61 Pa. Code § 34.4 - Direct payment permit

(a) Generally. Authorization to remit tax under a direct payment permit is limited to taxpayers who acquire tangible personal property or services under circumstances which make it impossible at the time of purchase or other acquisition to predict the manner in which the property or services will be used and, therefore, impossible to determine whether the use of the property or services will be taxable or exempt. Holders of direct payment permits are given the privilege of purchasing property without payment of tax to their suppliers, and later paying the tax directly to the Commonwealth. A tax status determination shall be made and recorded at the time the property or service is actually put to specific use or designated for specific use, or when the proposed use becomes known.

(b) Requirements. To receive a Direct Payment Permit, the following requirements shall be met by the taxpayer:

(1) Application for direct payment permit shall be filed with the Department by each taxpayer on a special form provided by the Department.

(2) The taxpayer's business activities shall include, in a substantial amount, purchases or other acquisitions of tangible personal property or services, the use of which is impossible to determine at the time of acquisition.

(3) The taxpayer shall substantiate to the Department the adequacy of its recordkeeping system with respect to the accumulation, recordation, reporting of purchases and remittance of tax incurred.

(4) Taxpayer's business classification shall be of such nature and size that the issuance of a Direct Payment Permit is prerequisite to economical and efficient accounting for tax incurred.

(5) Direct Payment Permit holders are required, as a condition of the issuance of the permission, to provide the Department access to all records maintained to account for the tax due.

(c) Manner in which direct payment permits is to be used by taxpayer. The Direct Payment Permit number shall be inserted on a certificate of exemption and issued in the same manner as any certificate of exemption in lieu of the payment of tax at the time of acquisition of tangible personal property or services except for those transactions enumerated in subsection (e) or except for those cases where the direct payment permit is further restricted at the time of issuance. Reference should be made to § 32.2 (relating to exemption certificates). A tax status determination, and a recordation thereof, must be made with respect to the purchase on the date upon which any of the following shall first occur: the date upon which the actual proposed use is known or designated; the date upon which the use actually occurs. However, it is expected that a tax status determination, and a recordation thereof, shall in all cases be made within 1 year from the date of acquisition of tangible personal property or services. The Department, upon examination of Direct Payment Permit holders, may consider the presumption of taxability to apply to those acquisitions for which tax status determinations have not been properly made and recorded within 1 year from the date of acquisition.

(d) Revocation of Direct Payment Permit. The Department has the authority to revoke a Direct Payment Permit at any time for failure to comply with the conditions under which the authority was granted, or for other reasons constituting misuse of the authority.

(1) Within 30 days after receipt by the permit holder of notice of revocation from the Department, or at least 30 days in advance of unilateral discontinuance of direct payment authority by the permit holder, he shall:

(i) Give notice to each supplier with whom he had transacted business under direct payment authority, that subsequent to an appropriate effective date, he will no longer claim exemption from payment of tax at the time of acquisition under direct payment authority.

(ii) Create and maintain records to evidence receipt of the notice by each such supplier for subsequent inspection by the Department.

(iii) Return to the Department the Direct Payment Permit certificate issued by the Department.

(2) However, where a unilateral discontinuance of direct payment authority is a result of the cessation of business activities, corporate reorganization, corporate merger or similar reasons the Department may waive the requirements in this subsection upon written request for the action by the permit holder, provided, however, that the request shall state the specific reasons for which special consideration is required by the permit holder.

(e) General restrictions upon use of Direct Payment Permit. A Direct Payment Permit may never be used in conjunction with the following transactions:

(1) Purchase of a motor vehicle, trailer, semitrailer or tractor required to be registered with the Bureau of Motor Vehicles.

(2) Purchase of prepared food or beverages at an eating place.

(3) Purchase of occupancy or accommodations subject to tax under the hotel occupancy tax provisions of the TRC.

Notes

61 Pa. Code § 34.4

The provisions of this § 34.4 corrected June 12, 2003, effective 2/29/1992, 33 Pa.B. 2756.

This section cited in 61 Pa. Code § 47.19 (relating to Public Transportation Assistance Fund taxes and fees); 61 Pa. Code § 47.20 (relating to Vehicle Rental Tax); and 61 Pa. Code § 60.16 (relating to Local Sales, Use and Hotel Occupancy Tax).