§ 32.1. Definitions.

 The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:

   Blasting—The use of a combustible or explosive composition in the removal of material resources, minerals and mineral aggregates from the earth, including the separation of the dirt, waste and refuse in which they are found.

   Charitable organization—

     (i)   An organization whose primary activities meet the following criteria. The organization:

       (A)   Advances a charitable purpose. An organization advances a charitable purpose if it makes gifts of services or property for general public use which are designed to benefit an indefinite number of persons from an educational, religious, moral, physical or social standpoint.

       (B)   Donates or renders gratuitously a substantial portion of its services. A substantial portion of the organization’s services shall be provided without charge to the subjects of the charity or to persons or entities that are directly providing the service on its behalf. The Department will determine whether the portion donated or rendered is substantial on an organization by organization basis. The word ‘‘substantial’’ does not imply a magical number.

         (I)   In calculating the gratuitous rendering of a substantial portion of services, an organization may include services to the same person, some of which are given without charge and some for which a charge is made. To qualify under this criteria, an organization may charge for some of its services but must render a substantial portion of its services without charge. This provision is not meant to exclude an organization that would otherwise meet this criteria if it charges some recipients on a sliding scale or graduated fee basis.

         (II)   To determine if an organization meets this criteria, the Department will examine the remuneration paid to its director and staff, the organization’s budget and the percentage of income used to provide charitable services in addition to other factors. In examining these factors, the Department will consider the type of charitable services provided, the location of the organization, the length of time the organization has been in operation and the cost of providing its charitable services.

       (C)   Benefits a substantial and indefinite class of persons who are legitimate subjects of charity. An organization’s gratuitous activity shall be ‘‘purely public,’’ in that the public must be the beneficiary of the gift conferred by the organization. The scope of the recipients can be limited to a particular group of the public, so long as the group is a legitimate subject of charity. Legitimate subjects of charity are those that are unable to provide for themselves what the organization provides. Examples include the handicapped, the aged, the sick, children and the poor.

       (D)   Relieves the government of some of its burden.

       (E)   Operates entirely free from private profit motive. An organization is not deemed to have a private profit motive merely because it hires employes and pays them reasonable compensation, or otherwise purchases at market rates other services that are required to carry out the charitable activity. The fact that an organization’s charitable activities generate surplus funds will be deemed by the Department to constitute evidence of a private profit motive, unless the surplus funds are reinvested to aid legiti-mate subjects of charity. Surplus funds reapplied to the maintenance and operation of a facility or to retire outstanding debt is not evidence of a private profit motive. Examples of operating entirely free from a private profit motive and not operating free from a private profit motive are as follows:

         (I)   A nursing home receives Medicaid reimbursements for a substantial number of its residents. The nursing home has a commitment to serve all applicants without regard to their financial means. The nursing home accepts the government reimbursement as full payment for its services. This government reimbursement does not cover the patient costs. The nursing home makes up the difference. This nursing home operates entirely free of a private profit motive.

         (II)   A corporation produces publications concerning the biological sciences and gives free seminars designed to educate the public. However, it also requires its clients to pay a fee for services rendered and charges clients for computer searches of its library. This organization does not operate entirely free of a private profit motive.

     (ii)   The term includes trust forms of community chests, funds or foundations and private charitable foundations which hold funds from contributions, such as grants, endowments, gifts and gratuitous donations and which then distribute substantially all of the funds to exempt organizations that qualify as purely public charities and that will use the funds for charitable purposes.

     (iii)   The term does not include an organization if any part of its funds may inure to the benefit of private shareholders or individuals other than for the payment of reasonable compensation for actual services rendered by the organization’s employes.

     (iv)   An organization’s primary purpose cannot involve the promoting or sponsoring of a noncharitable fund raising event such as an athletic or other special event. However, a charitable organization will not lose its status merely because it hires a promoter to run an event to raise funds to support the organization’s charitable purpose. Examples of noncharitable fundraising events and charitable fundraising events are as follows:

       (A)   An organization which exists for the primary purpose of sponsoring athletic events hires a promoter to run a professional golf tournament. The money raised by the event is used to pay the promoter for his services or to pay the event participants with any remaining funds distributed to exempt organizations. This is a noncharitable fundraising event.

