence, tax is not due provided the property was purchased more than 6 months prior to the date it was brought into this Commonwealth or more than 6 months prior to the establishment of the business or residence whichever first occurs. This paragraph is not applicable to tangible personal property temporarily brought into this Commonwealth for the performance of contracts for the construction, reconstruction, remodeling, repairing or maintenance of real estate.

   (3)  Property brought into this Commonwealth by tourists, vacationers for less than 7 days. The use of tangible personal property purchased by a nonresident person outside of this Commonwealth and then brought into this Commonwealth for use herein for a period not to exceed 7 days or for any period of time when the nonresident is a tourist or vacationer is not subject to tax if the property is not consumed within this Commonwealth. This 7-day period is calculated on a cumulative basis within any 12 consecutive months.

   This section cited in 61 Pa. Code §  31.5 (relating to persons rendering taxable services); 61 Pa. Code §  33.2 (relating to purchase price); and 61 Pa. Code §  60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).

CONSTRUCTION CONTRACTORS

§ 31.11. Definitions.

 The following words and terms, when used in this section and § §  31.12—31.16, have the following meanings, unless the context clearly indicates otherwise:

   Construction contract—A contract, whether lump sum, cost plus, unit price or time and materials under which a person agrees to perform construction activities.

   Construction activities—An activity resulting from an agreement or contract under which a contractor attaches or affixes tangible personal property to real estate so as to become a permanent part thereof. Construction activities also include the service of repairing real estate even though tangible personal property is not transferred by a contractor in conjunction with the repairs which he makes. In the absence of satisfactory evidence to the contrary, the following items are presumed to become a permanent part of real estate:

     Air, chiller

     Air conditioner, wall including filters, diffusers, grilles, registers

     Air conditioning system, central including filters, diffusers, grilles, regis   ters

     Air, handler

     Alarm systems (smoke, fire, burglar, security)

     Asphalt

     Awnings (other than cloth)

     Ballast, light

     Backboxes, electrical

     Blacktop (installed-contract Form No. MS-944)

     Boilers (including related accessories)

     Bricklaying

     Bridge (construction)

     Building (moving a building)

     Building (prefabricated, precut log, steel)

     Burglar alarm systems

     Cabinets (attached by screws or fasteners and the like)

     Can and bottle crusher (built-in)

     Car wash equipment

     Carpets (attached by tacking, adhesive, hooks, tape or other methods)

     Carports

     Ceiling (drop)

     Ceiling, molding trim

     Chalkboard attached by bolts, nails or screws

     Chimney cover

     Chimney damper

     Circuit breaker

     Circulating pump

     Computer rooms, wall and flooring

     Condenser, heating and air conditioning

     Conduit

     Control center (motor)

     Cooler, display (center cooling system)

     Dehumidifier (installed in hot air system)

     Dishwasher (built-in)

     Disposal, garbage

     Dock leveling equipment

     Doors, folding fabric

     Doors, overhead, garage

     Electrical fixtures and outlets

     Elevators

     Elevators (home stair model)

     Emergency lighting (built-in)

     Escalators

     Excavating (cellars)

     Fans, exhaust (built-in)

     Fencing

     Fire alarm system

     Fireplaces

     Fire protection system

     Flagpole

     Floor covering (tile, linoleum, and the like)

     Fuel saving units (installed in heating units)

     Furnaces (electric, gas, oil) including accessories and filters

     Freezer, walk-in

     Garage door opener, mechanical, electronic, and the like

     Glass (window)

     Glass tint material

     Guard rails (see also ‘‘Medical barriers’’ this listing)

     Heaters, baseboard, electrical

     Heating fan, coil

     Heating systems, central (including distribution system, exchanger)

     Hospital equipment Nurses aid stations

     Housing, prefabricated

     Insulation (building)

     Ironwork (ornamental)

     Joists

     Laboratory tables (with plumbing, utilities)

     Landscaping

     Lavatories (partition, soap dispenser, toilet tissue dispenser, towel dis  penser, dryer, urinal, mirror)

     Lifts (hydraulic vehicular)

     Lighting fixtures, wires and switches (see also ‘‘Backbox’’ this listing)

     Lighting system foundation material (example: concrete, stud and anchor    bolts, and the like)

     Lighting systems (exterior) embedded in concrete

     Lighting, traffic, foundation materials (example: concrete, stud and anchor    bolts, and the like)

     Lightning rods

     Locks, door

     Mantels, fireplace

     Mausoleums

     Medial barriers, highway (embedded in ground or concrete)

     Mirrors (attached by screws or bolts)

     Oil burners

     Ovens (built-in)

     Painting (a building or construction)

     Parking facility control equipment foundation material

     Partitions (attached by means of bolts or screws)

     Patio covers (other than cloth)

     Playground equipment foundation material (example: concrete, bolts, and    the like)

     Pumps, water (above ground and submersible)

     Railing (porch)

     Range, cooking (wood or coal)

     Refrigerator, walk-in

     Restaurant equipment

        Bins, storage

        Bun steamer, connected to water system

        Electrical systems

        Exhaust ventilators

        Faucets

        Plumbing systems

        Refrigerator, walk-in

        Scullery sink

        Shelving, built-in

        Sinks, vegetable and scullery

        Steamer, high speed, connected to water system

     Road (construction)

     Roofing (repairs)

     Saunas

     Scales, pit

     Scotchtint

     Sealant, driveway

     Security alarm system

     Security systems (burglar, smoke and fire alarm, and the like)

     Septic tank and pipes

     Shrubbery

     Shutters

     Siding (aluminum, metal or vinyl)

     Sink

     Solar energy system

     Smoke alarm system

     Spouting

     Sprinkler system

     Stair lift

     Swimming pool accessories (installed or attached to an in-ground swim  ming pool)

     Swimming pools (installed in-ground)

     Tank, storage

     Television, cable distribution system including equipment mounted on the    home owner’s TV set

     Temperature controls (installed as part of heating or air conditioning sys  tem)

     Tennis courts

     Tile

     Toilets

     Traffic control equipment foundation material (example: concrete, stud and    anchor bolts)

     Trees

     Vacuum systems, central

     Vanities

     Ventilating systems

     Wall paper

     Washer, dish (built-in)

     Water chillers

     Water heaters

     Windows, storm

     Wires, electrical

     Woodburning stoves

   Contractor—A person engaged in performing a construction contract or construction activities. The term includes prime contractors and subcontractors.

