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CITY OF PHILADELPHIA BUSINESS PRIVILEGE TAX REGULATIONS - page 26 / 59

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26 / 59

SECTION 305. ALTERNATIVE RECEIPTS TAX COMPUTATIONS

  • (1)

    Taxpayers who are engaged in manufacturing, and/or who make wholesale and/or retail sales are entitled to compute the tax on receipts by one or more of the alternative methods of tax computation provided in subsection (2).

    • (a)

      For purposes of determining which alternative method or methods may be used by a taxpayer, the classification of a taxpayer as a manufacturer, and/or a wholesaler, and/or a retailer shall be made on the basis of the type or types of sales made by the taxpayer. Each alternative method of computation may be used to compute the gross receipts tax only on that type of sale which qualifies the taxpayer to use that alternative method of computation. For example, a taxpayer who makes wholesale sales and retail sales may elect the wholesaler's alternative method of computation for wholesale sales only. That taxpayer may also elect to use the retailer's alternative method of computation for retail sales only.

    • (b)

      A taxpayer who elects to use an alternative method of computing the tax on receipts must use that method of computation for all of the taxable receipts of that type. For example, a taxpayer may not elect to use the wholesaler's alternative method for certain of its wholesale sales and use the regular method for its other wholesale sales. Either the alternative method must be used for all taxable wholesale sales or the regular method must be used for all taxable wholesale sales.

(c)

A taxpayer who elects to use an alternative method of computing the tax on receipts may deduct only the cost of goods and cost of labor applicable to such receipts. For example, a taxpayer who uses the alternative method to compute the receipts tax on retail sales may not include any costs of goods or labor attributable to wholesale sales or receipts from services. In computing the alternative method tax base, the amount of the costs of goods and costs of labor which are deductible from each type of receipts is computed by multiplying the total cost of goods and cost of labor attributable to that type of receipts by the percentage derived from dividing the taxable receipts of that type by the total receipts of that type.

Example:

Wholesales Sales Taxable Wholesale Sales Total Cost of Goods Attributable to Wholesale Sales Total Cost of Labor Attributable to Wholesale Sale

$1,000,000

600,000

900,000

50,000

Applicable Cost of Goods: 600,000/1,000,000 x 900,000 = 540,000

24

(Rev. 08/01)

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