TAX DISCOVERY: SALES TAX CROSS-CHECKING
REVIEW OF PHILADELPHILA’S SALES TAX EVADERS
DECEMBER 2010
The Commonwealth of Pennsylvania imposes a six percent sales tax on the retail sale, consumption, rental or use of tangible property within the state. Every person and business involved with making tax sales must be licensed with the Pennsylvania Department of Revenue and must report and remit these taxes within a specific time period. In 1992, the City of Philadelphia implemented, with state approval, a one percent sales tax putting the City’s rate at seven percent. Then, in October 2009, again with legislative approval, the City increased the rate to its current eight percent.
The state collects the entire tax rate for all businesses and as the case in Philadelphia, it keeps its six percent share and remits the two percent back to the City’s coffers. The City relies on these revenues to balance its budget and fund essential services. In the current FY2011 budget, Philadelphia is relying on $242 million in sales tax revenues and any amount less results in the City having to make up for the shortfall. When businesses evade paying their fair share of sales taxes or become delinquent, the City must either cut or eliminate services, or raise other taxes; either option penalizes all Philadelphians.
Almost 1,000 Philadelphia businesses owed the state $13 million in delinquent sales taxes, according to its December 2010 sales tax lien list. Of this total amount, it is estimated that the City is owed almost $2 million if the previous one percent sales tax rate is applied, due to many of these businesses delinquent under the City’s previous lower rate…