       (B)   A hospital which qualifies as a charitable organization conducts a carnival as a fundraising event. Money raised, other than reasonable payment to the employes or a promoter running the event, is used in the hospital’s charitable activities. This is an exempt charitable fundraising event.

     (v)   An organization is not a charitable organization if a substantial part of its activities consists of carrying on propaganda or otherwise attempting to influence legislation. Examples are as follows:

       (A)   An organization’s main activity is directed at influencing public opinion and enacting legislation against the use of animals in scientific experimentation. A substantial portion of the organization’s activities involves the dissemination of propaganda which is favorable to its tenets and beliefs or lobbying for legislation which supports the organization’s activities and causes. A substantial portion of this organization’s activities are considered to be attempting to influence legislation.

       (B)   An organization in addition to other activities holds an annual legislative breakfast and invites members of the State House and Senate. This event is not considered to involve a substantial portion of the organization’s activities and would not disqualify the organization from receiving charitable status.

   Common carrier—A public utility which is organized to perform, and which does perform, services which are affected with a public interest, and which holds itself out to the general public to carry goods or persons, without discrimination, for compensation. The term does not include an independent contractor who reserves the right to refuse to serve any person at his discretion and the right and power to fix his rates or charges by individual contract with the person with whom he contracts.

   Dairying—The business of converting raw milk and other raw materials into milk and milk products which meet the requirements imposed by law for sale of the products to the general public, including the bottling or other packaging of the milk and milk products. Dairying does not include the business of producing raw milk and activities associated therewith, such as the breeding, feeding and raising of cattle or other milk-producing animals, the production of feed for the animals, or the collection of raw milk from producers. With regard to the breeding, feeding and raising of milk animals, and the production of food for the animals, see §  32.33 (relating to farming).

   Dairying operation—Any of the series of production activities, beginning with the first production operation, clarifying and ending with the packaging of the product for the ultimate consumer, including the following activities: the transportation and storage of property between the first and last production operations; the measuring and testing of the dairy product and its ingredients; and the washing, sterilization and inspecting of bottles. The term does not include activities prior to the first production stage, such as collecting, weighing and storing raw milk or pumping raw milk into a clarifier, or activities following the last production stage, such as casing, loading or delivery to the consumer.

   Dairy product—Packaged milk and milk products which meet the requirements imposed by law for sale to the general public.

   Direct mail advertising literature or materials—Tangible personal property which is intended to promote business interest, create good will or engage the attention or interest of the prospective purchaser to whom it is distributed through the United States mails. The property includes but is not limited to, printed matter, brochures, price lists, matchbooks, playing cards, calendars, pens and similar materials, including envelopes and address labels used in sending the literature and materials through the mails.

   Exempt organization—An organization which has a current valid exemption number issued by the Department for a charitable, volunteer firemen’s or religious organization or a nonprofit educational institution.

   Exploring—The examination and investigation of the earth, waste or stock piles, pits or banks by drilling, digging, boring, sinking shafts or driving tunnels.

   Extracting—The removing of natural resources, minerals and mineral aggregates from the earth, waste and stock piles, pits or banks, including blast furnace slag.

   Farmer—A person engaged in the business of farming.

   Farming—The following activities when engaged in as a regular business, are farming:

     (i)   Agriculture. The business of producing food products or other useful or valuable growths or crops by tilling and cultivating the soil, and by breeding, raising and feeding cattle, livestock, bees, poultry or other animals which produce a food product or which are themselves a food product. For example, the commercial raising of mushrooms is farming, but gardening and similar noncommercial activities are not farming. The following are not included within the definition of agriculture:

       (A)   The breeding or raising of dogs, cats and other pets; game animals, birds or fish. See subparagraph (vi), or other animals which are intended for use in sporting or recreational activities such as, but not limited to, hunting, fishing, show competition and racing.

       (B)   The operation of stockyards or slaughter houses.

     (ii)   Horticulture. The business of producing vegetables, vegetable plants, fruits and nursery stock, including the operation of commercial vegetable greenhouses and nurseries. Horticulture does not include the business of servicing plants owned by other persons.

