.

Passengers choosing to ride round trip is a big difference than an experience that requires a round trip as part of the experience. One is holding themselves out as a transportation provider with a route from point A to point B. The second is only offering point A to point A so it may as well be a stationary business.

Also, common carriers absolutely should charge sales tax on intrastate tickets. A passenger boarding and disembarking in the same state is a taxable sale in about 7 or 8 states. Also, common carriers with a charter/tour business often meet sales tax and amusement tax requirements for those business segments. I worked for a passenger common carrier and dealt with these issues regularly. It’s often a gray area that requires a ruling by the taxing jurisdiction. When it comes to common carriers there are protections against tax that impedes with interstate commerce (ie crossing state lines). Intrastate commerce (within state) is a totally different animal.

This sounds too complicated to be enforceable.

Suppose Lansdale and North Wales are in the same fare zone, but Lansdale charges a sales tax and North Wales does not. If a passenger boards in Lansdale with a ticket sold in North Wales (no tax paid) is the train conductor obligated to collect the sales tax?

Suppose a passenger boards in Lansdale intending to pay a cash fare to the train conductor. The train conductor does not collect the fare until the train has passed beyond the Lansdale Borough limits. Since the ticket sale does not take place in Lansdale Borough, is the train conductor prevented from collecting the tax?

We can get absurd with some of the nuances of collecting sales taxes on a moving vehicle.

For these reasons it is impractical to impose a local sales tax on rail fares.

Phil Mulligan

Let’s assume Lansadale and North Whales have separate tax rates and no other exemptions are available. Then in your scenarios:

1) Yes, Lansdale tax should be collected when the ticket is sold. PA is an origin based state for sales tax situsing purposes. If the business has locations in PA then the location where service is first provided to the customer is the sales tax situs. If the ticket was not for Lansdale or valid at any point then the situs would be North Whales. At this point the carrier is off the hook and the customer has a use tax obligation to self-remit.

2) Same answer. It’s where the taxable event occurs. The place where money changes hands is irrelevant.

Yes, this stuff gets incredibly complex and complicated. Sometimes the business will choose to just “eat” the tax as a cost of doing business because of the difficulty. Sales tax on moving vehicles is actually a growing issue. With the growing sales of WiFi services and digital content sold on-board, the situsing of those sales becomes problematic. I’m not sure if Amtrak charges sales tax or not. I seem to recall a Supreme Court ruling that since Amtrak is a government provided service then the fares themselves are a tax and you generally can’t tax a tax.

At any rate we are getting way off topic from this amusement tax. My only point was to illustrate that being a common carrier in interstate commerce is no guaranteed protection from tax on intrastate activities

There is one more issue that arises in all this:

With some taxes, you may be required to add the tax to the bill as a separate line item. This is typical of most retail sales taxes, for example. Another example would be the hotel or motel that adds a locally-assessed "lodging tax" on their bill.

In a couple states (Maryland being one example), there are separate sales taxes for booze. Maryland's regular sales tax is 6%; it's 9% for beer, wine, and spirits, retail or bar/restaurant. When that tax was raised, I had to cover the topic for a couple beer publications.

Some places said they ran the taxes as a separate line labeled as "Md. Alcohol Tax"--so your $5 beer or wine gets rung up as $5.45. Other places continued a long-running practice of making the price $5--which meant that the real price was $4.58 plus tax of 9% to make it a flat $5. Only the cash register and the bar's accountants see this, of course. This is more "customer-friendly," as it were.

I spoke with bar managers that actually changed their practice from flat-price to separate tax line, specifically to show their customers who to blame for the price increases. Others said (and I quote the one bar manager verbatim) "Nah, we're eating it for now--all this means is eventually, the price of the pints goes up 25 or 50 cents faster than it would have through ordinary price increases."

So how should an excursion line approach this? Separate tax line, showing "local amusement tax," and let the customers know? Or just build it into the price for the sake of customer and employee convenience? Maybe the fare, in the case of the LGSR, goes from $15 to $18 or whatever, and the RR ticket agent starts handing out $2 bills in change to be spent locally?

Read the tax statute. Many require the tax to be separately stated. As a matter of practice I would always recommend a separate line item for tax. It is much cleaner when audited to show the tax was charged. If you just bump the price from $15 to $18 to cover the tax then the auditor will claim you simply raised ticket prices and will assess tax based on the $18. An auditor is going to review a sample of receipts/invoices as their starting point and a clear break-out of gross sales and tax is going to be far less messy than any behind the scenes accounting for the tax.

