The Pennsylvania Department of Revenue (DOR) is offering a voluntary compliance program for businesses that have inventory or store property in Pennsylvania but are not registered to collect and remit Pennsylvania taxes. The voluntary compliance program began February 8, 2021, and will run for 90 days (application period extended through June 8, 2021, see update below). The program offers the benefits of a limited look-back period and penalty relief for businesses that participate in the program. Taxpayers that participate in the program will not be liable for taxes owed prior to January 1, 2019. Participants in the program also will be given penalty relief for any non-compliance for past due tax returns that were not filed and taxes that were not paid.
To participate in the program or determine if they have nexus in Pennsylvania, taxpayers can complete the online Physical Presence Business Activity Questionnaire (BAQ) or print and complete a paper version of the BAQ and submit it via email. For access to the BAQ, visit the Pennsylvania DOR website. Once the BAQ is received by the DOR, they will complete a review and contact the business to discuss how to become compliant. Once the business is registered, has filed any tax returns that were due and remits payment of the taxes, all penalties for non-compliance will be waived. The DOR notes that this is conditional on the business continuing to maintain tax compliance with the DOR.
Notices are being sent to online sellers notifying them about the program. If a seller is notified and does not take advantage of the program, they should be cognizant that Pennsylvania is aware of them and could potentially come after them. For marketplace sellers, since the program’s start date for tax liability is January 1, 2019, their liability for sales made through the marketplace could be limited, but any direct sales (sales made to customers directly instead of through a marketplace) would have exposure to be paid. Income tax will be required if there is inventory in the state for 2019 and 2020. Given the timing, 2020 could be filed under extension but the ES payments could be due before the VDA would be submitted. For pass through entities, the entity and individual returns will be required.
We will continue to monitor this for developments (such as specific dates for the program) and keep you updated. (Voluntary Compliance Program for Retailers With Inventory in Pennsylvania, Pennsylvania DOR website)
UPDATE: The Pennsylvania Department of Revenue has extended the Voluntary Compliance Program for any business with in-state inventory or property storage in Pennsylvania for sales and use tax purposes but is not yet registered with the state. The extension to apply is through June 8, 2021.