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Imposing Sales and Use Tax on Commercial Storage Services Will Hurt PA Economy

 

For Immediate Release                               

For more information, contact: Stephanie Shirley,                                                       Stephanie@millirongoodman.com

Imposing Sales and Use Tax on Commercial Storage Services Will Hurt PA Economy

Adding sales and use tax to commercial storage services will result in the substantial loss of jobs and revenue for the Commonwealth and pass double taxation on to PA consumers.

HARRISBURG, Pa. —Governor Tom Wolf has proposed a 6 percent sales and use tax on commercial storage services in an attempt to help close a $3 billion deficit in the state’s 2017-18 budget. This would cause an average of a quarter-million dollars per warehouse in lost annual revenue, resulting in layoffs or businesses leaving Pennsylvania altogether

The proposed tax model has shown to be detrimental to other states’ economies. A 2007 Michigan State University study showed that when the state of Michigan proposed a warehouse tax, there would be a resulting 33 percent labor loss over just a few years in the warehouse industry. This amount is equal to approximately 7,000 jobs lost in that sector. A similar study relative to Pennsylvania, currently being conducted by Penn State University, estimates that the implementation of this tax would result in the loss of 9,000 jobs. Seasonal temp jobs would be in addition to this number, further adding to the impact.

Additionally, a recent KPMG study shows that 90 percent of states that attempted commercial storage taxes have ultimately chosen not to, or have repealed them. When looking at the full impact of such a tax, states clearly see that it translates to an actual loss of tax revenue, caused by a loss of economic activity, a loss of population, and a loss of income/sales taxes. Communities often end up with large, empty warehouse buildings that are not leasable for long periods of time, creating real estate taxation issues and revenue issues for local government and schools.

 

“Not only will the added roadblock of yet one more tax incentivize existing businesses and customers to leave the state, but the anti-business climate that this tax creates will deter further job creation and keep businesses from moving to Pennsylvania,” explains Steve DeHaan, president and CEO of the International Warehouse Logistics Association (IWLA).

Most troubling, the implementation of this tax constitutes double taxation on the PA consumer. Not only will consumers have to pay state sales tax when purchasing goods at the store, but they will in effect be paying this “commercial storage services” tax as well when warehouse customers pass along the cost of the tax into the retail price of the product.

“I’m confident that when Pennsylvania lawmakers see what has happened in other states that considered or enacted similar taxes, they will realize the negative impact this could have in the Keystone State,” DeHaan says. “I encourage them to tread carefully, and closely consider the real and substantiated implications of imposing this commercial storage services tax. The solution to the budget shortfall should not come at the cost of jobs and business growth in the Commonwealth.”

 

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