     (iii)   Floriculture. The business of producing flowers and decorative or shade trees, plants and shrubs, in the field, nursery or greenhouse, but not including the raising of trees as timber, or lumbering, logging or sawmill operations.

     (iv)   Dairy farming. The business of breeding, feeding and raising of cattle and other milk producing animals, and the production by the owner of the animals of feed for them, but not including operations such as pasteurizing or homogenizing or the making of butter, cheese and ice cream. Reference should be made to § §  32.31 and 32.32 (relating to dairying; and manufacturing; processing).

     (v)   Fur-ranching. The propagation and raising of ranch raised fur-bearing animals.

     (vi)   Propagation of game birds. The propagation of game birds for commercial purposes by holders of propagation permits issued under 34 Pa.C.S. § §  101—2965 (relating to Game and Wildlife Code).

     (vii)   Propagation of aquatic animals. The propagation of fish and other aquatic animals for commercial use as a food or food product by holders of propagation permits issued under 30 Pa.C.S. § §  101—7314 (relating to Fish and Boat Code).

   Farm products—The final natural products of farming operations. Products are considered to be farm products only while they are on the farm premises, and in an unprocessed state. Products such as butter, sausage, pasteurized milk, flour, canned goods, jellies and juices, are not farm products as defined herein, but may be manufactured products within the meaning of §  32.32.

   Isolated sales—Sales of taxable property or services which:

     (1)   Occur no more frequently than three times nor for more than a total of 7 days in any 1-calendar year.

     (2)   Are not made from a location at which other businesses are making similar sales of the same taxable property or services upon which tax is required to be collected.

   Manufacturing—The performance as a business of an integrated series of operations which places personal property in a form, composition or character different from that in which it was acquired whether for sale or use by the manufacturer. The change in form, composition or character shall result in a different product having a distinctive name, character and use. Operations such as compounding, fabricating or processing are illustrative of the types of operation which may result in a change although any operation which has that result may be manufacturing. Mere changes in chemical composition or slight changes in physical properties are not sufficient. For example, the C Company, as its business operation, takes coffee beans and thereafter, by mechanical and hand labor cleans them, removes the outer skins and roasts the beans. The roasted coffee, resulting from the C Company’s activities, is not a manufactured product, notwithstanding the fact that there has been a change in color, weight and size of bean.

   Manufacturing operations—Any one of the series of production activities, beginning with the first production operation and ending with the packaging of the product for the ultimate consumer. The term does not include activities prior to the first production stage, such as collecting, weighing and storing raw materials or activities following the last production stage, such as casing, loading or delivery to the consumer.

   Mining—Commercial mining both deep and strip mining, quarrying, gas and oil drilling, and other commercial removal of natural resources, minerals or mineral aggregates from the earth or from waste or stock piles or from pits or banks including blast furnace slag. Water well drillers shall be considered to be engaged in mining and shall be entitled to the mining exemption.

   Mining operation—Any of the activities set forth in the definitions of ‘‘mining,’’ ‘‘exploring,’’ ‘‘extracting,’’ ‘‘blasting,’’ and ‘‘refining’’ whether performed solely or collectively with one of the other activities.

   Multiple copies—Fifty or more copies.

   Nonprofit educational institution

     (i)   A charitable organization, as defined in this section, which is created and which exists by law or by public authority predominantly for the purpose of education without pecuniary profit to an officer, member or shareholder except as reasonable compensation for services actually rendered to the institution. Public schools which are governed by the Public School Code of 1949 (24 P. S. § §  1-101—27-2702) qualify as political subdivisions rather than nonprofit educational institutions. Reference should be made to §  32.23 (relating to sales to the Commonwealth or its political subdivisions).

     (ii)   The term does not include groups which merely support or encourage the cause of education in general or a specific educational institution, or disseminate information on safety, or which are concerned with the welfare of persons engaged in educational work, including groups such as PTA, alumni groups, scholastic groups, professional associations and contributor groups even if the groups are sponsored by or affiliated with a nonprofit educational institution, and even if the groups benefit or generally inform the public.

   Photofinisher—A person who is engaged in producing printed pictures from developed or undeveloped film is a photofinisher.