   Sales activities—An activity resulting from an agreement or contract under which a contractor transfers tangible personal property or performs services upon tangible personal property belonging to another person and installs the property so as not to become a permanent part of the real estate. In the absence of satisfactory evidence to the contrary, the following items are presumed not to become a permanent part of real estate:
 Air conditioner, window including filters
 Amplifiers, all (Beck Electric)
 Antenna, television
 Appliances (not built-in)
 Auditorium type seating
 Awnings (cloth)
 Backboxes, clock (Beck Electric)
 Baseboard, trane (plug-in)
 Basketball backstop (bolted)
 Blacktop (materials contract Form No. MS-963)
 Bleachers
 Blinds (venetian)
 Bowling alleys and pin setting equipment
 Bulb, lamp
 Buss duct
 Cabinets (free standing)
 Can and bottle crusher
 Carpets (unattached room size)
 Chalkboard (attached by hooks)
 Church pews
 Clock, master clock and program relay equipment (Beck Electric)
 Clock system, clock backbox, wiring (Beck Electric)
 Communication equipment
 Conveyors
 Cooler, display (unit self-contained)
 Dehumidifier (free standing)
 Dental chairs and accessories
 Dishwasher (free standing)
 Dispensing equipment, soda and liquor
 Drapes
 Dryer, clothes (free-standing)
 Emergency lighting (portable battery operated)
 File cabinets
 Fire extinguishers
 Fixtures, shelving, islands, (store)
 Freezers (home)
 Furniture
 Fuses
 Generators, electrical
 Grave marker foundations
 Grill, cooking
 Gymnasium equipment (portable)
 Hospital equipment
  Doctor paging system
  Nurse calling system
  Operating room lights
  Oxygen and gas systems
  Patient wall unit
  TV calling system
  TV monitoring system
 Hydro therapy equipment and accessories
 Laboratory tables (without plumbing, utilities)
 Lamps, portable
 Library shelving
 Lighting, emergency (portable battery)
 Lighting, stage, including power tracks
 Lighting, traffic (not foundation material)
 Lighting systems street and parking in which fixtures are attached to pre   pared foundations by bolt (not including foundation material or under   ground wiring and conduit)
 Linoleum (not attached to floor; see §  58.13 (relating to carpeting and   other floor coverings))
 Loud speakers, assemblies (Beck Electric)
 Medial barriers, highway (pre-cast cement free standing)
 Microphones
 Mirrors (attached by hooks)
 Modulars, room dividers, not attached
 Parking facility control equipment (not including foundations)
 Playground equipment (freestanding)
 Poles traffic light and luminaries when attached to concrete bases by means   of bolts not including foundation material
 Racks, bicycle
 Radio sets
 Railroad signal equipment
 Range, cooking (gas, electric)
 Rectifier, electrical (Beck Electric)
 Refrigerators (home)
 Restaurant equipment
  Board, cutting
  Cabinet, warming, portable
  Can opener
  Cutter/mixer, vertical
  Cutting boards
  French fryers
  Gas grill
  Mixer
  Peeler, potato
  Rack, oven
  Rack, pan
  Shelving, portable
  Slicer
  Truck, dish
  Truck, food
  Truck, tray and silverware
  Truck, utility
 Scales, portable
 Screen, projection
 Seating (auditorium, stadium, and the like)
 Signal head, traffic
 Signs (electric, neon, wood, metal or plastic attached by bolts or screws)
 Sound equipment (including amplifiers, transformers and microphones)
  (Beck Electric)
 Stone, sand, gravel, and the like, delivered on pile or spread but not involv  ing a contract of installation
 Swimming pool accessories (freestanding or installed on an aboveground   swimming pool)
 Swimming pools (installed aboveground)
 Switchgear, electric (Beck Electric)
 Telephone communication equipment
 Television sets, wiring and antennas
 Television transmission or receiving facility
 Traffic control equipment (not foundation material)
 Transformers (Beck Electric)
 Venetian blinds
 Washer (clothes—freestanding)
 Washer, dish
 Water cooler, drinking
 Water softener and filtration equipment
 Wired music equipment
 X-ray Equipment
 X-ray Illuminator

   The provisions of this §  31.11 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667; amended September 26, 1975, effective September 27, 1975, 5 Pa.B. 2538 through August 19, 1983, effective August 20, 1983, 13 Pa.B. 2554. Immediately preceding text appears at serial pages (40199) and (40200).

 (a)  Construction activities. Imposition of tax on construction activities shall conform with the following:

   (1)  A contractor shall pay tax upon the purchase price, as defined by the TRC, of all property, including materials, equipment, components and supplies, which he furnishes and installs in the performance of his construction activities.

   Example 1: As part of a contract for the construction of a house ‘‘X’’ Contractor has agreed to install a built-in dishwasher for his customer. ‘‘X’’ Contractor pays his supplier $150 for the purchase of the dishwasher. ‘‘X’’ Contractor pays $9 sales tax to his supplier and subsequently installs the dishwasher in the kitchen of the house he is building. The dishwasher becomes a part of the realty and is included in the overall price of the house to the customer. ‘‘X’’ Contractor does not charge sales tax on this transaction to his customer. The contractor may include the tax he must pay in his bid proposal but not as a separately stated item.

   (2)  A contractor whose activities are confined to construction activities is required to pay tax directly to his supplier at the time he purchases the materials, equipment, components or supplies which he furnishes and installs. A use tax license number shall be available to a construction contractor from the Department to permit him to remit tax directly to the Department upon the purchases from vendors who are not required or are not licensed with the Department for the collection and remission of tax.

