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Pennsylvania Budget Makes Losers of Lottery Winners and Digital Downloaders and Winners Out of Those Owing Back Taxes

08.01.16 | SALT Chat

Apparently Pennsylvania lawmakers agree with former House Majority Leader Dick Gephardt when he said “those who have prospered and profited from life’s lottery have a moral obligation to share their good fortune.”  Under new legislation signed into law on July 13, 2016 previously exempt State lottery winnings will now be subject to the 3.07% income tax.

The enacted legislation also represents a major change in the way digital products will be treated.  Effective August 1, 2016, the sales and use tax will apply to digital products including books, applications, music, canned software, video, photographs, satellite radio services, and a host of other items that have been historically subject to sales tax in their tangible form.  Vendors of these services have less than two weeks to begin to implement compliance requirements.

Good news comes for those who owe tax in the State, whether they know it or not.  The new law directs the governor to set a 60-day period during the State’s 2016 – 2017 fiscal year.  The program applies to all taxes administered by the Department of Revenue for liabilities delinquent as of December 31, 2015.  The program is particularly generous in that not only will penalties be abated, but 50% of the interest as well.  There’s an additional bonus for taxpayers who are accepted into the program. They will not be liable for the type of tax for which amnesty is granted for any period prior to January 1, 2011.

Certain restrictions apply to the program and the application period, once announced, will be very narrow.  I’ll keep you posted of these developments.

If you have questions about aspects of this new Pennsylvania legislation, contact me at WBerkowitz@berdonllp.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, New York Accountants, advises on the unique requirements of governments and municipalities across the nation.