Pennsylvania Enacts Notice and Reporting Requirements and Economic Nexus Legislation
*Repealed effective June 30, 2019*
Effective Date: April 1, 2018 for TPP; April 1, 2019 for digital as alternative to Notice/Reporting
Threshold: $10,000-$100,000 or comply with the notice and reporting requirements
Measurement Date: Previous 12-month period
Includable Transactions: Taxable sales
When You Need to Register Once You Exceed the Threshold: On or before June 1 of each calendar year
Pennsylvania has enacted legislation requiring certain remote sellers, marketplace facilitators, and referrers to elect to either collect and remit Pennsylvania sales tax or comply with notice and reporting requirements. If any of the above do not collect and remit sales tax, they must notify purchasers regarding the sales and use tax, and report specified information regarding purchasers or remote sellers to the Pennsylvania Department of Revenue. For purposes of the legislation, a “remote seller” is a person who does not maintain a place of business in Pennsylvania and who, through a forum, makes retail sales of tangible personal property that is subject to sales or use tax. Marketplace facilitators, marketplace sellers, referrers, and employees are not considered remote sellers. A “marketplace facilitator” is a person who facilitates retail sales of tangible personal property by listing or advertising tangible personal property for sale in any forum and either directly or indirectly through agreements/arrangements with third parties, collects payment from the purchaser and transmits payment to the seller. A “referrer” is a person, other than a person who prints or publishes a newspaper, who has an agreement/arrangement with a marketplace seller or remote seller to:
- list or advertise for sale one or more products of a marketplace seller or remote seller;
- receive consideration from the marketplace seller or remote seller from the sale offered in the listing or advertisement;
- transfer a purchaser to a marketplace seller, remote seller, or affiliated person to complete a sale.
- Does not collect a receipt from the purchaser for the sale.
“Referrer” includes a person that may also be a vendor. “Referrer” does not include a person who provides internet advertising services and does not provide the marketplace seller or remote seller’s shipping terms or advertise whether the marketplace seller or remote seller collects a sales or use tax. A “marketplace seller” is a person who has an agreement with a marketplace facilitator under which the marketplace facilitator facilitates sales for the marketplace seller. By March 1, 2018 and June 1 of each calendar year thereafter (beginning June 1, 2019), remote sellers, marketplace facilitators, and referrers with aggregate sales of $10,000 or more in the previous 12-month period must elect to collect and remit Pennsylvania sales tax or comply with the notice and reporting requirements. Click here to access the election form on the Pennsylvania Department of Revenue website. For marketplace facilitators, the election requirement applies to:
- retail sales through the marketplace facilitator’s forum that are made by or on behalf of a marketplace seller that does not maintain a place of business in Pennsylvania; and
- retail sales made by a marketplace facilitator on its own behalf, if the marketplace facilitator does not maintain a place of business in Pennsylvania.
For referrers, the election requirement applies only to retail sales:
- directly resulting from a referral of a purchaser to a marketplace seller that does not maintain a place of business in Pennsylvania;
- directly resulting from a referral of a purchaser to a remote seller; and
- of the referrer’s own products if the referrer does not maintain a place of business in Pennsylvania
Remote sellers and marketplace facilitators will be required to post a conspicuous notice on their forums to inform Pennsylvania purchasers that:
- sales or use tax may be due in connection with the purchase and delivery;
- Pennsylvania requires the purchaser to file a return if use tax is due; and
- the notice is required under statute.
Remote sellers and marketplace facilitators must also provide written notice to purchasers at the time of sale that includes:
- a statement that sales tax is not being collected in connection with the purchase;
- a statement that the purchaser may be required to remit use tax directly to the Department of Revenue; and
- instructions for obtaining additional information from the Department regarding whether and how to remit the use tax.
The notice must be prominently displayed on all invoices and order forms and on each sales receipt or similar document.
Referrers electing to comply with the notice requirements will be required to post a conspicuous notice on their platforms to inform Pennsylvania purchasers that:
- sales or use tax may be due in connection with the purchase and delivery;
- the person to whom the purchaser is being referred may or may not collect and remit sales tax to the Department of Revenue in connection with the transaction;
- Pennsylvania requires the purchaser to file a return if use tax is due and is not collected by the person to whom the purchaser is being referred; and
- the notice is required under statute.