   Example 1: ‘‘X’’ Contractor purchases lumber in Baltimore, Maryland, which is delivered in Pennsylvania. The lumber supplier is not registered with this Commonwealth to collect sales tax of this Commonwealth. ‘‘X’’ Contractor shall be required to remit use tax on his ‘‘purchase price’’ (including shipping charges) of the lumber directly to the Department under his use tax number. See §  33.2 (relating to purchase price).

   Example 2: ‘‘X’’ Contractor purchases and takes possession of lumber in Baltimore, Maryland. At the time of purchase the Maryland rate of tax is 4%. ‘‘X’’ Contractor pays to his supplier 4% tax. Maryland and the Commonwealth have enacted reciprocal tax statutes. Because of this reciprocity, ‘‘X’’ Contractor may take a 4% tax credit against the use tax of the Commonwealth which he owes. ‘‘X’’ Contractor shall be required to remit 2% use tax on his ‘‘purchase price’’ of the lumber directly to the Department under his use tax number.

   (3)  A construction contractor shall pay tax upon all tools and equipment, such as backhoes, cranes, saws, drills, motor vehicles, and the like, which are used but not transferred in conjunction with his construction activities. Effective March 4, 1971, a construction contractor performing contracts for public utilities may no longer claim the exemption of the utility upon the purchase or rental of such items.

   (4)  A contractor who performs both construction activities and sales activities shall be required to be licensed with the Department for the collection and remission of sales tax and shall be issued a sales tax license number. As to property which he knows he will resell, he may use a resale exemption certificate upon his purchase from his supplier. He shall collect and remit tax upon the sales. As to all other purchases which he may make, he shall pay tax to his supplier at the time of purchase.

 (b)  Sales activities. Imposition of tax on sales activities shall conform with the following:

   (1)  A contractor who, in addition to performing construction activities, makes sales at retail, as defined by the TRC, of tangible personal property is deemed to be a vendor and is required to register with the Department for the collection and remission of tax upon the sales which he makes.

   (2)  A contractor who performs taxable services in repairing and altering tangible property or applying or installing tangible personal property as a repair or replacement part of other personal property is also deemed to be a vendor and is required to collect and remit tax. See §  31.5 (relating to persons rendering taxable service).

   (3)  Effective March 4, 1971, charges for labor or transportation in conjunction with the sale at retail and installation of tangible personal property are subject to tax even though the labor or delivery charges are separately stated on the billing.

   Example 1: ‘‘X’’ Contractor, who has been issued a sales tax number, purchases a portable dishwasher which is delivered to the house ‘‘X’’ Contractor is building for ‘‘Y’’ Customer. ‘‘X’’ Contractor purchases the dishwasher for $150 from his supplier and gives him a resale exemption certificate. ‘‘X’’ Contractor then charges ‘‘Y’’ Customer $200 for the dishwasher, including delivery, unpacking and installation charges. ‘‘X’’ Contractor shall collect $12 sales tax from ‘‘Y’’ Customer based upon the total sales price of $200.

 (c)  Contractors producing the property they consume, as part of the same business operation. Contractors who, as part of the same business operation, produce the property they consume shall conform with the following:

   (1)  A contractor, in addition to performing construction activities, may also manufacture, mine, process or grow the materials, supplies or equipment which he consumes in the performance of his construction activities. With respect to his manufacturing, mining, processing, and the like, operations, the contractor is entitled to the exemption provided by the law for the operations.

   (2)  With respect to construction activities, the contractor’s use tax base is the acquisition cost of the raw material purchased to produce the property which he consumes.

   Example: A contractor purchases seedlings for $2 which he grows and later transfers to his customer in conjunction with his construction activities. At the time of transfer, the seedlings have a market value of $50. The contractor, however, is required to pay tax upon the $2 cost of the seedlings which he paid at the time of their acquisition.

   The provisions of this §  31.12 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667.

   Exemption

   The manufacturing exclusion of subsection (c)(1) does not apply to materials used in construction and affixed to real estate. That is consistent with the statutory definition of ‘‘manufacture.’’ Golden Eagle Construction Co. v. Commonwealth, 813 A.2d 13 (Pa. Cmwlth. 2002).

   ‘‘Use’’ of Materials

   Where the taxpayer uses raw materials as part of its paving activities, the activity is not considered ‘‘sale at retail,’’ and, since the materials are incorporated into and made a part of real estate, the materials are considered ‘‘used’’ and not ‘‘sold.’’ Golden Eagle Construction Co. v. Commonwealth, 813 A.2d 13 (Pa. Cmwlth. 2002).

 (a)  With the exception of the limited exemption set forth under subsections (h)—(k), a contractor may not claim an exemption upon his purchase of materials, supplies, equipment or parts which he installs so as to become a part of the real estate in conjunction with his construction activities. Thus, a contractor erecting a building, repairing a roof, replacing a door for a governmental agency, manufacturer, processor, public utility, school district, charitable or religious organization, and the like, shall pay tax upon the property which he consumes and is not entitled to use the exemption of the ultimate customer for whom he is performing the contract.

 (b)  Effective March 4, 1971, the exemption which a contractor has with respect to contracts with public utilities, manufacturers, and the like, has been limited. The exemption is limited to the purchase of property constituting equipment, machinery and parts thereof which the contractor, in conjunction with his contract, transfers to and is subsequently used directly by the public utility, manufacturer, processor, and the like. To qualify for exemption the equipment, machinery or parts thereof shall be used directly in the rendition of a public utility service, manufacturing operation, and the like, upon installation. The exemption applies whether or not the equipment, machinery or part thereof is affixed to the real estate. The following are examples of equipment to which the limited exemption applies:

   (1)  Coal conveyor systems, pulverizers, boilers, cooling towers, electrostatic precipitators, utility poles, transmission wire, transmission wire poles, transmission and substation equipment installed for public utilities or electric cooperatives.

   (2)  Sanitary sewer, not storm sewers, or water mains, manholes and covers, sewage treatment equipment, pumping equipment installed for public utilities, municipalities or municipal authorities.

