Money for nothing: Cap on vendor tax would reap state a big return
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In all of the discussions over multi-million-dollar line items for education, social services and economic development in Pennsylvania's 2012-13 budget, lawmakers shouldn't lose sight of a little thing that could make a big difference.
When Gov. Tom Corbett announced his $27.1 billion spending plan, one of the smaller proposals dealt with the state's antiquated vendor sales tax discount. Most taxpayers assume that when they pay an extra six or seven cents in sales tax on each dollar they spend on a taxable product or service that all of it is forwarded to Pennsylvania's coffers, but that's not correct. Vendors who collect the tax as required get to keep a small piece of it, a throwback to a time when assessing and forwarding the payments to the state meant keeping a ledger, writing a check and mailing it to Harrisburg.
Those days are long gone, with computerized record-keeping and tax payment systems that make the process much less onerous for business owners, but the vendor discount persists.
Mr. Corbett acknowledged as much in his budget, when he proposed putting a cap on the vendor discount. The governor's plan would not eliminate it all together, and the change would not affect an estimated 98 percent of the state's businesses. But by setting a monthly cap of $250 on the discount, the state could realize about $47 million a year.
Only very large retailers with a high volume of sales -- for example, the Walmart, Home Depot and Target chains -- would be affected by the imposition of a cap.
The Pennsylvania Budget and Policy Center, a nonpartisan research organization, said that in the past two years, five companies got discounts of $1 million per year or more, and another 11 exceeded $500,000 per year. By comparison, small businesses received only a few dollars, with 74 percent of the monthly filers getting $50 or less.
Pennsylvania is one of 28 states that provides the vendor discount, and 16 of them already have put caps on the amounts. Doing so would add a layer of fairness to the tax collection process; most businesses would continue to get a small sum for collecting the tax but big vendors wouldn't be able to reap windfalls from it.
According to the Democratic House Appropriations Committee, Senate Republicans have rejected the idea. They should reconsider.
First Published June 19, 2012 12:00 am