Legislation would eliminate estimated sales tax for businesses

Legislation recently introduced in the state House of Representatives would eliminate the practice of requiring Pennsylvania businesses to pay an estimated sales tax in advance.

House Bill 2277 would amend the Tax Reform Code of 1971 to eliminate the estimated sales tax and replace it with a policy that businesses pay only the sales tax they collect. Taxes would be paid quarterly.

Under current law, businesses must prepay the sales tax they expect to collect based on the previous year’s collection. If businesses underestimated the amount of sales tax they’d collect, they must make an additional payment at the end of a tax period.

“This outdated collection scheme is akin to requiring consumers to estimate, and pay in advance, the sales tax they think they may pay in a year. It just doesn’t make sense,” said Rep. Jesse Topper (R-Bedford/Franklin/Fulton), who introduced the bill. “This change would provide much-needed relief for our small businesses that continue to try to rebuild after the extraordinary challenges of these past two years.”

Topper said that prepaying sales creates cash flow problems and consumes resources businesses can use to grow.

The bill is in the House Finance Committee for consideration.