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of the Commonwealth of Pennsylvania

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    Online Retailers Selling Goods and Services to Pennsylvania Customers

    As outlined in Sales and Use Tax Bulletin 2019-01 [PDF], the requirement to collect Pennsylvania’s sales tax is expanded to include businesses making at least $100,000 in annual Pennsylvania gross sales. Act 13 of 2019 has codified this rule, and removed the election and reporting requirements for sellers located outside of Pennsylvania.

    All marketplace facilitators and online sellers who maintain a place of business by having economic presence (i.e. Pennsylvania annual gross sales of greater than $100,000) must now register, collect and remit Pennsylvania sales tax starting July 1, 2019. If your business has nexus in Pennsylvania under these new standards, the previous Marketplace Sales provisions allowing a choice of either collecting sales tax or providing notices to Pennsylvania customers will no longer apply to you after that date. To be clear, the option that previously existed for online sellers to elect to send their customers notices informing them that they may owe Pennsylvania use tax is no longer available. Additionally, a business that does not maintain a place of business in Pennsylvania (has neither physical nor economic presence) has no Pennsylvania sales tax obligations.

    Depending on its activities, a single business can be a marketplace facilitator, a marketplace seller or a vendor with only economic presence, or any combination of these activities.

    A marketplace facilitator contracts with marketplace sellers to list or advertise the sellers’ goods and services for sale through a marketplace. The facilitator directly or indirectly collects the payment from the purchaser, and transmits the payment to the marketplace seller.

    A marketplace seller has a contract with a marketplace facilitator in which the facilitator agrees to list or advertise the seller’s goods and services, collect payment from customers and remits the payment back to the seller.

    Sellers from outside of Pennsylvania must determine on a year-to-year basis if they have “economic presence” in the state, which requires the collection and remittance of Pennsylvania sales tax.

    • The sales threshold of $100,000 will be measured by calendar year. After the first year, collection will begin in the second quarter to allow taxpayers adequate time to compile their calendar year sales.
    • The collection period is July 1, 2019 through March 31, 2020 using Calendar Year 2018 sales to determine economic presence.
    • The collection period is April 1, 2020 through March 31, 2021 using Calendar Year 2019 sales to determine economic presence.
    • Subsequent years will follow the same collection period.
    • Economic presence in Pennsylvania is measured by sales threshold only. There is no transactional count requirement.
    • Sales are the gross amount on all channels, including taxable and nontaxable sales. A marketplace facilitator with no physical presence in Pennsylvania should use both facilitated and direct sales to determine whether it has exceeded the economic nexus threshold. A marketplace seller with no physical presence in Pennsylvania should use only its direct sales and those sales made through a marketplace facilitator that does not collect sales tax on its behalf to determine whether it has exceeded the economic nexus threshold.

    Any vendor who does not have physical presence in Pennsylvania can utilize the services of an approved Certified Service Provider (CSP) to report and remit the tax to the department.

    The Department of Revenue is working with Certified Service Providers (CSPs) to make it easier for individuals and businesses with sales tax collection obligations in Pennsylvania to comply with the law.

    Under this arrangement, any vendor who does not have physical presence in Pennsylvania can outsource most of their sales tax administration responsibilities to a CSP. For example, a CSP will facilitate the registration process, file tax returns and collect and forward tax payments to the department on behalf of its clients.

    A CSP can also help vendors of products on the Internet determine which products are subject to Pennsylvania sales tax, easing the compliance burden further. Moreover, working with a CSP can relieve the seller of certain liabilities upon audit. Vendors with no physical presence who elect to use a CSP are not required to obtain a Pennsylvania sales tax license or file sales tax returns so long as they retain and use the services of a CSP.

    Below are the three companies the department has procured to perform sellers’ sales tax functions at free or reduced cost:

    Avalara – https://www.avalara.com

    Sovos – https://sovos.com

    TaxCloud – https://TaxCloud.com

    As a reminder, effective July 1, 2019, vendors who have no physical presence but whose sales in Pennsylvania exceed $100,000 in the prior year, must register to collect and remit Pennsylvania sales tax or choose to use a CSP as described above.

    If you are an online seller who prefers to file tax returns and remit Pennsylvania sales tax directly to the Department of Revenue, you need to register for a sales tax license. Visit mypath.pa.gov to complete the Pennsylvania Online Business Tax Registration process.

     

    Pennsylvania customers who purchase taxable items without paying sales tax at the time of the purchase must remit use tax directly to the department. See Pennsylvania use tax for information on how businesses and individuals file and pay the tax.