An Act amending the act of December 31, 1965 (P.L.1257, No.511), known as The Local Tax Enabling Act, in local taxes, further providing for delegation of taxing powers and restrictions thereon, for payroll tax and for limitations on rates of specific taxes and providing for expiration of business gross receipts tax.

PRINTER'S NO. 1886
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 1582
Session of
2025
INTRODUCED BY KERWIN, GAYDOS, ROWE AND STENDER, JUNE 9, 2025
REFERRED TO COMMITTEE ON FINANCE, JUNE 10, 2025
AN ACT
Amending the act of December 31, 1965 (P.L.1257, No.511),
entitled "An act empowering cities of the second class,
cities of the second class A, cities of the third class,
boroughs, towns, townships of the first class, townships of
the second class, school districts of the second class,
school districts of the third class and school districts of
the fourth class including independent school districts, to
levy, assess, collect or to provide for the levying,
assessment and collection of certain taxes subject to maximum
limitations for general revenue purposes; authorizing the
establishment of bureaus and the appointment and compensation
of officers, agencies and employes to assess and collect such
taxes; providing for joint collection of certain taxes,
prescribing certain definitions and other provisions for
taxes levied and assessed upon earned income, providing for
annual audits and for collection of delinquent taxes, and
permitting and requiring penalties to be imposed and
enforced, including penalties for disclosure of confidential
information, providing an appeal from the ordinance or
resolution levying such taxes to the court of quarter
sessions and to the Supreme Court and Superior Court," in
local taxes, further providing for delegation of taxing
powers and restrictions thereon, for payroll tax and for
limitations on rates of specific taxes and providing for
expiration of business gross receipts tax.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Sections 301.1(a.1) and (f)(12), 303(d) and
311(2) of the act of December 31, 1965 (P.L.1257, No.511), known
as The Local Tax Enabling Act, are amended to read:
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Section 301.1. Delegation of Taxing Powers and Restrictions
Thereon.--* * *
[(a.1) (1) A local taxing authority may levy a tax on the
privilege of doing business in the jurisdiction of the local
taxing authority if:
(i) the privilege is exercised by conducting transactions in
the jurisdiction of the levying local taxing authority for all
or part of fifteen or more calendar days within the calendar
year; or
(ii) the privilege is exercised through a base of operations
in the jurisdiction of the levying local taxing authority. The
gross receipts subject to this tax shall not include any
receipts subject to a tax measured by such gross receipts which
is imposed under subparagraph (i).
(2) As used in this subsection, the term "base of
operations" shall mean an actual, physical and permanent place
of business from which a taxpayer manages, directs and controls
its business activities at that location.]
* * *
(f) Such local authorities shall not have authority by
virtue of this act:
* * *
(12) To levy, assess and collect a mercantile or business
privilege tax on gross receipts. [or part thereof which are: (i)
discounts allowed to purchasers as cash discounts for prompt
payment of their bills; (ii) charges advanced by a seller for
freight, delivery or other transportation for the purchaser in
accordance with the terms of a contract of sale; (iii) received
upon the sale of an article of personal property which was
acquired by the seller as a trade-in to the extent that the
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gross receipts in the sale of the article taken in trade does
not exceed the amount of trade-in allowance made in acquiring
such article; (iv) refunds, credits or allowances given to a
purchaser on account of defects in goods sold or merchandise
returned; (v) Pennsylvania sales tax; (vi) based on the value of
exchanges or transfers between one seller and another seller who
transfers property with the understanding that property of an
identical description will be returned at a subsequent date;
however, when sellers engaged in similar lines of business
exchange property and one of them makes payment to the other in
addition to the property exchanged, the additional payment
received may be included in the gross receipts of the seller
receiving such additional cash payments; (vii) of sellers from
sales to other sellers in the same line where the seller
transfers the title or possession at the same price for which
the seller acquired the merchandise; or (viii) transfers between
one department, branch or division of a corporation or other
business entity of goods, wares and merchandise to another
department, branch or division of the same corporation or
business entity and which are recorded on the books to reflect
such interdepartmental transactions.]
* * *
Section 303. Payroll Tax.--* * *
(d) A city of the second class may enact ordinances and
regulations necessary to implement this section. [The ordinance
levying the tax authorized by this section shall permanently
replace the city's existing mercantile tax and shall reduce the
business privilege tax rate as follows:
(1) In tax years 2005 and 2006, the business privilege tax
shall be two mills.
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(2) In tax years 2007, 2008 and 2009, the business privilege
tax shall be one mill unless the revenues collected from the
payroll expense tax exceed fifty million five hundred thousand
dollars ($50,500,000) in any fiscal year, at which time the
business privilege tax shall be replaced for the subsequent
fiscal year. After the phaseout of the business privilege tax,
all amounts of moneys in excess of fifty million five hundred
thousand dollars ($50,500,000) shall be used by the city of the
second class to further accelerate the reduction of the tax
imposed by the city of the second class on parking as provided
in section 308.
(3) In tax year 2010 and thereafter, the business privilege
tax may not be imposed.]
* * *
Section 311. Limitations on Rates of Specific Taxes.--No
taxes levied under the provisions of this chapter shall be
levied by any political subdivision on the following subjects
exceeding the rates specified in this section:
* * *
[(2) On each dollar of the whole volume of business
transacted by wholesale dealers in goods, wares and merchandise,
one mill, by retail dealers in goods, wares and merchandise and
by proprietors of restaurants or other places where food, drink
and refreshments are served, one and one-half mills; except in
cities of the second class, where rates shall not exceed one
mill on wholesale dealers and two mills on retail dealers and
proprietors. No such tax shall be levied on the dollar volume of
business transacted by wholesale and retail dealers derived from
the resale of goods, wares and merchandise, taken by any dealer
as a trade-in or as part payment for other goods, wares and
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merchandise, except to the extent that the resale price exceeds
the trade-in allowance. When a political subdivision which
currently levies, assesses or collects a mercantile or business
privilege tax on gross receipts under section 533 of the act of
December 13, 1988 (P.L.1121, No.145), known as the "Local Tax
Reform Act," merges with one or more political subdivisions to
form a new political subdivision on or after August 1, 2008, the
new political subdivision may levy that mercantile or business
privilege tax in the first year following the merger at a rate
necessary to generate the same revenues generated in the last
fiscal year that the merging political subdivision generated
before the merger. Such rate shall remain in effect for the new
political subdivision in subsequent years, but the revenue-
neutral limitation shall only apply to the first year following
the merger. If the merging political subdivision had previously
shared the rate of taxation with another political subdivision,
the nonmerging political subdivision which had shared the rate
is capped at the rate it was previously levying.]
* * *
Section 2. The act is amended by adding a section to read:
Section 331. Expiration of Business Gross Receipts Tax.--(a)
All mercantile, business privilege and other business gross
receipts taxes authorized under this chapter and in accordance
with section 311 shall expire December 31, 2025.
(b) A political subdivision may not levy, assess or collect
a tax referred to under subsection (a) after December 31, 2025.
Section 3. This act shall take effect as follows:
(1) The following shall take effect immediately:
The addition of section 331 of the act.
This section.
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(2) The remainder of this act shall take effect December
31, 2026.
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