Yuengling owes city tax $

[billy ross]

City says Yuengling owes $6.6 million in taxes

Not quite foreigners living abroad - I think this one is the other shoe dropping because the city decided to stop taxing city companies on gross receipts outside the city, thus ending a penalty assessed on Philly-based companies only. Makes sense to me.

[carloss]

Umm......

How does a Pottsville-based beer company that doesn't have a brewery or a plant in Philadelphia come to owe millions in Business Income and Receipt Taxes [i.e. what used to be called "Business Privilege Taxes"] to the city?

It's not quite clear, because no one from the city would comment on the suit or even explain the basic foundation of the claims.

Sounds like an airtight case to me. Although it could be they're trying to look like they're aggressively pursuing back-taxes right before the assessments come out, it's probably going to backfire if a claim is bogus.

[OffenseTaken]

The business income and receipt tax (BIRT), formerly known as the business-privilege tax (BPT), can be levied on any person or corporation that engages in taxable activity within the city, even if that business is not located in the city.

What the city constitutes as a taxable activity "is essentially a factual determination made on a case-by-case basis," according to the regulations listed on the city's website.

Any of you smart cookies care to explain what in ****'s name that means? Because it sounds like a shakedown to me, and that can't be right.

[raider.adam]

City says Yuengling owes $6.6 million in taxes

Not quite foreigners living abroad - I think this one is the other shoe dropping because the city decided to stop taxing city companies on gross receipts outside the city, thus ending a penalty assessed on Philly-based companies only. Makes sense to me.

I don't follow what you are saying.

Any of you smart cookies care to explain what in ****'s name that means? Because it sounds like a shakedown to me, and that can't be right.

To put simply, if you sell a product in Philadelphia, you have to pay taxes on it. Think of it as a reverse sales tax where the business pays.

[lucidinnature]

I don't follow what you are saying.



To put simply, if you sell a product in Philadelphia, you have to pay taxes on it. Think of it as a reverse sales tax where the business pays.

I'm sorry, but this law is so far reaching that it really has become ridiculous.

Today I bought envelopes. Does mead have to pay a tax on top of staples? How about bic pens? How about the Chinese company that made my rubber bands?

[MarketStEl]

I'm puzzled too. It would seem to me that the manufacturer of a product that someone else sells in Philadelphia on that manufacturer's behalf would not therefore have to pay Philadelphia gross receipts taxes on the sale of that product - the seller would, since he receives the income.

Unless the city is counting D.G. Yuengling & Son's round of beer for the entire city as a direct sale on its part, and I can't see how that would be the case - it would be an expense, as Yuengling received no revenue from the beer giveaway.

[lucidinnature]

I'm puzzled too. It would seem to me that the manufacturer of a product that someone else sells in Philadelphia on that manufacturer's behalf would not therefore have to pay Philadelphia gross receipts taxes on the sale of that product - the seller would, since he receives the income.

Unless the city is counting D.G. Yuengling & Son's round of beer for the entire city as a direct sale on its part, and I can't see how that would be the case - it would be an expense, as Yuengling received no revenue from the beer giveaway.

It's the inherent problem with the law. Pick and choose, at the mercy of the city.

Take conventions. Thousands of vendors. Are they sending each of these people tax notices for doing business in the city? Microsoft sells windows software through computers sold in Philly- where's their tax bill? Idiocy.

[Scoats]

Yuengling sells directly to their wholesale distributor here for the five county area (more or less). The distributor is located within the city limits. But then so does every other brewery or their importer. I guess this is where the city thinks the tax liability is coming from.

Since Yuengling only has one direct customer here (their distributor), it is possible for the city make that calculation. But that would seem to be a huge stretch. General Motors sells direct their dealers here, are they paying the tax? What about Amazon?

[raider.adam]

I'm puzzled too. It would seem to me that the manufacturer of a product that someone else sells in Philadelphia on that manufacturer's behalf would not therefore have to pay Philadelphia gross receipts taxes on the sale of that product - the seller would, since he receives the income.