   (3)  Machinery and equipment which act upon or convey the manufactured or processed product between the first and last production operation installed for manufacturers or processors. Machinery and equipment which act upon or convey dairy products between the point where raw milk enters the clarifier to the point the dairy product is bottled or capped, installed for a dairy.

   (4)  Silos which produce ensilage, hay and grain conveyor systems, irrigation pumps, pipe and fittings, water pumps and piping used to convey water to farm animals installed for a farmer.

 (c)  Notwithstanding any other procedure established by this section, a contractor, whether or not licensed with the Department for the collection and remission of sales tax, shall obtain a ‘‘Certification’’ from the exempt public utility, manufacturer or similar customer certifying that:

   (1)  The property will be resold or transferred to the exempt public utility, manufacturer, or the like.

   (2)  It constitutes machinery, equipment or parts thereof.

   (3)  Upon installation it will be directly used by the exempt customer in its public utility facilities, manufacturing operations, or the like. Attached to the ‘‘Certification’’ shall be a listing of the specific items of equipment, machinery or parts upon which the exempt customer claims an exemption.

   (4)  A sample copy of the required form for this ‘‘Certification’’ is as follows:

CERTIFICATION

 (d)  At the time the contractor makes purchase of the items for resale, he is required to tender a copy of the ‘‘Certification’’ to the supplier, upon which the supplier will mark the date filed, which the supplier will retain, together with a copy of the Department’s ‘‘Blanket Exemption Certificate’’ (Form REV-345), completed by the contractor setting forth on the face thereof the following language: ‘‘Property and/or services will be resold to (Name of Exempt Customer) pursuant to the Certificate executed by them and filed with you on (Date of Filing)’’.

   (1)  A sample copy of the required format is as follows:

BLANKET EXEMPTION CERTIFICATE

   (2)  The supplier shall retain the Blanket Exemption Certificate together with the ‘‘Certification’’ in his exemption certificate file to justify the tax free sale of the list of items filed with the certification. Contractors failing to follow this procedure may not make tax free purchases and are liable for tax upon the materials used in conjunction with their contracts.

 (e)  A contractor may make tax free purchases of property which he resells to exempt entities in conjunction with his construction activities. This exemption applies only to property furnished by the contractor which, upon installation, does not become a permanent part of the real estate. Examples of property which, upon installation, do not become part of the real estate are set forth in the definition of ‘‘sales activities’’ in §  31.11 (relating to definitions).

 (f)  A contractor who is licensed with the Department to collect and remit sales tax; that is, holds a sales tax license, may make tax free purchases of property which he will sell by tendering to his supplier a completed copy of a Blanket Exemption Certificate (Form REV-345). To qualify as a valid exemption certificate, the face side of the certificate must reflect the following language: ‘‘Property and/or services will be resold in the ordinary course of the purchaser’s business conducted under Pennsylvania Sales Tax License Number (Insert Number).’’

   (1)  A sample copy of the required format is as follows:

BLANKET EXEMPTION CERTIFICATE

   (2)  If the exempt customer to whom the property will be transferred holds a valid exemption; that is, a governmental agency, school district, and the like, applying to the property being transferred, the contractor shall obtain a completed copy of a Blanket Exemption Certificate (Form REV-345) from the exempt entity in lieu of the collection of tax. If the ultimate consumer does not hold an exemption, the contractor shall collect and remit the tax upon the contract price of the item or items including charges for delivering or installing the item under the contract.

 (g)  A contractor who is not licensed with the Department to collect and remit sales tax is not authorized to follow the normal procedure outlined in subsection (f) in making tax free purchases of property he will resell in conjunction with his construction activities. A contractor may not use a Use Tax License Number in making tax free purchases for resale. A Use Tax License Number is that number issued by the Department prefixed with the digits ‘‘89.’’

 (h)  When the ultimate customer is a governmental agency, school district, religious organization, or the like, the contractor not holding a sales tax license shall obtain a ‘‘Certification’’ from the exempt customer certifying the following:

   (1)  The property will be resold to the exempt customer.

   (2)  The basis for the exemptions.

   (3)  The property, upon installation, will not constitute an improvement to real estate but remain tangible personal property.

 (i)  Attached to the ‘‘Certification’’ shall be a listing of the specific items upon which the exempt customer claims an exemption.

   (1)  A sample copy of the required format for this ‘‘Certification’’ is as follows:

CERTIFICATION

   (2)  At the time the contractor purchases the items for resale, he shall tender a copy of the ‘‘Certification’’ to the supplier, upon which the supplier shall mark the date filed, which the supplier shall retain together with a copy of the Department’s ‘‘Blanket Exemption Certificate’’ (Form REV-345), completed by the contractor, setting forth on the face thereof the following language: ‘‘Property and/or services will be resold to (Name of Exempt Customer) pursuant to the Certification executed by them and filed with you on (Date of Filing).’’ A sample copy of the required format is as follows:

BLANKET EXEMPTION CERTIFICATE

   (3)  The supplier shall retain the Blanket Exemption Certificate together with the ‘‘Certification’’ in his exemption certificate file to justify the tax free sale of the list of items filed with the ‘‘Certificate.’’ Contractors failing to follow this procedure may not make tax free purchases. If the contractor fails to obtain a ‘‘Certification’’ and does not pay tax at the time of purchase, he shall be deemed to be the ultimate consumer of the property which he transfers and shall pay the applicable tax. A contractor’s failure to register shall make him liable for tax upon the installed value, including delivery, labor and installation costs, of the property not incorporated as part of the real estate.

 (j)  When the ultimate customer is not entitled to an exemption, the contractor shall be licensed with the Department either temporarily or permanently for the collection and remission of tax. Upon receipt of a temporary or permanent sales tax license number, he may purchase property for resale utilizing the procedure outlined in subsection (f). A temporary sales tax license number may be used for 90 days after issue by the Department and may be obtained from a District Sales Tax Office.

