Remote sellers responsible for Pennsylvania sales tax starting July 1, 2019

Starting July 1, 2019, remote sellers with gross sales of more than $100,000 in Pennsylvania in the previous 12 months are responsible for collecting and remitting Pennsylvania sales tax. To ease the burden of sales and use tax compliance, remote sellers are encouraged to outsource most sales tax administration responsibilities to a Certified Service Provider.

The Keystone State has incrementally expanded sales tax collection obligations for more than a year. Marketplace facilitators became responsible for sales tax collection and remittance on sales made through the marketplace starting April 1, 2018. And now the state is amending that requirement and expanding the sales tax collection obligation to more remote sellers.

Requirements for marketplaces and non-collecting sellers

Pennsylvania’s collection requirement for marketplaces predated the United States Supreme Court decision in South Dakota v. Wayfair, Inc. (June 21, 2018). Since states lacked the authority to require remote sellers to collect sales tax prior to the Wayfair decision, Pennsylvania gave remote marketplaces a choice: Collect and remit sales tax, or comply with non-collecting seller use tax reporting requirements.

More details about Pennsylvania’s marketplace and non-collecting seller use tax requirements are available here.

Economic nexus

In early 2019, the Pennsylvania Department of Revenue announced it would follow South Dakota’s lead and base a remote seller sales tax collection obligation on economic activity, or economic nexus. Like South Dakota, Pennsylvania is allowing an exception for small sellers. Thus, effective July 1, 2019, out-of-state businesses establish an obligation to collect and remit Pennsylvania sales tax once they have annual gross sales in excess of $100,000 in Pennsylvania.

Remote marketplaces that exceed the $100,000 threshold are no longer allowed to opt out of sales tax collection by complying with non-collecting seller use tax reporting requirements: They must collect and remit the tax due on all sales made through the marketplace in Pennsylvania as of July 1, 2019.

In-state marketplaces have an obligation to collect and remit tax on all sales made through the marketplace no matter what their sales volume in Pennsylvania. However, the non-collecting seller use tax reporting option will continue to be available to remote marketplaces that don’t meet the economic nexus threshold (i.e., whose gross sales into Pennsylvania are less than $100,000 in the previous 12 months).

Certified Service Providers

Recognizing the inherent challenges of complying with remote sales and use tax laws, the Pennsylvania Department of Revenue encourages remote sellers to outsource the bulk of their sales and use tax administrative responsibilities with a Certified Service Provider (CSP) of sales tax automation software, like Avalara.

Pennsylvania Department of Revenue Secretary Dan Hassell explains: “The Supreme Court made it clear in its decision that tax administrators should not make it overly difficult for out-of-state sellers to comply with the law. The work the department is doing with Certified Service Providers will remove many of the obstacles for Internet sellers who will soon be required to collect Pennsylvania sales tax.”

A CSP can assist remote sellers with registration, collecting and remitting sales tax, and filing sales and use tax returns. Because these services are subsidized by Pennsylvania, they’re available to qualifying sellers for free or at a reduced cost.

Pennsylvania’s CSP program is similar to the one offered through the Streamlined Sales and Use Tax Agreement, or SST. The 24 SST member states also subsidize the costs of sales and use tax compliance for remote sellers that qualify as volunteer sellers and register and remit through an SST CSP.

As an SST CSP, Avalara has been helping remote sellers with their sales and use tax obligations in SST states for years. Now, Pennsylvania has chosen Avalara to be one of four CSPs to support their remote seller sales tax laws.

More than 40 states have adopted economic nexus laws in the wake of South Dakota v. Wayfair, Inc. Learn more.