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Pennsylvania, Use Tax, Sales Tax and the Internet

Pennsylvania has already passed a law to require Internet retailers to begin collecting and remitting sales tax in September 2012, but until then, they are being more aggressive in ensuring that consumers know about and remit use tax on those purchases. As a result, Pennsylvania residents will see a new special line on their income tax form (line 25) “…requiring citizens to pay ‘use tax’ on items they purchased over the Internet for which no sales tax was charged.”

How much might you pay when you declare use tax on your income tax form? The state provides a “…handy table of estimated tax based on income.” PennLive.com commented that it appears “…the wealthiest pay a rate 25 percent lower than the poorest of Pennsylvanians.” According to their review, an individual “…making $30,000 a year…[is estimated to] buy $200 in goods over the Internet" and given the amount of $12 to be paid in tax. Someone making $200,000 can use a percentage or pay $71 for the year of purchases, whichever is lower.  Using these numbers, if the lower income wage-earners were required to apply the same rate (0.03 percent of income) to their use tax, they would be required to pay only $9 instead of $12.

Will reporting no use tax on your income tax return flag you for an audit? Revenue spokeswoman Elizabeth Brassell says no, “[b]ut if the department comes across information that indicates the person owes use tax, she said the state will go after the tax owed ‘with interest and penalties.’” The Beaver County Times states that the department will “…identify those not reporting the tax through audits, complaints, investigations and checks of purchase lists made with out-of-state companies.”

In Pennsylvania, it’s expected that the tax will apply to state and local taxes. Pennsylvania Department of Revenue Secretary Dan Meuser says that “Pennsylvania businesses—those who employ our residents, pay state and local taxes and support our communities—are put at a 6 or 7 or 8 percent competitive disadvantage against out-of-state businesses when sales or use tax is not paid on the taxable items purchased online.”

It is estimated that “[i]f just half of tax filers pay the lowest suggested tax, the state would collect $18 million more than it did last year.”  But “[s]tate officials would prefer that online retailers collect the sales tax.”

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”