But why should hotels pay a lodging tax if Amtrak doesn’t have to? ;)

OK, since we're getting into personal experience with unique sales tax situations... Amtrak is/was exempt from charging sales tax for on-board food service - either cafe or dining car - because (at least I was told as an LSA) it was part of being in interstate commerce. Also, it allowed Amtrak to make all prices in nickel amounts and not have to deal in pennies (at least nominally). I really hated it when someone would dump 10 or 20 pennies on me to get rid of them, asking if I needed pennies, even if I was fed up enough from the entire day at that point to say no, instead of grinning and bearing it. (Please let's get rid of pennies already.) Anyway...

The other part of my experience with local sales taxes is that (again long ago) Cedar Point Amusement Park's admission fees built-in local and state taxes for a single, flat-fee (and 40 years ago it was something like $14.95/day, $9.95 after 6 pm, and a season pass was not much more than today's one-day fee), with special permission of the taxing authorities, so charging for entrance in the days of mostly cash transactions would be sped-up at the ticket windows. That also included the fee for the causeway across Sandusky Bay into the park, which was a flat 50 or 75 cents (now the causeway is free and parking fees are charged - steeply).

I also remember that some buffets, like Old Country Buffet, are allowed to include sales tax (at least in localites where I've eaten there) in their single-price, all-you-can-eat meals. Again, I'm sure that is through an arrangement with local taxing authorities.

I don't know if a taxing jurisdiction could consider 'lodging' in a sleeping=car to be comparable to 'drinking alcohol' in a diner or lounge. Seems to me state option clearly applied to the latter, and tax applicability (via what would be a comparable regulatory statute) would also apply for service rendered in the jurisdiction. It might get silly to enforce this, but a simple 'compromise' would be to assume sleeping during some statutory sleeping hours, and enforce on a pro-rata basis for the number of miles or time a train is scheduled for if it passes through during those hours. It might be silly to microbill this back in the Pullman age, but there are cost-effective methods today that could track, bill, and remit the amounts automatically -- even making adjustments for late trains, etc.

For the Lansdale-North Wales example, the sales tax is on a journey of xx miles, and the tax can be assessed on that basis rather than on the fare basis for various stations. The tax is assessed at the point of sale, but disbursement (to the various municipalities) is weighted by the percentage of trip in or through each. If the state tax agency cares to work out a different breakdown (for example, if Lansdale has more costs associated with the rail service than North Wales does, after the pro rata assignment by distance) that is a matter for 'compact' between municipalities or regional authorities with the state of Pennsylvania. Again, it's transparent to the user how the tax is paid (since it's a known percentage imposed on the purchase total) and it doesn't remain with the taxing municipality (any more than it does with a business) so any 'fun' comes down to dueling city attorneys, who tracked their expected gains in detail, and the state, which tracks its revenue and its assignment. In any case the railroad is only indirectly involved -- to the extent it collects the additional 'tax' it does so as a merchant, and its sole responsibility is to render the tax amount to whatever agency will do the allocation.

In part, this approach might also be applied to a situation like that in Jim Thorpe: in most cases the 'amusement tax' applies only to activities -- fairs, movies, rides -- conducted substantially within city limits. That should imply that only a pro rata share of the price of a ticket corresponding to the time or distance actually within Jim Thorpe be the basis for the amusement-tax 5%. Note that if 'dwell within Jim Thorpe' is taken by the city as a basis -- which in some contexts might be fair -- LG&N could spend extended time out in Old Penn Haven or other scenic areas, and minimize the actual time returning to Jim Thorpe, detraining passengers and turning any maintenance, and boarding the next group... idling the train or keeping it parked at Jim Thorpe would not count, as there is no 'amusement' going on and the trains are on private property...

Good point that you could argue that the “amusement” is not taking place in Jim Thorpe. What evidence supports that though? It would be an easier argument if it was a ride to a specific point of interest like say the Grand Canyon Railway. Or if there was a dinner served at the turnaround point. Even if there was a destination to get off the train. How much of the ride takes place outside of Jim Thorpe city limits? What does the railroad offer at the station such as souvenirs, displays, etc. for passengers. How do you show that the intent of the railroad and its passengers is get people out the city to be “amused” by something. If the amusement seems to be the train ride itself it’s going to be difficult argument.