   Photographer—A person engaged in the business of performing the total photography operation of picture taking, development of exposed film and the finishing and printing of pictures. The term also includes a person engaged in the business of performing a photography operation using microfilm, videotape, videocassettes or the like.

   Photo-refinisher—A person engaged in the business of tinting, coloring or altering of finished photographic prints, microfilm, videotape, videocassettes or the like, in any form. A photo-refinisher is to be distinguished from a photographer engaged in the finishing segment of the photography operation on the basis that a photo-refinisher performs an activity which is not in conjunction with the photography operation and which, in fact, occurs subsequent to the completion of the photography operation.

   Printed matter—The term includes but is not limited to books, booklets, letterheads, billheads, printed envelopes, folders, printed packages and packaging materials, advertising circulars, programs, newspapers, magazines, periodicals and similar items.

   Printer—A person engaged in the business of printing.

   Printing—The term includes the following:

     (i)   The performance of an integrated series of operations engaged in as a business which is predominantly and directly related to the production of multiple copies of substantial similar printed matter upon which a sales or use tax is due or for which an exemption exists. Based upon a 12-month period, property is predominantly used in printing when multiple copies are produced for 50% or more of the time or the total copies of printed matter, divided by the number of orders for substantially similar items, exceeds 50 or more copies.

     (ii)   When part of an integrated series of operations, the process of organization and arrangement of graphic material into page or other final format, whether by manual operation, computer operation or otherwise. It does not include data processing, word processing, photocopying or automatic typewriters, except where the activities are part of the integrated series of operations. Where equipment is used for both exempt and nonexempt purposes, the predominant use test shall determine its tax status.

   Processing—The following operations when engaged in as a business enterprise have been defined by the General Assembly as processing:

     (i)   The cooking or freezing of fruits, vegetables, mushrooms, fish, sea food, meats or poultry, when the person engaged in business packages such property in sealed containers for wholesale distribution.

     (ii)   The scouring, carbonizing, cording, combing, throwing, twisting or winding of natural or synthetic fibers, or the spinning, bleaching, dyeing, printing or finishing of yarns of fabrics when the activities are performed prior to the sale to the ultimate consumer.

     (iii)   The electroplating, galvanizing, enameling, anodizing, coloring, finishing, impregnating or heat-treating of metals or plastics for sale or in the process of manufacturing.

     (iv)   The rolling, drawing or extruding of ferrous and nonferrous metals.

     (v)   The fabrication for sale of ornamental or structural metal or of metal stairs, staircases, gratings, fire escapes or railings, not including fabrication work done at the construction site.

     (vi)   The preparation of animal feed or poultry feed for sale.

     (vii)   The production, processing and bottling of nonalcoholic beverages for wholesale distribution.

     (viii)   The operation of a saw mill or planing mill for the production of lumber or lumber products for sale.

     (ix)   The milling for sale of flour or meal from grains.

     (x)   The slaughtering and dressing of animals for meat to be sold or to be used in preparing meat products for sale, and the preparation of meat products, including lard, tallow, grease, cooking and inedible oils for wholesale distribution.

     (xi)   The processing of used lubricating oils.

     (xii)   The broadcasting of radio and television programs of licensed commercial or educational stations.

   Public utility—A person engaged in the performance of public utility service, as that term is defined in this section.

   Public utility service—The performance of services for compensation for the general public, without discrimination, which is subject to regulation by a governmental agency rather than determined by contract with the person for whom the services are performed; provided that the services so performed shall be affected with a public interest.

   Purchase price—The total value of anything paid or delivered, or promised to be paid or delivered, whether it be money or otherwise, in complete performance of a sale at retail, without any deductions on account of expenses incurred, such as travel time, rentals of rooms or equipment, salaries or wages paid to assistants or models, and charges for the developing of negatives, even though the expenses are separately itemized in billings to customers.

   Refining—The collective operation of cleaning, grading, cracking, crushing and similar processing of natural resources, minerals and mineral aggregates after their extraction from the earth, waste or stock piles, pits or banks including blast furnace slag.

