Posted on March 13, 2012
The Pennsylvania (PA) Department of Revenue (DOR) is reminding retailers who have nexus (i.e. presence, connection) with the Commonwealth to collect PA sales tax, including sales made via the internet, catalog, and telephone. PA has long imposed a sales tax on each sale of tangible personal property (TPP) made within the Commonwealth.
The Tax Reform Code of 1971 contains provisions requiring vendors that are maintaining a place of business within the Commonwealth to collect sales tax on each retail sale.
Who Is Responsible?
The PA vendor is required to collect sales tax from the purchaser and remit it to the Commonwealth. If the vendor does not collect the sales tax, then the purchaser, who uses the purchased item or service within the Commonwealth, is required to pay use tax directly to the Commonwealth.
What Defines “Maintaining a Place of Business” in PA?
The Tax Reform Code of 1971 defines maintaining a place of business within the Commonwealth as summarized in the following:
1) either directly or through a subsidiary, representative, or an agent, having, maintaining, or using an office, sales house, distribution house, warehouse, service enterprise, or other place of business; or any agent or representative, whether permanently or temporarily located in the Commonwealth
2) engaging in any activity as a business either directly or through a subsidiary, representative, or an agent in connection with the lease, sale, or delivery of TPP or the performance of services for storage, consumption, or connected with the sale or delivery for use of the services enumerated in the Code
3) regularly or substantially soliciting orders in connection with the lease, sale, or delivery of TPP…by means of catalogues or other advertising, whether the orders are accepted within or without the
Commonwealth; “having any contact within this Commonwealth which would allow the Commonwealth to require a person to collect and remit tax under the Constitution of the United States.”
What Are Some Examples?
The DOR provides guidance regarding which activities satisfy the Tax Reform Code and the US Constitution relating to maintaining a place of business in the Commonwealth. These include but are not limited to the following regarding a remote seller:
1) storing its property or its representative’s property at a distribution center located within the Commonwealth
2) having a contractual relationship with an entity or individual physically located in PA whose website has a link that encourages customers to place orders with the remote sellers, where the in-state entity or individual receives consideration for its contractual relationship
3) utilizing affiliates, agents, independent contractors located in PA who provide repair, delivery, or other service relating to TPP sold by the remote seller to PA customers
4) affiliates, agents, independent contractors provide services within the Commonwealth that benefit or otherwise support the remote seller’s business activity
5) employees who regularly travel to PA for any purpose related to remote seller’s business activity
6) accepting orders that are directly shipped to PA customers from a PA facility operated by a remote seller’s affiliate, agent, or contractor
7) regularly soliciting orders from PA customers via the website of an entity or individual physically located in PA (i.e., click-through technology).
What Are the Implications?
The DOR requires that these remote sellers collect PA sales tax and will enforce these provisions. If a remote seller is not currently registered to collect and remit PA sales tax, they should contact the DOR about collection obligations and registration.
Businesses with PA nexus that do not become registered and begin collecting sales tax by September 1, 2012 will face “a variety of escalating enforcement options over time, including assessment, audit, lien, or referral to a collection agency or the Office of Attorney General”, according to the DOR’s article dated 8/30/2012 titled “Revenue Department Expects Sales Tax Compliance from E-Commerce Companies;
Touts Success of Corbett Administration’s Business-Friendly Approach.”
The statute of limitations for PA sales and use tax is at least three years for audit and assessment purposes.
For More Information
For additional information regarding remote seller’s tax collection requirements in Pennsylvania, refer to Pennsylvania Sales Tax Bulletin No. 2011-01 (12/1/2011), 72 P.S. § 7201(p), 7201(b), 7202(a), and 7202(b). If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News and Events at www.allynintl.com.
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Allyn’s tax team is staffed with seasoned tax professionals experienced in all aspects of multi-state and local tax compliance and consulting for large US and global corporations. We use that experience to your advantage. Contact us and we can provide a customized cost-effective solution to meet your company’s needs in Pennsylvania or any other state. For further information on Allyn Tax services, please contact: email@example.com.