March 1 Deadline: New Pennsylvania Tax Obligations for Out-of-State Vendors
Pennsylvania Imposes New Tax Obligations for Out-of-State Vendors Beginning March 1
A new Pennsylvania tax law will impact out-of-state manufacturing, distribution and/or retail businesses who make taxable sales through their own website (“remote seller”). The law imposes new notice and reporting requirements for businesses that are not registered to collect and remit sales tax on products sold to PA customers.
If you do not have a business location in Pennsylvania but have made internet sales directly to Pennsylvania customers within the last 12 months of at least $10,000 in taxable products, this new law applies to you.
The new law that impacts remote sellers imposes a March 1, 2018 deadline to make an annual election to conform with the new notice and reporting requirements for businesses that are not registered for sales and use taxes.
The stakes are high. If no election is made by March 1, the business is presumed to have made the election to comply and can be subject to penalties equal to the lesser of $20,000 or 20% of total sales in Pennsylvania per year for each violation of the notice and reporting requirements.
What are the next steps for your business?
The purpose of this legislation is to force remote sellers to register for sales and use tax in the state of Pennsylvania so they are on a level playing field with brick and mortar stores. Complying with the notice and reporting requirements can be more burdensome than registering and collecting sales tax.
The new law, currently being challenged in court, also applies to marketplace facilitators who facilitate the sale and collect payment for taxable online sales (e.g. Amazon). In addition, it applies to referrers that receive compensation for transferring buyers from their website to a seller’s website to complete a sale, or sale of the referrers own products. In both cases, the law applies to facilitators and referrers that do not have a place of business in Pennsylvania.
The new law has complexities and applies to individual companies differently. Lean on Sax to effectively guide you through your decision-making process. Reach out to a Sax advisor for a company evaluation or for more information on how this new law may apply to you.
Peggy Tilles, JD, LLM is a Senior Tax Manager at Sax and is the firm’s in-house advisor on Sales and Use Tax. She has over 25 years of accounting, government and corporate experience. At Sax, she directs tax credit studies and advises clients on multi-state tax matters including tax research and proactive tax planning. She can be reached at [email protected].