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Pennsylvania restaurants that provide free meals to employees or patrons are not subject to sales and use tax. In addition, no use tax is due on restaurant purchases as long as the food is obtained from wholesalers, distributors, grocery stores or other non-eating organizations. However, the restaurant is liable for use tax on soft drinks provided free to employees or patrons. (Legal Letter Ruling No. SUT-05-004, Pennsylvania Department of Revenue)

(08/18/2006)

A letter ruling clarified that a taxpayer's purchases of natural gas qualify for the manufacturing exclusion and are not subject to Pennsylvania sales and use tax when directly used in the production of electricity. Other items such as machinery, equipment, parts and supplies, are also considered non-taxable when used in the production of electricity. (Pennsylvania Department of Revenue, Legal Letter Ruling No. SUT-05-003, February 23, 2005)

(04/12/2006)

The Pennsylvania Department of Revenue recently issued Legal Letter Ruling No. SUT-05-004, which stated that free meals provided by a restaurant to its employees or patrons were not subject to sales and use tax. The Department of Revenue concluded that the free meals were not subject to tax on the statutory language that a basis for use tax is the provider’s acquisition of the property or services provided. In the case of the restaurant’s provision of free meals to its employees, the restaurant’s tax basis is the restaurant’s acquisition of the food that was incorporated into the free meals. The letter ruling states that assuming the restaurant purchases the food incorporated into the meals from food wholesalers, distributors, grocery stores or other non-eating establishments, the restaurant’s purchase of the food is nontaxable; therefore, there is no tax basis. However, use tax is due on any soft drinks provided free of charge to the restaurant’s employees or patrons. (Pennsylvania Department of Revenue, Legal Letter Ruling No. SUT-05-004, March 28, 2005)

(04/22/2005)

The Pennsylvania Department of Revenue recently issued a letter ruling stating that a college qualifying as a purely public charity is not liable for sales and use tax on a contract for the purchase and installation of an artificial playing surface or sod. A qualifying public charity is exempt from tax on its purchases that qualify as building machinery and equipment. The letter ruling stated that the organization would be required to pay sales and use tax on its purchases of items other than building machinery and equipment if it performs construction contract activities itself. However, since the college is utilizing a construction contractor to perform the installation of the artificial playing surface, sales and use tax is not due on the contract price as it is considered a construction contract. The college’s contractor is responsible for paying sales and use tax on the materials used in performing the construction contract and may include tax paid in the cost of materials, but not as a separate line item at invoicing. (Pennsylvania Department of Revenue, Legal Letter Ruling No. SUT-05-005, March 28, 2005)

(04/22/2005)

The Pennsylvania Department of Revenue recently issued a Legal Letter Ruling stating that a taxpayer’s purchase of natural gas, machinery, equipment, parts, and supplies qualifies for the manufacturing exclusion when used “directly and predominantly” in the production of electricity at its generating peaking power facility. The facility generates power that is sold to a public utility. Since the taxpayer was utilizing the natural gas, machinery, equipment, parts, and supplies directly and predominantly in the production of electricity for sale, the State concurred that such purchases qualified for the manufacturing exemption. (Pennsylvania Department of Revenue, Legal Letter Ruling No. SUT-05-003, February 23, 2005)

(12/06/2005)

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