Pennsylvania Clarifies Sales Tax Nexus Laws

Citing the need for equal treatment among competing retailers, on December 1, the Pennsylvania Department of Revenue (PDR) issued a regulatory bulletin [1] that clarified existing state sales tax laws. The bulletin made clear that remote sellers with nexus in the state through warehouses or online affiliates are required to collect and remit sales tax for purchases made in state. A Pennsylvania Depart of Revenue release noted that the Tax Reform Code nexus language has been in place for many years, but because taxpayers may not be familiar with it, the bulletin was issued as a clarification of existing law.

“Obviously, we’re pleased with the state's actions,” said Todd Dickinson of Aaron’s Books [2] in Lititz, Pennsylvania. Dickinson has been extremely active in the campaign for sales tax fairness over the years and has met with both state and federal legislators on this issue. “This is about fairness. If someone from my neighborhood orders a book from Amazon, that order is filled in an Amazon warehouse here in Pennsylvania. The state requires me to collect sales taxes — they need to do the same to my major competitor.”

Pennsylvania Secretary of Revenue Dan Meuser explained that the department issued the bulletin because there had been many questions about when businesses are required to collect sales tax. “This bulletin spells out the law for remote sellers so they better understand how to comply,” he said in a statement. “It’s simply a matter of fairness under the existing law, and it’s essential that both e-commerce retailers with nexus and brick-and-mortar stores in Pennsylvania, many of which are small businesses employing thousands of Pennsylvanians with retail jobs, are treated equally.”

Under the guidelines noted in the bulletin, if a company has nexus in Pennsylvania but has not been collecting sales tax on Pennsylvania consumer purchases, it must become licensed to collect sales tax as soon as possible, but no later than February 1, 2012. Companies with nexus that fail to begin collecting sales tax as required by law may be pursued by a variety of  “escalating enforcement options over time,” including audit, assessment, lien, and/or referral of the case to a collection agency or the office of Attorney General.

In cases where companies with nexus “blatantly disregard the Tax Bulletin and their obligations to begin collecting sales tax, the department has the statutory authority to look back at least three years for audit and assessment purposes.”

The regulatory bulletin coincides with a consumer-based approach to simplifying use tax reporting and payment. Beginning in January 2012, individuals will be able to self-report use tax on Pennsylvania’s personal income tax return.