Community Banker Alert
To: All PACB Members
From: Frank A. Pinto, President/CEO
Subject: Urgent Action Needed on Legislative Plan to Impose Sales Tax on Banking Services
Date: October 24, 2005
PACB is part of a coalition that has organized to oppose plans in the House and Senate that would, as part of solutions to address the school property tax issue, impose the sales tax on banking services and an array of other professional services. We expect this proposal to be voted in the House of Representatives later this fall and it may be considered in the Senate since one of its strong proponents is the Senate Majority Whip, Jeff Piccola, the third-ranking member of the Senate Republican Leadership.
The PACB Legislative Committee met and considered this issue and voted to oppose the expansion of the sales tax to including banking services and to join the coalition opposing these plans. The coalition will be lobbying members of the Legislature but if we are to defeat this plan, it is critical that we have grassroots pressure and opposition.
It is vital for community bankers to contact state legislators that represent your financial institution and branch offices and legislators with whom you have developed a relationship.
Your message to your legislators should be to ask them to oppose the plan to expand the sales tax to banking services.
This proposal is fraught with problems for banking and our customers. We are concerned that:
- There is no certainty on what banking services and fees would be taxed and what would not be taxed. Interpretations would be made by the Department of Revenue and likely subjected to lengthy appeals and administrative processes. For instance, we do not know with certainty whether ATM surcharges and points on loans would or would not be subject to the sales tax;
- The cost of reporting sales tax and tracking when sales tax is due is extraordinarily cumbersome and adds to the paperwork burdens of an already over-regulated industry;
- In the post Sarbanes-Oxley environment that many of our community banking members struggle with, accounting and legal services are even more crucial. These services would be taxed like banking thus adding to the costs of these services you pay for complying with Sarbanes-Oxley if you are required to comply and the whole range of other regulatory burdens all community bankers face on a daily basis that require legal and accounting services;
- There are interstate commerce and competitiveness issues as well. Pennsylvania depository institutions would be required to pay the sales tax on out-of-state services you may need while out-of-state institutions would not, creating an uneven playing field.
As we continue to review, analyze and discuss this issue further, there are additional concerns that develop. Time is of the essence and, again, it is critical that you contact your legislator(s) now with this message.
Because this issue is so complex and controversial, we have included an analysis Dave Transue, our Government Affairs Consultant, prepared for the Legislative Committee as it considered this sales tax plan. I urge you to take a moment and read this document to better understand the intricacies of local tax reform and why we are so concerned that this sales tax expansion on banking services may be adopted. Please feel free to contact Dave Transue with questions or if you need additional material. As you make your contacts and receive feedback, please contact Dave with any information you may receive from your legislator(s). Dave may be reached here in the office at 717-231-7447 or via email at dave@pacb.org.
Thanks so much for your attention to this issue.