Meuser said they project a $78 million surplus for the FY 2010-11 fiscal year, which includes a $110 million over-estimation of the Gross Receipts Tax, $69 million cost to the bonus depreciation change and other adjustments. Other revenues seem to be flowing in per estimates, he said.
Sales Tax Collections: Meuser said the Department of Revenue is preparing a plan to step up collections of Sale Tax for online and other purchases under existing state law. He said uncollected Sales Tax due the state may amount to an estimated $350 million, doubling existing collections annually from state income tax forms.
The Secretary of Revenue said the measures include adding a specific line to each personal income tax form asking taxpayers if they made purchases online and to remit the Sales Tax. Right now it is collected through a separate form.
Meuser said he also anticipates stepped-up enforcement of Sales Tax collections from companies that have a "nexus" in the Commonwealth, again under existing state law.
Federal Tax Bonus Depreciation: Several members of the Committee asked about the Department of Revenue's adoption of the federal corporate tax bonus depreciation schedule that would give an over $200 million tax benefit to 117,000 state business taxpayers.
In particular, House Democrats asked what the authority for the directive was (existing authority) or whether the change was tied to requiring businesses to purchase equipment in Pennsylvania (no other than generally making the business climate better).
Meuser said there will be a $69 million cost in state revenue to bonus depreciation in FY 2010-11. He did say his agency would appreciate some "legislative clarity" on the 100 percent depreciation going forward.
Privatizing Liquor Stores: Rep. Ron Walters (D-Philadelphia) expressed a concern about whether privatizing liquor stores will result in collection of all the taxes due because private companies will own the stores rather than collecting the tax from a state agency. Rep. Walters also said employees of private liquor stores will pay their workers less and therefore state income tax collected will be less.
Majority Committee Chair Rep. Adolph noted the Governor's proposed budget is not based on privatizing liquor stores and a new commission to be established by the Governor and additional hearings will address that issue.
Marcellus Shale Taxation: Rep. Greg Vitali (D-Delaware) expressed concerns about the Governor not proposing a Marcellus Shale severance tax when his budget is proposing deep cuts in education and welfare programs. A severance tax could bring in $200 million for FY 2011-12 by some estimates, he said.
Meuser said Marcellus Shale related companies have paid more than $100 million in state taxes and since West Virginia passed a severance tax only 20 Marcellus Shale wells have been drilled there while Pennsylvania has had 600 wells drilled.
He also said his agency has not done an estimate on what a severance tax would bring in or of potential job losses if a severance tax is adopted. Meuser said a severance tax is a relatively new tax, 60 or 70 years. He explained his responsibility is not to defend any industry, but collect taxes due.
Meuser noted, as with most companies (70 percent), Marcellus Shale drilling companies do not pay corporate income tax, because they are typically S corporations or limited partnership, but do pay other taxes as they are required to do under current state law. He said gas production royalty payments have not yet really begun, but will result in additional Personal Income Tax revenues.
He also said his agency has not done an estimate on what a severance tax would bring in or of potential job losses if a severance tax is adopted. Meuser said a severance tax is a relatively new tax, 60 or 70 years. He explained his responsibility is not to defend any industry, but collect taxes due.
Meuser noted, as with most companies (70 percent), Marcellus Shale drilling companies do not pay corporate income tax, because they are typically S corporations or limited partnership, but do pay other taxes as they are required to do under current state law. He said gas production royalty payments have not yet really begun, but will result in additional Personal Income Tax revenues.
Meuser encouraged legislators to ask county commissioners where there is drililng whether they think drilling companies are paying their fair share of taxes.
Rep. Vitali noted under Pennsylvania law, natural gas property interests are not taxable under county or local property tax.
Under separate questioning, Rep. Brian Ellis (R-Butler) noted the state has benefited from leasing state lands which adds upfront and royalty payments to the Commonwealth directly.
Further questioning was discontinued by Chairman Adolph saying those questions would be better directed to the Governor's Budget Secretary.
Taxing Texting, Internet Services: Several legislators asked about the possibility of the state taxing additional cell phone services. The representatives of the Department of Revenue said federal law prohibits taxing Internet-related cell phone services, but texting is something captured by existing state tax laws.
Tax Filing Deadline: Committee Chair Bill Adolph reminded the public the deadline for filing state and federal income tax is April 18 this year.