The notice must also contain instructions for obtaining additional information from the Department regarding the use tax.
By January 31 of each year, a remote seller or marketplace facilitator that elects to comply with notice and reporting requirements must provide a written report to each purchaser required to receive the notice. The report must include:
- a statement that the remote seller or marketplace facilitator did not collect sales tax on the purchaser’s transactions and that the purchaser may be required to remit use tax to the Department;
- a list, by date, indicating the type and purchase price of each product purchased or leased by the purchaser from the remote seller or marketplace facilitator and delivered to a location within Pennsylvania;
- instructions for obtaining additional information from the Department regarding whether and how to remit the use tax;
- a statement that the remote seller or marketplace facilitator must submit a report to the department that includes the purchaser’s name and the aggregate dollar amount of the purchases made from the remote seller or marketplace facilitator; and
- additional information as required by the department.
By January 31 of each year, remote sellers and marketplace facilitators that elect to comply with notice and reporting requirements must also provide a written report to the Department of Revenue. For each purchaser required to receive the notice during the previous calendar year, the report must include:
- the purchaser’s name;
- the purchaser’s billing address and, if different, the purchaser’s last known mailing address;
- the address in Pennsylvania where products were delivered to the purchaser;
- the aggregate dollar amount of purchases that the purchaser made from the remote seller or marketplace facilitator; and
- the name and address of the remote seller, marketplace facilitator, or marketplace seller that made the sales to the purchaser.
By January 31 of each year, a referrer that elects to comply with notice and reporting requirements must provide a written report to each remote seller to whom the referrer transferred a potential purchaser located in Pennsylvania during the previous calendar year. The report must include:
- a statement that Pennsylvania may impose sales or use tax on the transaction;
- a statement that the remote seller may be required to elect to either collect and remit the sales and use tax or comply with notice and reporting requirements; and
- instructions for obtaining additional information regarding sales and use tax from the Department.
By January 31 of each year, referrers must also provide a report to the Department containing a list of remote sellers who received the notice described above.
The notice requirements and requirements for providing reports to the Department of Revenue:
- are effective February 1, 2018, and will apply beginning on April 1, 2018, for sales of products and services other than digital products and related services; and
- are effective February 1, 2019, and will apply beginning on April 1, 2019, for digital products and related services.
- The annual notices will be required starting in 2019 for the 2018 activities.
Penalties for non-compliance with the notice and reporting provisions will be $20,000 or 20% of the total sales in Pennsylvania during the previous twelve months, whichever is less, against a remote seller, marketplace facilitator or referrer that makes an election to comply with the notice and reporting requirements or is deemed to have made such election and fails to comply. The penalty shall be assessed separately for each violation but may only be assessed once in a calendar year. For a period of five years after the effective date, the Department may abate or reduce the penalty due to hardship or for good cause. A positive provision in the bill prohibits the filing of a class action against a marketplace facilitator or a referrer on behalf of purchasers related to an overpayment of sales or use tax collected by the facilitator or referrer, regardless of whether such action is characterized as a tax refund claim. Purchasers will retain their right to file for a tax refund from the Department. If federal legislation relating to remote sellers has not been enacted by December 31, 2018, the Independent Fiscal Office, in conjunction with the Department, shall conduct a study assessing the legal implications and fiscal impact of mandating notice requirements for remote sellers. (Act 43 (H.B. 542), Laws 2017)
UPDATE: After a seller exceeds $100,000 in gross sales into Pennsylvania, tax collection is mandatory as per the state’s economic nexus legislation. Read our news item for more information: Pennsylvania Enacts New Economic and Marketplace Nexus Provisions.
UPDATE: Pennsylvania enacted legislation that eliminates the option to either collect and remit Pennsylvania sales tax or comply with notice and reporting requirements. All marketplace facilitators and online sellers who exceed the $100,000 threshold must register, collect and remit Pennsylvania sales tax effective July 1, 2019. Electing to provide notices to Pennsylvania customers is no longer an option. For more information, read our news item: Pennsylvania Codifies Economic and Marketplace Nexus Provisions, Repeals Notice and Reporting Option