   Religious organization for religious purpose—A group or body of persons which is created and which exists for the predominant purpose of regularly holding or conducting religious activities or religious education, without pecuniary benefit to an officer, member or shareholder except as reasonable compensation for actual services rendered to the organization. It is not sufficient that one of the purposes of an organization is to support or encourage religious activities or education. Mere sponsorship by or affiliation with a church or other religious organization for a religious purpose does not, of itself, render the sponsored or affiliated group a religious organization for a religious purpose. For example, the First Church sponsors a Men’s Bible Class and a bowling team. The Bible Class has as its predominant purpose the holding of classes in religious education. It is, therefore, a religious organization for a religious purpose. The bowling team, although sponsored by the church, is not a religious organization for a religious purpose.

   Returnable containers—Containers which are designed to deliver property more than one time, including containers which require cleaning, repair or refurbishing prior to their subsequent use.

   Volunteer firemen’s organization—A group or body of persons which is created and which exists for the purpose of fighting fires for the protection of the public without reimbursement or an organization which is formed under the Volunteer Firemen’s Relief Association Act (53 P. S. § §  8501—8508). The organization shall be operated without pecuniary profit to an officer, member or shareholder, except as reasonable compensation for actual services rendered to the organization. The term does not include a fire company’s auxiliary or similar group composed of persons who merely support or sponsor the work of a fire company but which, as a group, does not fight fires.

   Wrapping equipment—Property used in the operation of packaging which collectively includes conveying, inserting, packing, crating, binding, sealing, coding, weighing and addressing of personal property which is delivered to another person.

   Wrapping supplies—The term includes property, except for returnable containers as defined in this section, which is used as an outside covering or internal packing in order to deliver personal property to a purchaser. The term also includes items such as nonreturnable containers, mailing labels, envelopes and packing slips attached to the covering transferred with the personal property, instruction sheets, warranty cards, material for preservation of the property, paper and plastic plates, cups and similar items. The term does not include napkins, wooden or plastic spoons, forks, straws and similar items and these items are therefore subject to tax when sold to restaurants or other eating places. The sale or use of wrapping supplies, equipment and services for residential use is explained in §  58.1 (relating to publication of list of taxable and exempt tangible personal property).


   The provisions of this §  32.1 amended April 5, 1985, effective April 6, 1985, 15 Pa.B. 1261; amended June 28, 1985, effective June 29, 1985, 15 Pa.B. 2389; amended June 29, 1990, effective June 30, 1990, 20 Pa.B. 3600; amended March 29, 1991, effective March 30, 1991, 21 Pa.B. 1288; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322; amended December 23, 1994, effective December 24, 1994, 24 Pa.B. 6437. Immediately preceding text appears at serial pages (184049) to (184050), (179253), (149561) to (149564), (179255) to (179256) and (190177).

Notes of Decisions

   Charitable Organization

   The Court of Common Pleas committed an error of law when it concluded that corporations formed to promote golf tournaments and conduct charitable activities met the burden of proving that they were institutions of purely public charity simply because they provided funds to organizations that were tax exempt under federal law, where the corporations employed another corporation, which specializes in managing golf tournaments, to promote its 1996 and 1997 golf events, and where the record establishes that the overwhelming majority of revenue generated, after operating expenses, went to fund the purse for the participants of the golf tournament. Betsy King LPGA Classic, Inc. v. Richmond Township, 739 A.2d 612 (Pa. Cmwlth. 1999); appeal denied 760 A.2d 856 (Pa. 2000).

   The trial court properly determined that the drug and alcohol treatment facility advances a charitable purpose, where the nature of the facility’s activity is that of helping to restore lives broken by addiction to alcohol or other drugs, and this is clearly a gift of services or property for general public use which are designed to benefit an indefinite number of person from a physical and social standpoint, and where the facility rendered services at below cost in many instances, particularly to in-patients of State agencies such as the Department of Corrections. Gateway Rehabilitation Center, Inc. v. Board of Commissioners of the County of Beaver, 710 A.2d 1239 (Pa. Cmwlth. 1998).