Unless the city is counting D.G. Yuengling & Son's round of beer for the entire city as a direct sale on its part, and I can't see how that would be the case - it would be an expense, as Yuengling received no revenue from the beer giveaway.

It's the inherent problem with the law. Pick and choose, at the mercy of the city.

Take conventions. Thousands of vendors. Are they sending each of these people tax notices for doing business in the city? Microsoft sells windows software through computers sold in Philly- where's their tax bill? Idiocy.

I am going to reserve judgement until they disclose what they are saying is the reason for the tax liability.

[Jayfar]

I am going to reserve judgement until they disclose what they are saying is the reason for the tax liability.

But of course they're not saying. The only way to find out is to see a copy of the suit or wait for the trial or settlement.

[raider.adam]

But of course they're not saying. The only way to find out is to see a copy of the suit or wait for the trial or settlement.

I believe the news article says the filing didn't say either. It will likely need to wait until it goes to court.

[Jayfar]

I believe the news article says the filing didn't say either. It will likely need to wait until it goes to court.

Oh yeah, you're right: "though the suit does not detail what activities Yuengling conducted within Philadelphia that the city determined to be taxable."

I always thought a suit had to be somewhat specific as to what the basis of the suit is, but I guess Philadelphia plays by their own rules of "because we say so, that's why."

What the city constitutes as a taxable activity "is essentially a factual determination made on a case-by-case basis," according to the regulations listed on the city's website.

Read more: City says Yuengling owes $6.6 million in taxes

Wow, why would anyone in their right mind want to do business in Philadelphia on the that basis?

[John Goodman]

Ya this is an odd one

What other companies pay this type of tax? Are others delinquent as well?

Maybe nutter personally dislikes these guys?

[billy ross]

I don't follow what you are saying.



To put simply, if you sell a product in Philadelphia, you have to pay taxes on it. Think of it as a reverse sales tax where the business pays.

It's not a reverse sales tax. It's a sales tax paid by the seller, instead of the purchaser.

Previously, only Philly companies were subject to this tax, and it was for sales anywhere in the world. Not surprisingly, companies 'volunteered' to leave the city in droves so that they weren't subject to that insane tax. Very recently it was switched to the opposite of what it was before. Only sales in the city of Philadelphia are subject to the tax, no matter where the company is based. This makes much, much more sense, and it removed a huge disincentive to locate a company in Philly. If companies resent paying this tax, they are free to not sell in Philly. Then they lose the incremental sales from selling in Philly. Thus Wal-Mart et al will continue to do business in the city, and the city's tax revenues will grow.

My understanding is that the spirit of the law is for sales made for final consumption within the City of Philadelphia. This is where the city needs the leeway to determine what sales are where. If the five county distributor is in Philly, then what they then move to other counties should not be subject to the tax. I was under the impression that this was applied at the point of sale, but evidently it is applied at every level of the supply chain. For instance, my suppliers need to pay it when they sell stuff to me, then I need to pay it again when get paid by my clients, and my vendors need to pay it when I pay them, etc. Not 100% sure, but that seems to be how it works. Still, there needs to be a 'maquiladora' process whereby stuff can be brought in 'duty free' if its going right back over the border again, especially in the wholesaling business.

[newphil]

Why make an example out of Lager. Does Miller or Bud pay this tax? Also in the end won't this tax just be passed through to the end user? It's nothing more than double taxation, a second sales tax on the citizens. Who thought up this stupid method of collecting taxes? Did they not see the end result being ultimately born by the buyer?! I get that you need to tax the Walmarts and it needs to be based on Gross receipts b/c you 'll never get net profits of individual stores out of that corporation or any like it but this is ludacris.

[TruthBeTold]

It's not a reverse sales tax. It's a sales tax paid by the seller, instead of the purchaser.

