Tax Alert: Pennsylvania Extends Deadline for Online Retailers to Begin Collecting Sales Tax
2/07/2012
On January 27, 2012, the Pennsylvania Department of Revenue (the “Department”) announced that it is extending the deadline by which remote sellers, who have a taxable Pennsylvania presence, as set forth in the Department’s Sales and Use Tax Bulletin 2011-01 (the “Bulletin”), must become licensed and begin collecting and remitting Pennsylvania sales tax. Pursuant to the Bulletin, taxpayers were initially required to be compliant as of February 1, 2012, but, due to operational and technical obstacles, the Department extended the deadline seven months, until September 1, 2012. It is our understanding that there will be no further extensions.
In December 2011, the Department issued the Bulletin clarifying that existing Pennsylvania nexus provisions applied to remote sellers. The Bulletin expands the Department’s reach of the sales and use tax “doing business” statute to include “click-through” and “affiliate nexus” concepts. The Bulletin provides several examples of what the Department now considers as “maintaining a place of business in the Commonwealth” for purposes of determining whether the remote seller has a Pennsylvania sales tax collection obligation. These examples include:
- A remote seller storing its property or the property of a representative at a distribution or fulfillment center located within the Commonwealth, regardless if the center also stores property of third parties that is distributed from the same location;
- A remote seller who has a contractual relationship with an entity or individual physically located in Pennsylvania whose website has a link that encourages purchasers to place orders with the remote seller and the in-state entity or individual receives consideration for the contractual relationship with the remote seller;
- A remote seller utilizing affiliates, agents, and/or independent contractors located in Pennsylvania who will provide repair, delivery, or other services relating to the tangible personal property sold by the remote seller to the Pennsylvania customer;
- A remote seller’s affiliates, agents, and/or independent contractors provide service(s) within the Commonwealth (including, but not limited to storage, delivery, marketing, or solicitating sales) that benefit, support, and/or complement the remote seller’s business;
- A remote seller’s employee(s) that regularly travel(s) to Pennsylvania for any purpose related to the remote seller’s business activity;
- A remote seller who accepts orders that are directly shipped to Pennsylvania customers from a Pennsylvania facility that is operated by a remote seller’s affiliate, agent, or independent contractor; or
- A remote seller who regularly solicits orders from Pennsylvania customers via the website of an entity or individual physically located in Pennsylvania, such as via click-through technology.
Businesses that fail to register and begin collecting tax by the extended September 1, 2012 deadline “will face a variety of escalating enforcement options including assessment, audit, lien or referral to a collection agency or the Office of Attorney General,” said Revenue Secretary Dan Meuser.
If your company makes remote sales, it should review its state tax profile to ensure that it is properly complying with the complex sales tax nexus rules in all required jurisdictions. J.H. Cohn’s State and Local Tax (“SALT”) professionals can work with you to review your operations and determine whether and where sales tax nexus has been established. In addition, we may be able to provide guidance on how to structure your multistate activities to manage overall state tax nexus risks.
For more information on the Pennsylvania’s remote seller requirements, or other state and local tax matters, please contact Scott Smith, CPA, senior manager in the Firm’s SALT Practice, at ssmith@jhcohn.com or 973-364-7720, or Corey L. Rosenthal, JD, director in the Firm’s SALT Practice, at crosenthal@jhcohn.com or 646-625-5729.
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