I still think the one factor in the railroads favor is the lack of action on this. For whatever the reason the railroad did not register for, collect or pay the tax and the borough never pursued it. Why? Were notices ever sent? Are interest and penalties being assessed or just the tax? It’s too high profile of a business in that town to have accidentally slipped through the cracks all this time. Sometimes lack of enforcement can be construed as evidence of doing the right thing.

Still not sure what leaving town will solve. They will either owe the back taxes or not. Moving does not relieve the past due tax. Going forward it gets passed to the customer so money out of pocket to the railroad is identical. If it’s just a matter of principal then good for them. Jim Thorpe is certainly biting the hand that feeds them which is true of most amusement taxes.

The listing on ecode clearly states that taxable amusement takes place 'within Jim Thorpe'. Very little except the boarding and deboarding, certainly very little of the 'entertainment' value in the LG&N ride, likely actually takes place there.

I feel reasonably confident that the LG&N riders aren't paying their fare for the privilege of getting on and off the train -- they're concerned with the riding experience.

That's certainly not to say that Jim Thorpe can't be entitled to some compensation for facilitating the amusement experience -- nor to say that whatever tax amount applies can't be collected 'at the point of entry' as the ecode indicates. It also follows that the 5% rate is applicable to ... whatever percentage of the experience is, or comes to be deemed, within Jim Thorpe municipal limits.

As I noted, there are a couple of fair 'pro rata' ways this relatively small time or distance could be calculated; in theory, it could be adjusted somewhat to include any special costs Jim Thorpe incurs at the 'endpoints' that don't apply to the trip itself. What is fairly certain, however, is that no fair claim could be laid for tax on the whole ticket price. At least according to the actual letter of the statute ... and I see no other provision that would otherwise control.

On the other hand, as noted above any other municipality through which the train passes on its 'amusement-only' run could arguably have a claim on a corresponding pro-rata share of the amusement-tax percentage ... and under current Pennsylvania law, Jim Thorpe would be responsible for collecting and disbursing this appropriately. I was unable to find any codes for the communities that might exist north of Jim Thorpe to, and including, Old Penn Haven, but I'd think municipalities might take an interest in additional revenue, even if relatively slight.

Playing devil's advocate, it would certainly appear that if the actual starting and ending point were to be moved to just outside city limits, and 'free' shuttle buses provided to meet the train, the city's ability to impose amusement tax under present applicable lawwould be wholly negated for these trips.

It also occurs to me that the municipality demanding 'back taxes' calculated as a whopping excess over what should actually have been billed may violate other provisions of applicable law, particularly if there have been threats of consequences for nonpayment either of the full amount or 'made timely'. Be interesting if monetary punitive damages came to be involved or discussed!

It is always competition and such a tax really looks like a way to strangle an enterprise. This question really became interesting to me, I will try to clarify it at my enterprise.

One thing to keep in mind is that a sales tax (which includes amusement taxes) is generally collected at the point of sale. If the point of sale is considered to be Jim Thorpe, then that local tax rate applies. Doesn't matter that the train leaves town.

It's sort of similar to this: if I sell a doohickey to someone in Upper Duckbutter, Idaho, I have to include my local Ohio sales tax as that is the point of sale. It matters not where the doohickey is going.

It's not always that simple. Sales tax is based on the point of delivery. I can, and do, have clients where I perform work at various locations. Even if they're based in Seattle, if I fix a track in Wenatchee, I charge tax for that local area. If the job spans two towns, we do our best to charge tax on the value of the work in each locality.

If you're shipping items, you charge tax based on the delivery location not where you shipped from. This is a relatively new change. It used to be pretty much impossible, you could sell widgets to all 50 states. However, the new online sales tax laws made it a requirement to track, and pay, sales tax to the localities you ship to. It can get very complicated if you're a small vendor selling to lots of places. There's software to help of course, but it all costs money.

Bob,

I didn't want to open the Internet sales debacle and get into the whole "economic nexus" thing. However, PA is like OH in that it is an origin-based sales tax state. For example, I have to charge applicable sales tax for any tangible property I sell even though my business is classified as a service and is exempt from sales tax as long as my deliverables are electronic. As soon as someone wants a hard copy, local sales tax applies to the price of that hard copy, including freight/postage, no matter to where it is shipped. But now I'm veering a little off-topic.