   The record supported the trial court’s determination that the drug and alcohol treatment facility provides a substantial portion of its services gratuitously, where the facility receives Medicaid payments for eligible in-patients but that the amount received does not cover the cost of treatment; the facility has operated at a loss since 1990 or 1991; and the facility provides other services free of charge, including evaluations of prospective patients (always free regardless of ability to pay) and education programs for staffs of other facilities that treat alcohol and drug dependent patients. Gateway Rehabilitation Center, Inc. v. Board of Commissioners of the County of Beaver, 710 A.2d 1239 (Pa. Cmwlth. 1998).

   Although the definition of ‘‘charitable organization’’ was not binding in the instant case, it was generally supportive of court’s conclusion that historical society, while performing good works, did not serve a purely public and charitable purpose and thus was not entitled to tax exempt status. In re Salem Crossroads Historical Restoration Society, Inc., 526 A.2d 1257 (Pa. Cmwlth. 1987).

   Nonprofit corporation providing statistical analysis services to hospitals and other health care providers was not entitled to tax exempt status as a ‘‘purely public charity’’ required by Article VIII, Section 2 (a)(v) of the Pennsylvania Constitution of 1968 nor as a ‘‘charitable organization’’ defined in this section. Since its computer services could not be deemed a gift for general public use, it did not donate any of its services, all clients had to pay fees to cover costs, its beneficiaries were limited in number and were not legitimate objects of charity, and it failed to demonstrate operation completely free of profit motive. Hospital Utilization Project v. Commonwealth, 487 A.2d 1306 (Pa. Super. 1985).

   The fact that an organization is involved in activities which attempt to educate or motivate the general populace toward community improvement and is devoid of private gain does not characterize such an organization as a ‘‘purely public charity’’ in the legal sense. Commonwealth v. The American Anti-Vivisection Society, 377 A.2d 1378 (Pa. Cmwlth. 1977).


   A laboratory’s analysis, research and testing of client-provided products did not constitute a transformation of property or otherwise satisfy the definition of ‘‘manufacturing’’ as would entitle it to an exclusion from use tax. Lancaster Laboratories, Inc. v. Commonwealth, 578 A.2d 988 (1990); vacated in part 611 A.2d 815 (Pa. Cmwlth. 1992); affirmed in part 631 A.2d 739 (Pa. Cmwlth. 1993).

   Freezing of water into ice constitutes only superficial change and cannot be considered to come within the ‘‘manufacturing exclusion’’ from use taxation, 72 P. S. §  7201(o)(4); Commonwealth v. Air Products and Chemicals, Inc., 380 A.2d 741 (1977) (customer stations transforming liquid to gas are used in manufacturing) distinguished. Marweg v. Commonwealth, 513 A.2d 525 (Pa. Cmwlth. 1986).

   Nonprofit Educational Institution

   Since the nonprofit corporation’s seminars and group study programs existed primarily for the benefit of individuals with an occupational interest in the accounting profession, it was not entitled to a sales tax refund as a nonprofit educational institution although its programs were open to the public. PICPA Foundation for Education and Research v. Commonwealth, 598 A.2d 1078 (Pa. Cmwlth. 1991); affirmed 634 A.2d 187 (Pa. 1993).

   Public Utility; Conflict with Statute

   Taxpayer, a provider of cellular telecommunications, asserted it was entitled to exclusion from sales and use tax on the grounds that it was a public utility as defined in the Department of Revenue’s regulations; however, where the definition contained in the statute under which the regulation was promulgated provides otherwise, the statute controls. Bell Alantic Mobile Systems, Inc. v. Commonwealth, 799 A.2d 902 (Pa. Cmwlth. 2002); affirmed 845 A.2d 762 (Pa. 2004).

Cross References

   This section cited in 61 Pa. Code §  60.9 (relating to premium cable services); 61 Pa. Code §  32.21 (relating to charitable, volunteer firemen’s and religious organizations, and nonprofit educational institutions); 61 Pa. Code §  32.33 (relating to farming); 61 Pa. Code §  38.1 (relating to imposition and computation of tax); 61 Pa. Code §  60.7 (relating to sale and preparation of food and beverages); 61 Pa. Code §  60.8 (relating to secretarial and editing services); 61 Pa. Code §  60.17 (relating to sale of food and beverages by nonprofit associations which support sports programs); and 61 Pa. Code §  60.20 (relating to telecommunications service).

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