Previously, only Philly companies were subject to this tax, and it was for sales anywhere in the world. Not surprisingly, companies 'volunteered' to leave the city in droves so that they weren't subject to that insane tax. Very recently it was switched to the opposite of what it was before. Only sales in the city of Philadelphia are subject to the tax, no matter where the company is based. This makes much, much more sense, and it removed a huge disincentive to locate a company in Philly. If companies resent paying this tax, they are free to not sell in Philly. Then they lose the incremental sales from selling in Philly. Thus Wal-Mart et al will continue to do business in the city, and the city's tax revenues will grow.

My understanding is that the spirit of the law is for sales made for final consumption within the City of Philadelphia. This is where the city needs the leeway to determine what sales are where. If the five county distributor is in Philly, then what they then move to other counties should not be subject to the tax. I was under the impression that this was applied at the point of sale, but evidently it is applied at every level of the supply chain. For instance, my suppliers need to pay it when they sell stuff to me, then I need to pay it again when get paid by my clients, and my vendors need to pay it when I pay them, etc. Not 100% sure, but that seems to be how it works. Still, there needs to be a 'maquiladora' process whereby stuff can be brought in 'duty free' if its going right back over the border again, especially in the wholesaling business.

Makes much, much more sense? What world do you live in?

First, let's consider a case of beer. Let's call this beer Yuengling. Yuengling sells cases of beer to a wholesale distributor (such as Penn Distributors). Penn Distributor sells to a beer distributor (such as Javies). Javies sells to customers (such as Billy Ross) and bars (such as Union Jack's). Considering sale for resale, there are a few steps here where sales tax is not paid. Let's put Net Profit Taxes in a box and keep it out of this discussion due to variables impacting the margins of any of these businesses. But there are Gross Receipts taxes. So, how many times is a case of beer being taxed when (a) sold to an end user at Javies and (b) the end users at Union Jack's?

All these extra layers of tax ultimately create what? Yes, a higher price to the end user. So, why does this make sense?

End users buying cases of beer will go outside the city more frequently. It is already happening for pretty much any other product subject to sales tax. So that is zero dollars going to City Hall when you buy a TV in Delaware, Montgomery County or New Jersey. Hogs get fat, pigs get slaughtered.

Secondly, how will this be enforced? Is the city prepared to receive returns from every company that creates a product that ultimately ends up being sold in the City of Philadelphia? How would the company even know how much of their product is ending up at the Target on City Ave or the Target on Chemical Road. How will this be measured by the city? How will it be enforced? The city can't even collect RE taxes from people living in the city on a tangible property that is being taxed a certain amount by the city.

Finally, if you have an item that sells wholesale for a buck and at retail for $2.50 - how much money does the city of Philadelphia deserve when one of these items is sold at a Wawa? While you are figuring that out, the price has probably already increased to $2.60 to make up for the BIRT on the manufacturer in Topeka, KS. I hope you used a pencil.

[BarryG]

Oh yeah, you're right: "though the suit does not detail what activities Yuengling conducted within Philadelphia that the city determined to be taxable."

I always thought a suit had to be somewhat specific as to what the basis of the suit is, but I guess Philadelphia plays by their own rules of "because we say so, that's

The way I read the article, the issue was that Yuengling declined to provide the city with the numbers they needed to calculate the tax owed, so bringing suit was basically the only way to force them to open their books (via discovery).

[lucidinnature]

Pabst reps directly deal with bars. Where's their bill?

Rolex deals directly to each partner in jewelers row. Where's their bill?

On and on nonsense- and any well meaning business is victimized.

[billy ross]

Pabst reps directly deal with bars. Where's their bill?

Rolex deals directly to each partner in jewelers row. Where's their bill?

On and on nonsense- and any well meaning business is victimized.

