Like their counterparts in New York, printers in Pennsylvania will have to start collecting sales tax on direct mail advertising if their current exemption from the levy is eliminated from the state’s next budget. The Graphic Arts Association (GAA) is alerting its members to the potential loss of the exemption, which would apply the state’s 6% sales tax (7% in Philadelphia and Pittsburgh) to the printing of direct mail, catalogs, and other mailed matter containing advertising. Margaret Baumhauer, president of GAA, says that most of the state’s 2,100 printers would be affected since most of them do work of this kind. The exemption for direct mail advertising, says Baumhauer, is one of 74 such exclusions that Governor Ed Rendell wants to remove from his proposed $29 billion budget for Pennsylvania’s 2010-2011 fiscal year. Last week, a key Republican senator predicted that Pennsylvania's budget deficit would reach $1 billion by the end of the current fiscal year on June 30. A similar situation exists in New York, where a sales and use tax exemption on promotional materials could be eliminated from the budget now being finalized. Baumhauer says she agrees “absolutely” with claims that loss of exemption will drive printing out of states that attempt to impose taxes on production as a means of raising revenue. “What’s worse,” she says,” “is that what doesn’t go out of state won’t get done at all” or will be replaced by electronic alternatives. A statement expressing GAA’s opposition to the governor’s proposal can be found here. The association, a PIA affiliate representing printers in Pennsylvania, southern New Jersey, and Delaware, is asking its Pennsylvania members to write to their lawmakers urging them to preserve the exemption.