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%
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)
1/(1-0.0606) = 1/0.9394 = 1.064509
Below is an example to demonstrate how the adjusted rate works.
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.
Published: April 8, 2011