You're missing a HUGE point. Previously, Philly-based companies (say, Budd) were taxed on their sales all around the world. That was moronic, but it raised revenue. The city wisely decided to get rid of that tax, but in order to replace the revenue (which is absolutely necessary in these days of lean budgets) it decided to do the inverse, which is to tax the revenues of any company in the world which sells in Philly, to create a level playing field for Philly-based companies (for a change). Everyone knows that foreigners living abroad are the best people to tax, and this comes pretty close. If those companies don't like this, they are free to boycott Philly for the fraction of a cent that the city wants in Gross Receipts Tax. This is a very smart move. You want to tax companies that aren't in your jurisdiction, not home-based companies, and the vast majority of this new tax will be levied upon non-Philly companies. The only problem with what the city's done is that they should have chosen a convenient villian like Wal-Mart to make an example of. Yuengling is a local outfit, and they should have gotten to Yuengling after the big boys were in compliance. For all I know that may be the case, but I'd like to see the city confirm that the large multinationals are in compliance first.

In addition, if the city doesn't have enough information to properly calculate your taxes due, they plug in made-up numbers and send you a bill. These numbers are very favorable to them, and you are hugely incentivized to clean up the numbers. The state of PA does the same thing. That is how they do business, that that is what happened in this case. Meanwhile, in today's NY Times California's top income tax bracket - state and federal - is now 51.9% (with a state rate of 13.3%), while PA + Philly's top rate is 6.998%, and scheduled to drop yet again July 1 of this year. I just don't get that people are blind to smart moves by Philly like collecting taxes from compaines that want to take our money out of this city while at the same time reducing taxes for people basing their business or living in the city of Philadelphia.

http://www.nytimes.com/2013/02/07/us....html?hpw&_r=0

My accountant told me that I should move my company's 'place of business' to Montgomery County so that I would no longer be subject to the city's Gross Receipts Tax. I refused to do so. Now I no longer have a financial incentive to do so. It's about time common sense prevailed.

Makes much, much more sense? What world do you live in?

First, let's consider a case of beer. Let's call this beer Yuengling. Yuengling sells cases of beer to a wholesale distributor (such as Penn Distributors). Penn Distributor sells to a beer distributor (such as Javies). Javies sells to customers (such as Billy Ross) and bars (such as Union Jack's). Considering sale for resale, there are a few steps here where sales tax is not paid. Let's put Net Profit Taxes in a box and keep it out of this discussion due to variables impacting the margins of any of these businesses. But there are Gross Receipts taxes. So, how many times is a case of beer being taxed when (a) sold to an end user at Javies and (b) the end users at Union Jack's?

All these extra layers of tax ultimately create what? Yes, a higher price to the end user. So, why does this make sense?

End users buying cases of beer will go outside the city more frequently. It is already happening for pretty much any other product subject to sales tax. So that is zero dollars going to City Hall when you buy a TV in Delaware, Montgomery County or New Jersey. Hogs get fat, pigs get slaughtered.

Secondly, how will this be enforced? Is the city prepared to receive returns from every company that creates a product that ultimately ends up being sold in the City of Philadelphia? How would the company even know how much of their product is ending up at the Target on City Ave or the Target on Chemical Road. How will this be measured by the city? How will it be enforced? The city can't even collect RE taxes from people living in the city on a tangible property that is being taxed a certain amount by the city.

Finally, if you have an item that sells wholesale for a buck and at retail for $2.50 - how much money does the city of Philadelphia deserve when one of these items is sold at a Wawa? While you are figuring that out, the price has probably already increased to $2.60 to make up for the BIRT on the manufacturer in Topeka, KS. I hope you used a pencil.

You clearly don't understand how taxes are levied in this country. If my auto shop needs to charge $80 per shop hour to be able to pay his mechanic $30 per hour, and the worker only gets to take home $20 per hour, and I've got to work four hours and get paid $120 (@ $30 per hour) but only get to take home $80 out of that experience in order to pay the guy doing the work his $20, you can see all of the inefficiencies in the system and the huge incentive to do work yourself if you're handy. It's the total tax bite that makes a difference, and the city's miniscule gross receipts tax makes not a whit of difference in the above calculations.

[Ho Chi Minh]

Why make an example out of Lager. Does Miller or Bud pay this tax?

Easy, AB-Inbev's, or SAMillerCoors, lawyers would eat the city attorneys for lunch or tie it up for 30 years. Yuengling is an easy target, they're privately owned yet large enough to squeeze out some real coin.