More tax and religion

Robert Destro destro at LAW.EDU
Thu Apr 30 00:34:06 PDT 1998

     Jim Maule's post concerning the pending PA sales tax on religious
     books point points out nicely why arguments about taxes and the First
     Amendment can be so frustrating.

     The problem is that the "subject" of the sales tax is the sales
     *transaction* (usually defined -- as it is in PA -- as a "retail sale"
     or "use"), not the book, and it is collected by the seller *from the

     What Pennsylvania has done is to define the subject of the tax in a
     manner that does not capture all transactions that might generally be
     described as "retail sales."  There are plenty of exceptions to the
     concept of "retail sale" under Pennsylvania, and other state, law.

     The "First Amendment" issue (if it can be called one) in this context
     should be summarized this way:

     1) What branch of government holds the exclusive power to impose
     taxes, and to define the subject(s) and rate(s) of taxation?

        a) to what extent is the decision to define the "subject" of a tax
     subject to judicial review?

        b) assuming judicial review is appropriate, what is (or would be)
     the effect of a holding of invalidity? (i.e. failure of the tax, or
     imposition without legislative concurrence?)

     2) On what is the tax imposed? ["retail sale"]

        a) how is that term defined -- across the board?

     In PA, as in other states, there are lots of exclusions. The one
     relevant here exempts transactions by charities and churches that are
     within the scope of their charitable or religious activities.  In many
     states (unfortunately not Virginia, where I live) food is not subject
     to the tax on "retail sales" notwithstanding the fact that tangible
     personal property changes hands for consideration.  In some states,
     sales of high school yearbooks are also exempt.

        b) does the definition of "retail sale" (or "use") define a broad
     class of transactions, and is that class of transactions a
     "reasonable" one?

     3) on whom is the tax imposed? [i.e. who is the "actual" payor"?]

     In PA, as in many states, the tax is actually imposed "on the sale",
     but is collected from the buyer (or user).

     4) Who collects the tax? [the seller -- also known as the nominal

     The Swaggart case actually gets this point wrong: the issue should not
     have been phrased "Can CA impose a tax on such transactions?", but
     rather, can CA impose, on a church, the obligation to collect taxes on
     the State's behalf?

     5) Who "benefits" from the "lack" of a tax?

     This is the key question: If the seller charges the full amount of the
     tax to the buyer, the exemption benefits *the buyer* [the actual
     payor], not the church [the "nominal" payor]. If the seller lowers the
     price to "include" the tax, the burden may be borne in whatever
     proportion is necessary to make the price "right." [This is what
     vending machine operators do.]

     6) Is an "exclusion" different from an "exemption"?

      Hard to say. We do know for sure that exclusions and exemptions are
     different in kind (qualitatively) from "credits", in that a credit is
     a return of tax otherwise due and owing.

     Exemptions and exclusions, however, are generally used to define what
     is "subject" to the tax in the first instance. If the transaction is
     not one upon which the tax is imposed *ab initio*, the "First
     Amendment" (or PA Constitution) question must be understood in the
     following manner:

     7) Does the First Amendment (or the Pennsylvania Constitution)
     *require* the imposition of an excise tax on all transactions for
     consideration (i.e. sales) where the property or service obtained in
     the transaction is "religious" in its character?

     [Note: in this formulation of the question, the existence of other
     "exemptions" is irrelevant.]

       If it does, the next logical question is: How do you square the
     "answer" with question 1 above?

     Bob Destro
     Robert A. Destro                                      Destro at
     Columbus School of Law                                  202-319-5202
     The Catholic University of America                  fax:202-319-4498
     Washington, D.C. 20064-8005             


        b) If so,

     not, what set of facts would *invalidate* an "exclusion"?

______________________________ Reply Separator _________________________________
Subject: More tax and religion
Author:  Law & Religion issues for Law Academics
Date:    4/29/98 1:25 PM

Maybe I missed this -- perhaps it has already been discussed in
connection with the briefs, but yesterday the Penna Supreme Court
heard arguments on whether it ought to overturn a 4-2 Commonwealth
Court (intermediate appellate court) decision that the sales tax
ought to be collected on religious books.

The state takes the position that the exemption is permissible. Its
attorney argued the exemption is equivalent to the real estate tax
exemption for churches. He argued that the Boerne case has no
reasoning that applies to the sales tax case. The attorney for those
who are challenging the exemption argued that the exemption
constitutes "unconstitutional support of religion" by the state
government. The challengers include a publisher of nonreligious books
and a consumer.

Pending the litigation the sales tax is not being collected. If
collected, it would raise $900,000 annually. (Which, using my tax
math, suggests that there is about $1.5 million annually in sales of
religious books and articles).

The exemption was enacted in 1956 (which may be when the sales tax
was enacted -- I can't remember because it precedes my interest in
law, tax, and religion). The exemption also applies to religious

Jim Maule
Professor of Law
Villanova University School of Law
Villanova, PA 19085
maule at
(610) 519 - 7135

"government big enough to give you everything you want is also big
enough to take away from you everything you have"
    -- George Herbert Walker Bush

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