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No telling what's taxable (and what's not) in Pa.
HARRISBURG - Your parents didn't pay a sales tax to put you in diapers. Neither will your loved ones when they put you in the ground.
In the half-century since Pennsylvania enacted its sales tax, the state has carved out exemptions for goods and services that run the gamut from cradle to grave.
Typical exemptions are for basic needs - food and clothing. Or caskets and burial vaults, "the final basic necessity," says the reasoning in Gov. Rendell's phonebook-thick 2009-10 budget book.
But as Rendell has pointed out lately, the list includes gold. He promised he would take to a Phillies World Series game anyone who could "give me one plausible reason why we would exempt bullion, gold bullion."
Actually, he should know. He signed the bullion exemption into law on July 6, 2006, as a small part of a much broader bill.
Now, as Harrisburg is poised to balance the budget in part by imposing the sales tax on tickets to plays, museums, concerts, and zoos, the exemption list is coming under scrutiny, and many are wondering why some things are taxed and others aren't.
"A lot of the exceptions make no sense," Rendell said recently, "and are solely the product of effective lobbying by special interests."
The tax-free list includes everything from dry cleaning and basic cable to toothbrushes and trout. And horses - but only if they're destined for out of state.
A trip to the movies tells the tale of the sales tax's patchwork nature. Theaters don't pay the tax on films they acquire to show audiences; neither do moviegoers when they buy tickets. At the counter, popcorn and Pepsi are taxed - but not Dots and Dentine.
"It is a perfect example of how arbitrary the sales-tax structure is," said Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, a liberal-leaning Harrisburg think tank that has studied the exemptions. "It shouldn't have winners and losers. It should be simple and fair."
The bullion exemption was a long time in the making. For years, Pennsylvania coin dealers labored fruitlessly to persuade the General Assembly to lift the sales tax on investment-grade coins and gold bullion.
Then they hired Rosemary Chiavetta.
A former Public Utility Commission lawyer, Chiavetta has been a lobbyist for 10 years and runs a one-woman firm in Harrisburg.
She went to work, and persuaded lawmakers to include the niche industry among the state's sales-tax-free items, a move that will cost the state an estimated $2.7 million this fiscal year.
Chiavetta's argument: Coin dealers were losing business to states that didn't impose the tax. Besides, she contended, it was a matter of fairness.
"People don't buy gold to sit on the table. It's an investment," she said. "It's OK to buy a share of stock without paying the sales tax, but not investment metal. That's not fair."
Pennsylvania began collecting a sales tax in 1954 - all of a penny on the dollar. It rose to 3 percent in 1956, 4 percent in 1959, and 5 percent in 1963 before reaching the current 6 cents on every dollar in 1968.
(In Allegheny County and Philadelphia, the rate has been 7 percent; Philadelphia will raise its rate to 8 percent next week to help solve its own budget woes.)
Sales-tax structure varies widely from state to state. All states except five, including Delaware, levy sales taxes, which, nationwide, generate $236 billion, or about a third of all state tax collections, according to the Center on Budget and Policy Priorities, a Washington group.
And exempting certain goods and business sectors is a time-honored - and confusing - tradition in many states.