 (k)  A contractor may not use a use tax license number in making exempt purchases for resale. A contractor may not collect sales tax from his customer unless he has been issued a sales tax license number by the Department. A contractor making taxable sales of property not incorporated as part of the real estate shall be liable for the collection of tax upon the installed value including delivery, labor and installation costs of the property not incorporated as part of the real estate.

   The provisions of this §  31.13 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667.

   This section recognizes sanitary sewer systems and water systems as public utility facilities for purposes of the statutory exemption for use sales tax purposes. Ernest Renda Contracting Co., Inc. v. Commonwealth, 532 A.2d 416, 419 (Pa. 1987).

   For an exemption certificate to be valid on its face there must be ‘‘a listing of the specific items of equipment, machinery or parts upon which the exempt customer claims an exemption’’ attached to the certification. Ernest Renda Contracting Co., Inc. v. Commonwealth, 532 A.2d 416, 423 (Pa. 1987).

 (a)  If a contractor later resells a particular item to a nonexempt customer with respect to which he has paid sales tax at the time of purchase, he shall nonetheless collect the full sales tax upon his retail price from his customer, and he shall report the tax collected to the Department. He may, at the time he reports the tax, take a credit on account of ‘‘Taxes Paid—Purchases Resold’’ (TPPR) against the tax which he has collected equal in amount to the tax which he paid to his supplier, provided that he paid the tax to his supplier within 3 years of the date of resale. He shall indicate upon his return the amount of tax which he has paid to his suppliers upon items sold which he is crediting against the tax collected from his customer on account of TPPR. It is not sufficient merely to report and remit tax upon the ‘‘markup’’ without indicating to the Department upon his return the amount of credit which he has taken.

 Example: ‘‘X’’ Company purchases 100 sinks during the month of August at $70 per sink. ‘‘X’’ pays tax to its supplier upon all of the sinks, since ‘‘X’’ does not know or have good reason to know that all or any specified number of them will be sold. Later ‘‘X’’ uses 60 of the sinks in construction activities, and sells 40 of them over-the-counter at a retail price of $100 per sink. ‘‘X’’ collects sales tax of $240 upon the sale of these sinks.

 (b)  In reporting the tax upon its return, ‘‘X’’ Company shall show the following with respect to these transactions:

   (1) Total Gross Sales    $4,000.00

   The TPPR figure represents the amount of tax paid to ‘‘X’’ Company’s supplier upon the sinks which ‘‘X’’ resold (40 X $70 X 6%). Item (8) shall be inserted upon the return form on the ‘‘Total Tax Due’’ line, the TPPR amount being inserted in front of the total amount in the rules column, thus:

   The provisions of this §  31.14 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667.

 (a)  A contractor may be entitled to a tax credit against tax owed to the Commonwealth upon property used or consumed in this state. To be entitled to such credit, the following conditions shall be met:

   (1)  Purchase and possession of the property shall be made in a state other than this Commonwealth; and

   (2)  Sales tax shall have been legally paid upon the property to the other state; and

   (3)  The sales tax law of the other state must grant substantially the same tax credit for sales tax paid to the Commonwealth. A list of states granting tax credit is available from the Department, attention Legal Bureau.

 (b)  A contractor who is entitled to tax credit against sales tax owed to the Commonwealth may do so at the time he files his sales or use tax return. He shall indicate upon the return the amount of tax which he owes and the amount of tax credit he is taking in a similar manner to the taking of TPPR credit outlined in §  31.14 (relating to taxes paid purchases resold (TPPR). A contractor taking reciprocal tax credit shall maintain supporting records as justification for tax credit taken on his tax return.

   The provisions of this §  31.15 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667.

 A contractor who, under a binding agreement with his customer, acts in the capacity as an agent is subject to this chapter in the same manner as he would if the agency relationship did not exist.

 Example: ‘‘X’’ Contractor and ‘‘Y’’ Public Utility enter an agency contract for the construction of an electrical generation station. The agency contract provides that ‘‘X’’ Contractor shall purchase all equipment, materials and supplies as agent for ‘‘Y’’ Public Utility. The exemption available to ‘‘X’’ Contractor is limited to the purchase of machinery, equipment and parts thereof which upon installation are directly used in generating and transmission of electricity. ‘‘X’’ Contractor is not entitled to the same exemption as that of ‘‘Y’’ Public Utility.

   The provisions of this §  31.16 adopted April 14, 1972, effective April 14, 1972, 2 Pa.B. 667.

   This section cited in 61 Pa. Code §  31.11 (relating to definitions); 61 Pa. Code §  46.3 (relating to construction contractor installing stained glass windows); 61 Pa. Code §  46.7 (relating to nonresident contractors); 61 Pa. Code §  46.8 (relating to industrialized housing); and 61 Pa. Code §  58.13 (relating to carpeting and other floor coverings).

SPECIALIZED TYPES OF BUSINESS OR PROPERTY

§ 31.21. Advertising agencies.

 (a)  Purchases. Purchases by advertising agencies shall be taxed in accordance with the following:

   (1)  Materials used or consumed in rendering professional services. Advertising agencies that provide professional services are the ultimate consumers of tangible personal property used or consumed by them in the preparation and placing of advertising in magazines, newspapers, and on radio and television when no tangible personal property is tranferred to the purchaser other than proofs or samples for his approval, comment, criticism, information or other similar purposes. Purchases of office supplies, paper, ink, paint, art work from independent artists, engraver’s charges for metal plates, mats and other materials used or consumed in this type of work is subject to tax. For example, an advertising agency is the ultimate consumer of the mats and all other tangible personal property it uses or consumes in the preparation of the mats.

   (2)  Tangible personal property purchased on behalf of specific clients. Advertising agencies rendering professional services, (that is, market and public relations counseling, copy writing, art or creative direction, placement and supervision of media and graphic arts purchases on behalf of specific clients) shall pay sales tax on all purchases of tangible personal property for specific client accounts to the exact degree that the respective client would be liable if purchasing the materials directly from primary suppliers. Certification that the authorized purchase of specific tangible property falls within any exempt category can originate only with the client and shall be furnished to the agency in writing stating the basis on which exemption is claimed. The agency may then inform the pertinent supplier or suppliers on the client’s behalf, providing a duly executed exemption certificate indicating the basis for the exemption.

