Sales Tax Articles
Sales Tax State Activity Update - January 2006
Pennsylvania Lifts Up Elevator and Escalator Exemption
In a recent letter ruling, the Pennsylvania Office of Chief Counsel indicates escalators and elevators used directly by a subway operator in rendering a public utility service may be purchased and transferred exempt by the contractor in the performance of his construction contract.
A construction contractor engaged in business with a subway operator licensed with the Public Utility Commission to manufacture and install elevators and escalators for several subway stations.
Generally, contractors pay sales and use tax on the purchase of materials used or consumed in construction activities. Pennsylvania statutes provide an exemption for machinery, equipment and parts purchased pursuant to a contract with a public utility.
The ruling indicates so long as the elevator and escalators are directly used in rendering a public utility service, the contractor may purchase and transfer the machinery, equipment and parts exempt to the subway operator. The machinery, equipment and parts for elevators and escalators not used by subway passengers, such as those used by subway employees only, remain subject to tax.
The full text may be accessed at the Pennsylvania Department of Revenue website.
(Pennsylvania Office of Chief Counsel, Private Letter Ruling No. SUT-05-032, 12/12/05)
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