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Gross Receipts Taxes Passed Through to Businesses in Pennsylvania

Typically, taxes that are collected on your electric bill are kept separate and apart from the revenue on which those taxes are applied. However, in Pennsylvania, the Gross Receipts Tax (GRT) is passed through to the consumer and considered to be part of the revenue base against which the GRT is calculated.

The new total GRT calculation is broken down as follows:
GRT (Gross Receipts Tax)                                           4.40%
PURTA (Public Utility Realty Tax Act Surcharge)      0.16%
RNR (Revenue Neutral Reconciliation)                    1.50%
TOTAL                                                                              6.06%

It is common practice in Pennsylvania for electricity suppliers to use an adjusted rate to ensure they are billing the appropriate revenue to cover business costs. This practice is called “grossing up.”

The calculation formula is:

Cost = (Taxable Amount)/(1 – GRT)

or

1/(1-0.0606) = 1/0.9394 = 1.064509

Below is an example to demonstrate how the adjusted rate works.

Transaction                                          $1,000.00
PA GRT Adjusted Rate                       6.4509%
PA GRT charged to consumer         $64.51
Reportable Gross Receipts              $1,064.51
PA GRT Rate                                        6.0600%
PA GRT due to State                           $64.51
Resulting Revenue                             $1,000.00

Utilities and electricity generation suppliers use varying methods to invoice the Pennsylvania GRT.

Constellation Energy presents the GRT as a separate line item, which allows our customers to identify its exact amount. See a sample bill here. Other suppliers may embed the tax in their price, making it more difficult to confirm their calculation method (i.e. whether or not they are ‘grossing up’).

I hope that this information is helpful. If you have any questions, please do not hesitate to leave me a comment.

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Comments (2)

  • avatar

    Mike

    Is GRT also being passed on to residential customers? As I search for a commercial rate I’ve noticed that some companies say they include GRT in their rate and when you look at the bill you can easily check that rate by dividing what that provider is charging by the kWh usage. Another supplier told a friends company that to calculate their rate one must first subtract GRT from the total of their charges. Would I then be correct to assume that this second case is “grossing up” as you call it? My first example sounds like its simular to what you all do except they don’t list it out on the bill, but it still seems more upfront.

    For my residential account this doesn’t mean much, but for our business that is paying more than $6000 in electricity and $200 or more in GRT this does make a difference. Anyway let me know what you think about this – if I made any sence.

    Reply
    • avatar

      Ed Wilson

      Hi Mike. Our commercial rate quotes in PA do not include Gross Receipts Taxes (GRT), but as I mentioned in my blog post there is a calculation formula that can be applied to project how much the GRT will be. Our fixed price plans for residential customers in PA include current GRT, but exclude applicable state and local sales taxes, which will be separately assessed, and utility distribution fees or other charges, which will be charged by your local electric distribution company in the service territory where you reside. The price we charge for power and energy service is reflective of competitive market conditions and was not set or approved by the Pennsylvania Public Utility Commission. To view our residential plans in PA, go to home.constellation.com. Thanks for commenting and please let me know if you have any other questions.

      Reply

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