   (3)  Materials purchased for resale. Advertising agencies are entitled to claim the resale exemption on purchases of tangible personal property which they directly resell or incorporate into products which they resell. Circulars, signs, mats, show cards, posters and other similar tangible personal property are deemed to be resold by advertising agencies. For example, when an advertising agency prepares and sells signs to a client, it shall collect tax on the purchase price, but is entitled to claim a resale exemption on materials which become part of the signs. Similarly, when an advertising agency contracts to provide mats to a client who in turn will forward the mats to its dealers throughout the country, the advertising agency shall collect tax on the price charged for the mats, but is entitled to claim a resale exemption on the purchase of the mats from the mat maker. The exemption does not apply to the purchase of the art work, paper and ink, which is used by the agency in preparing the mock-up of the mat for the mat maker since the materials used in preparing the mock-up are not resold to the client.

   (4)  Limited application of printing exemption. Printing engaged in as a business is included in the definition of manufacturing. See section 201 of the TRC (72 P. S. §  7201) and §  32.32 (relating to manufacturing; processing). The sale of taxable property to an advertising agency is not subject to a claim of exemption on the theory that the purchased property is to be directly used in printing operations unless the agency itself is actually engaged in the business of printing. The exemption is not applicable to purchases by advertising agencies of tangible personal property such as paper, ink, mats, plates and similar property which are used in the preparation of or form a part of mock-ups or similar items which are transferred to printers or other persons for use in reproduction.

 (b)  Sales. Sales by advertising agencies shall be taxed in accordance with the following:

   (1)  Advertising agencies shall collect tax from their customers on sales of circulars, signs, mats, show cards, posters and similar tangible personal property. If the sale of the property includes a charge for services such as consultant fees or market research fees, and the charge for such services is not separately stated, tax shall be charged on the total purchase price. For example, if an advertising agency contracts to conduct a market research program for a client and supply him with 1,000 advertising displays based on the findings of the research, the charge for the market research program is subject to tax if it is not separately stated from the charge for the displays. Similarly, advertising agencies are not required to collect the tax on services performed in preparing and placing advertising in magazines, newspapers, or on radio and television when no tangible personal property is transferred to the purchaser other than samples for his approval.

   (2)  Professional services do not include labor, even though it be skilled, which is performed in the preparation of tangible personal property which is sold at retail by the advertising agency. For example, when an advertising agency prepares signs for its clients, a deduction is not permitted for the salary paid to its painter. Similarly, when an advertising agency employs a commercial artist, a deduction for his salary is not permitted from the purchase price charged for his art work which is sold at retail to another advertising agency or person.

   (3)  Sales of direct mail advertising materials are exempt from tax. See §  31.29 (relating to books, printed matter and advertising materials). Property used or consumed in production of direct mail advertising is subject to tax unless it qualifies for the printing or resale exemption.

 (a)  Sale at retail of taxable property. Persons engaged in the process of accurately duplicating, reproducing or forming a durable medium for the reproduction of an original document are vendors of copies purchased by their customers, whether or not produced to the special order of the customer. Duplicating includes, but is not limited to, the production of photostatic copies or blueprints. Sales tax applies to all charges for the products sold at retail, including charges for the making of copies out of materials furnished by the customer. The purchase price may not be reduced on account of expenses incurred, such as rentals of equipment, or salaries or wages paid to assistants whether or not such expenses are itemized in billings to customers.

 (b)  Purchase of supplies and equipment. The purchase of items, such as chemicals, film, proof paper or other supplies used or consumed in the process of duplicating, reproducing or forming a durable medium for the reproduction of an original is subject to tax. Vendors may claim the resale exemption on purchases of tangible personal property which they directly resell or incorporate into products which they resell.

 (a)  Sales by auctioneer. An auctioneer selling his own tangible personal property shall collect and remit the tax. When he is engaged by another to sell tangible personal property and the sale at auction takes place on premises of the auctioneer, the tax shall also be collected and remitted to the Commonwealth by the auctioneer.

 (b)  Sales on premises other than auctioneer’s. When the owner of tangible personal property sold at auction, other than on auctioneer’s premises, is regularly engaged in selling the property, the auctioneer shall be deemed to be the agent of the owner and the owner is responsible for the collection of the tax on the transaction. If the owner is not regularly engaged in selling property, the transactions are not taxable.

 (c)  Sales for out-of-State owners. An auctioneer selling tangible personal property within this Commonwealth shall collect the tax notwithstanding the fact that the property belongs to an out-of-State owner.

 (d)  Computation of tax. The tax shall be computed upon the total purchase price of each transaction without deduction for the auctioneer’s commission.

 (a)  Sale or rental of floral products. Florists shall collect the tax upon sale or rental of flowers, wreaths, bouquets, potted plants and property of a like nature.

 (a)  Every person operating a club or similar merchandising plan, or operating as an independent vendor representing a particular supplier selling taxable property shall obtain a license from the Department and collect tax on merchandise sold by him, unless the one supplying the merchandise has been authorized by the Department to register and precollect tax from the club secretaries or independent vendors based upon the purchase price of the merchandise to the ultimate consumer. When the person supplying the merchandise registers to collect the tax, the club secretaries or vendors shall reimburse themselves for the tax paid to the supplier by adding the tax, as such, to the purchase price and collecting it from their customer.

 (a)  Purchases by financial institutions. A financial institution shall pay the tax at the time of purchase of all tangible personal property to be used by it in the conduct of its business. This includes all tangible personal property gratuitously furnished by the financial institutions to its customers, such as passbooks, check books, deposit slip books or similar items.

 (b)  Sales by financial institutions. A financial institution selling personalized check books, coin banks or other items of tangible personal property subject to tax may do one of the following:

   (1)  Obtain a license, collect the tax from its customers and remit the tax collected along with its monthly returns.

