Taxpayer asks:
Hello Taxgirl,
I appreciate you taking my question.
Is there any ruling, statute, or law of any kind in the state of Pennsylvania that states that retailers must charge tax (apply rate) on total purchases versus applying the tax rate line item by line item?
Example:
Total purchases: $40.45 Rate: 0.0675% Total Tax: $2.73
Difference of .02
Thank you very much,
Taxgirl says:
That’s a really interesting question! I’ve never really given it much thought but it does make a difference, as you pointed out.
It appears that the answer is the “total transaction” and not the individual items. Here’s the statute:
If anyone has a different read, let us know.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl!
{ 4 comments… read them below or add one }
But the law doesn’t really answer the question, because it doesn’t exactly define what constitutes a single “sales transaction.”
Is one person standing in line at the register with a bunch of items to purchase necessarily making a “single sales transaction?”
Maybe or maybe not.
For example, I might be buying two of the same item, but one is for my own use and one is to be used by a club which will reimburse me, but for which I will need a separate receipt. Or maybe I’m buying five of the same item to give as gifts to my five grandchildren, but I need five separate receipts to enclose so they can each make a decision to exchange them if needed.
But this does bring back memories for me. I went on a date with Harvard Law student in the mid-1970s, to a diner that had a lot of 99 cent specials for a complete dinner. I had just moved to Massachusetts and didn’t realize there was no sales tax on meals under a dollar. But order something that cost a dollar or more, and the full 5% tax kicked in immediately. My date ordered a 99cent special, and I, unknowingly, ordered something I thought was in the same ballpark, since it was listed on the menu at $1.05. My date looked at me, aghast, since it was actually going to set him back $1.10 since it would trigger the dreaded sales tax. I quickly revised my order to something else that was 99 cents, and the date went on.
I guess if we had been dining under the applicable rules in Pennsylvania, we should have asked for separate checks so that the total of each “single transaction” would be under 99 cents!
It shall be computed and collected on the basis of the total amount of taxable items in the transactions without regard to the value or price of the separate items making up the total amount of a single sales transaction.
It seems to me that the above explains it. Add it up, total it, tax it.
Hello,
Our Ladies Aid Society has dinners 9 times a year. We charge $7 per meal. At the end of the day we multiply the number of meals served by $7 to get our total income and then multiply that sum by 6% to calculate the amount of Sales Tax owed. Is that the proper way to calculate the tax? Or should we multiply the $7 by 6% and then multiply the product by the number of meals
served? It only makes a few cents difference, but what is the law?
Thank you, Hedy
Could you please answer the above question?