We all remember the bedtime story, The Little Engine that Could. With hard work and perseverance, it pulls the train over the mountain to deliver the goods.
This week in the General Assembly, a train carrying a host of liquor code amendments made it out of one station, stopped to unload some combustible freight, but found it was already too late when it got to the next station, since there were a host of other vehicles were blocking its way.
Thus, nothing happened. This was a good thing for beer distributors.
The combustible freight is a controversy surrounding a legal position being taken by the Pennsylvania Brewers Association. They claim that sales by brewers at their taprooms, whether for on or off-premises consumption, are not subject to the Pennsylvania Sales Tax. Their authority for this claim is a blog written by their lawyer, who claims to have a 3-year-old letter from the Department of Revenue.
In June, Revenue issued a bulletin saying their beer is taxable, but only at the “wholesale” price, unless they want to collect the full tax at the time of sale. Enough people squawked, including the Brewers themselves, so the department suspended the ruling until July 1, 2019.
The liquor bill in question included an amendment to put this rule into law. This was seen by most in the industry as preferential treatment, hitting each of their competitors in a somewhat different way, thereby creating a host of serious opposition. As one would predict, this caused the Senate to dump this provision before passing the bill and sending it to the House. By the time the House received the bill after 9:30 p.m., it was winding down and looking forward to adjourning, thus not considering it.
So what is the law? Must they collect sales taxes?
If you believe the Brewers public statements, any one of them who is collecting sales tax on their products is taking money from customers, which, since they are tax exempt, their customers need not pay. What do you call that?
On the other hand, if you believe those who argue that the products of brewers are, in fact, taxable, just as are the sales of all tangible property without a specific statutory exemption, then any seller not collecting that tax will, in the event of an audit, become subject to payment of the tax plus a substantial penalty.
What is as certain as things get in the Harrisburg political world is that the General Assembly is gone for the year. Everyone expects them to be buckling down for a rough political ride at the polls on election day.