 (a)  Taxable sales to funeral directors. Sales to morticians and funeral directors of tangible personal property to be used or dispensed in the operation of their business are sales at retail and subject to the tax imposed by the act. Taxable equipment, materials and supplies include, but are not limited to: hearses, limousines and flower cars; shrouds; clothing specially designed and only usable for burial purposes; chairs; gloves; cosmetics; embalming supplies; embalming equipment; flowers and floral decoration.

 (b)  Exemption. The sale or use of caskets, movable burial vaults, and markers and tombstones for human graves shall be exempt from tax.

 (c)  Rentals of property to funeral directors. Rentals of property such as limousines, hearses and flower cars to morticians and funeral directors to be used by them in rendering of services in conjunction with a funeral shall be taxable and the funeral director shall pay a sales tax on the rentals in the manner provided in §  31.4 (relating to rentals or leases of tangible personal property).

 (d)  Rentals of property by funeral directors. Morticians and funeral directors who rent property to others shall register and collect tax with respect to such rentals. Use of property in conjunction with a funeral service performed by the person owning the property shall not be deemed to be a rental. If a separate charge is made for rental of specific items, the tax applies.

 (a)  Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

   Juice beverage—A liquid beverage containing at least 25% by volume natural fruit or vegetable juice.

   Meal—A variety of foods prepared for immediate consumption and sold as a single item.

   Operator—A person who makes sales of tangible personal property, including food or beverages, primarily through a vending machine.

   Selected food and beverage items—Soft drinks; meals; hot or cold sandwiches, including cold meat sandwiches, cheese sandwiches, hoagies, hot dogs, hamburgers and similar sandwiches; brewed coffee; hot beverages such as hot chocolate, hot tea and similar items; food from salad bars; pizza, soup and other food items dispensed from the vending machine in a heated form or which are served in cold form and normally heated in an oven or microwave provided by the operator.

   Soft drink—

     (i)   All nonalcoholic beverages, whether carbonated or not, such as soda water; ginger ale; Coca Cola; lime cola; Pepsi Cola; Dr. Pepper; fruit juice when plain or carbonated water, flavoring or syrup is added; carbonated water; orangeade; lemonade; root beer or all preparations, commonly referred to as ‘‘soft drinks’’ of whatsoever kind, and are further designated as including all beverages, commonly referred to as ‘‘soft drinks,’’ which are made with or without the use of any syrup.

     (ii)   The term does not include a juice beverage.

   Vending machine—A device which mechanically dispenses tangible personal property, including food and beverages, for a purchase price.

 (b)  Registration. An operator who sells taxable tangible personal property or selected food and beverage items through a vending machine is required to obtain a Sales, Use and Hotel Occupancy Tax License for the purpose of collecting and remitting tax to the Department. One license is sufficient for any number of machines operated by the same operator.

 (c)  Identification requirement. A sign or a sticker setting forth the name and address of the operator shall be conspicuously displayed on the vending machine.

 (d)  Scope.

   (1)  General. The sale of food or beverages from a vending machine may be taxable or exempt depending upon the type of food or beverage or upon the basis of the location from which the food or beverage is sold. Since a vending machine does not qualify as an eating establishment, only the sale of selected food and beverage items as defined in subsection (a), is taxable when sold from a vending machine. Taxable tangible personal property, other than food and beverages, is also subject to tax when sold from a vending machine.

   (2)  Sales of taxable tangible personal property, other than selected food and beverage items.

     (i)   Imposition. The sale of taxable tangible personal property, such as cigarettes, combs, toys, pencils and similar items is subject to tax upon the purchase price of each individual item.

     (ii)   Collection of tax. The vending machine operator is required to collect tax upon the purchase price of each individual taxable item of property. The amount to be inserted in the machine is presumed to include the amount of tax to be collected for each item. If, however, the Department determines upon audit that the vending machine operator has not reported and remitted tax in accordance with this section and the TRC, the presumption will not apply, and the Department will assess the vending machine operator as though the amount inserted into the machine was the purchase price without the tax.

   Example 1: ‘‘A’’ operates a vending machine from which pencils may be purchased. To obtain a pencil, the purchaser is required to insert 35¢ into the machine. The tax is properly reported and remitted as follows: the purchase price is 33¢ and tax is 2¢.

   Example 2: ‘‘A’’ operates a vending machine from which pencils may be purchased. To obtain a pencil, the purchaser is required to insert 35¢ into the machine. ‘‘A’’ reports and remits no Sales Tax. When ‘‘A’’ is audited by the Department, he is assessed as follows: purchase price 35¢, tax 3¢.

   (3)  Sales of selected food and beverage items.

     (i)   Imposition. The sale of selected food and beverage items, as defined in subsection (a), from a vending machine is subject to tax upon the total receipts from the sale of the items.

     (ii)   Collection of tax. An operator of a vending machine from which selected food and beverage items are sold is required to collect and remit Sales Tax at the rate of 6% upon the sale of the selected food and beverage items. Sales Tax shall be computed by the following formula: (Total receipts from the sale of selected food and beverage items ÷ 1.06) x .06 = Sales Tax due.

     Example:

  ‘‘A’’ operates a vending machine from which milk, coffee and crackers are sold. ‘‘A’’ removes $100 from the machine representing the following sales: milk—$50, coffee—$25 and crackers—$25. Coffee is a selected food and beverage item. Milk and crackers are not. ‘‘A’’ remits tax in the amount of $1.42 calculated as follows: ($25 ÷ 1.06) x .06 = $1.42.

   (4)  Sales of food and beverages other than selected food and beverage items.

     (i)   The sales of food and beverages of the type described in this paragraph are not subject to Sales Tax when sold from a vending machine.

     (ii)   Examples of exempt food and beverages include:

       (A)   Baked goods, such as cakes, pies, cookies.

       (B)   Potato chips.

       (C)   Corn chips.

       (D)   Cheese balls.

       (E)   Pretzels.

       (F)   Crackers.

