Pennsylvania advances marketplace provider sales tax
- Oct 12, 2017 | Gail Cole
Update 11.1.2017: House Bill 542 (Act 43) has been enacted. Qualifying non-collecting referrers, remote sellers, and marketplace facilitators with annual retail sales of taxable goods in Pennsylvania of at least $10,000 must register with the state on or before March 1, 2018. Those that don't must comply with new notice and reporting requirements. See the text of the bill for more details.
Although still mired in a budget impasse, the Pennsylvania Legislature has amended and advanced a bill that would require marketplace providers to either collect tax on third-party sales, or comply with use tax notification and reporting requirements. The measure would also apply to certain individual online sellers.
As amended, House Bill 542 requires remote sellers with annual Pennsylvania sales of at least $10,000 to elect to either:
- Collect or remit Pennsylvania sales and use tax; or
- Comply with notice and reporting requirements
The measure is similar to one enacted this summer in Washington: House Bill 2163. Since that law doesn’t take effect until Jan. 1, 2018, it’s unclear how many sellers will opt to collect tax and how many will instead choose to report consumer use tax information.
Collect and remit tax
Individual out-of-state sellers and marketplace facilitators (often referred to as “providers” in other states) meeting the sales threshold would be required to register with the Pennsylvania Department of Revenue by Dec. 1, 2017 March 1, 2018. Those that don’t “shall be deemed to have elected to comply with the notice and reporting requirements.” However, sellers would be permitted to change their election, with notice.
Marketplace facilitators or referrers that opt to register with the state would be required to collect tax on retail sales:
- Made through the marketplace facilitator’s forum by or on behalf of a marketplace seller that does not maintain a place of business in Pennsylvania; and
- Made by a marketplace facilitator on its own behalf if the marketplace facilitator does not maintain a place of business in Pennsylvania.
In other words, a remote marketplace provider that also sells its own products would have to collect tax on all sales — those of its own products and those of products owned by its remote marketplace sellers.
Use tax notice and reporting requirements
The use tax notice and reporting requirements under consideration are similar to those that have been adopted by other states, including Colorado and Vermont. In a nutshell, Pennsylvania would require non-collecting sellers to:
- Notify all Pennsylvania purchasers at the time of sale that sales or use tax may be owed on the transaction
- Provide all Pennsylvania consumers with an annual purchase summary
- Provide the Pennsylvania Department of Revenue with an annual customer information report
The annual purchase summary would have to include a dated list “indicating the type and purchase price of each product purchased or leased,” instructions on how to remit use tax and obtain more information from the Pennsylvania Department of Revenue, and a statement that the seller or marketplace facilitator is required to submit to the department a report including “the name of the purchaser and the aggregate dollar amount of the purchaser’s purchases.”
The annual report to the department would have to include the purchaser’s name, address, and the aggregate dollar amount of the purchaser’s purchases.
Failure to collect tax or comply with the use tax notification and reporting requirements would result in a penalty of the lesser of $20,000, or 20 percent of total Pennsylvania sales during the previous 12 months.
Protection against class action
HB 542 would also protect marketplace facilitators or referrers from a class action “arising from or in any way related to an overpayment of sales or use tax collected by the marketplace facilitator or referrer.”