Pennsylvania Enacts New Economic and Marketplace Nexus Provisions

Effective Date: July 1, 2019

Threshold: $100,000

Measurement Date: Previous calendar year

Includable Transactions: Gross sales, excluding marketplace sales for which the marketplace facilitator is collecting the tax

When You Need to Register Once You Exceed the Threshold: Next transaction (state hasn’t specified)

Pennsylvania has issued a bulletin clarifying the state’s economic and marketplace nexus provisions and creating a new economic nexus threshold. Effective July 1, 2019, sellers making more than $100,000 in Pennsylvania gross sales in the previous 12 months must register to collect and remit sales tax in Pennsylvania.

The economic nexus threshold will be measured by calendar year. After the first year, collection will begin in the second quarter to allow taxpayers adequate time to compile their calendar year sales. For the July 1, 2019 – March 31, 2020 collection period, sellers should use calendar year 2018 sales to determine if they meet the economic nexus threshold. For the April 1, 2020 – March 31, 2021 collection period, taxpayers should use calendar year 2019 sales to determine if they meet the economic nexus threshold. Subsequent years will follow the same collection period.

A marketplace facilitator with no physical presence in Pennsylvania should use both facilitated and direct sales to determine whether it has exceeded the threshold. If a marketplace facilitator has economic nexus in Pennsylvania, it will be required to collect sales tax on all sales into Pennsylvania, even if the sale is on behalf of a marketplace seller that does not individually have any nexus.

A marketplace seller with no physical presence in Pennsylvania should use only its direct sales and those sales made through a marketplace facilitator that does not collect sales tax on its behalf, to determine whether it has exceeded the threshold. These economic nexus provisions do not affect marketplace sellers for whom marketplace facilitators collect and remit sales tax on their behalf.

The newly enacted economic nexus provisions do not replace or provide an alternative to Act 43, previously reported on here. Act 43 requires 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 they exceed a $10,000 Pennsylvania sales threshold. The provisions of Act 43 remain valid law applicable to vendors who have neither a physical presence nexus nor meet the new $100,000 economic nexus threshold in Pennsylvania. The Act 43 election is no longer available for marketplace facilitators and remote sellers who were required by Act 43 to make the election but now have economic nexus in Pennsylvania.

The state has not included the 200 transaction threshold adopted by many other states enacting economic nexus laws.

The state announced that it plans to certify service providers to help in the registration, collection, reporting, and remittance of sales tax.

To see our previous news item on this topic, visit Pennsylvania Enacts Notice and Reporting Requirements and Economic Nexus Legislation. (Sales and Use Tax Bulletin 2019-01, Pennsylvania Department of Revenue, January 11, 2019; Pennsylvania Sales Tax and Economic Nexus – South Dakota v. Wayfair, Pennsylvania Department of Revenue, January 2019)

Posted on January 18, 2019