       (G)   Milk products, such as plain milk, chocolate milk, malted milk.

       (H)   Ice tea and iced coffee.

       (I)   Juice beverages.

       (J)   Unflavored water.

       (K)   Prepackaged ice cream products, such as ice cream cakes and pies, popsicles, sundaes and novelties.

       (L)   Prepackaged frozen water-based products, such as ice pops, fudge pops, fruit ice, bomb pops and similar items.

       (M)   Candy and gum.

       (N)   Other food and beverages not defined as a selected food and beverage item, including cold food for which heating facilities are not provided.

 (e)  Vending machine sales on school or church property.

   (1)  Sales of selected food and beverage items dispensed by means of a vending machine located on the premises of a school or church are exempt from tax.

   (2)  Sales of tangible personal property, other than food or beverages, which are dispensed by means of a vending machine located on the premises of a school or church, are subject to tax.

 (f)  Remitting tax to the Department. Sales Tax collected by the operator upon the sale of taxable tangible personal property, including selected food and beverage items, shall be reported and remitted to the Department.

 (g)  Purchase or lease of vending equipment and supplies.

   (1)  The purchase or lease of vending equipment, including parts, accessories, such as tables, chairs, microwaves, straw and napkin dispensers and other similar items, and supplies, such as straws, napkins, stirrers, eating utensils and similar items, is subject to tax.

   (2)  Wrapping supplies, such as plastic, paper and styrofoam cups, bowls or similar containers used to wrap property which is sold, are exempt from tax.

   The provisions of this §  31.28 amended under section 270 of the Tax Reform Code of 1971 (72 P. S. §  7270).

 (a)  Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

   Advertising insert—Printed advertising material that is circulated with another publication.

   Advertising literature or materials—Tangible personal property that is intended to promote business interest, create goodwill or engage the attention or interest of a recipient.

     (i)   The term includes printed matter, brochures, matchbooks, calendars, price lists, video and audio tapes, computer disks, investment prospectuses, financial and corporate annual reports, electoral literature or materials, playing cards, envelopes, address labels, reply envelopes, application forms, pens and similar promotional materials.

     (ii)   The term does not include proxy materials.

   Circulated among the general public—Made available for purchase from a retail outlet, such as a newsstand or bookstore, or made available for purchase by subscription. In the case of an organizational publication, the publication will be considered to be circulated among the general public only if there are regular sales of the publication to purchasers other than members of the organization.

   Direct mail advertising literature or materials—Advertising literature or materials that are distributed directly to intended recipients through the United States Postal Service. The term does not include advertising literature or materials that are distributed in a manner other than by the United States Postal Service.

   Magazine—A publication that is published at regular intervals not exceeding 3 months, that is circulated among the general public, and contains matters of general interest and reports of current events that are published for the purpose of disseminating information of a public character or is devoted to literature, the sciences, art or some special industry. The term does not include loose leaf information services.

   Mail order catalogue—A publication that contains a listing of items with descriptive details and includes a mail order form and is distributed through the United States Postal Service.

   Newspaper—A ‘‘legal newspaper’’ or a publication containing matters of general interest and reports of current events that qualifies as a ‘‘newspaper of general circulation’’ authorized to carry a ‘‘legal advertisement’’ as those terms are defined in 45 Pa.C.S. §  101 (relating to legal notices). The term does not include magazines.

   Publication—Information transferred by means of tangible media.

     (i)   Examples include printed material, such as books; financial and corporate annual reports; investment prospectuses; proxy materials; shopping guides; magazines; tabloid newspapers; and printed material that may supplement, explain, amend, revise or otherwise alter, expand or render current a looseleaf information service, or a book or bound volumes of books previously issued, including a supplement or pocket part, whether the additional material is periodically distributed or purchased independently of the basic book to which it is applicable.

     (ii)   The term also includes video and audio tapes, computer disks and similar items.

   Religious publication—Religious commentaries and other publications primarily devoted to religious instruction, promotion or information.

   Shopping guide—A publication primarily devoted to consumer awareness, promotion or information and that is generally provided to a consumer free of charge.

   Subscription—The advance purchase of a series of issues of a magazine delivered by the publisher to an address designated by the purchaser.

     (i)   The term includes a series of magazines provided by an organization to its members in consideration of the payment of membership dues, provided the magazine is also sold by subscription or by individual copy to the public.

     (ii)   The term does not include a purchase of an issue or series of issues of a magazine from a person other than the publisher.

   Textbook—A new or used book that is required or approved for use in conjunction with an educational curriculum provided by an institution of learning recognized by the Department of Education.

 (b)  Scope.

   (1)  Except as otherwise provided in this subsection, the sale at retail or use of publications, advertising inserts, Bibles, religious publications, including religious publications sold by religious organizations and advertising literature or materials is subject to tax when delivered to a location within this Commonwealth.

   (2)  The sale at retail or use of the following items is exempt from tax:

     (i)   Mail order catalogs.

     (ii)   Direct mail advertising literature or materials. See §  32.36 (relating to printing and related businesses).

     (iii)   Textbooks.

     (iv)   Newspapers.

     (v)   Magazines sold by subscription.

     (vi)   Advertising inserts that become a part of a newspaper or magazine.

     (vii)   One time license fees paid for the use of a listing of names and mailing addresses for each delivery of direct mail advertising literature or materials.

   The provisions of this §  31.29 amended under section 270 of the Tax Reform Code of 1971 (72 P. S. §  7270).

   The provisions of this §  31.29 amended March 29, 1974, effective March 30, 1974, 4 Pa.B. 581; amended April 5, 1985, effective April 6, 1985, 15 Pa.B. 1260; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322; amended March 24, 2000, effective March 25, 2000, 30 Pa.B. 1654. Immediately preceding text appears at serial pages (179232) to (179233).

 (a)  Definitions. The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise:

   Prebuilt housing—Housing which qualifies either as:

     (i)   Manufactured housing, including mobile homes, which bears the label required by and referred to in the Manufactured Housing Construction and Safety Standards Authorizat