Residents of Pennsylvania have long enjoyed the luxury of shopping online without paying the 6% Pennsylvania sales tax imposed in physical stores within the commonwealth. This changed last July with the enactment of Pennsylvania Act 13 of 2019, otherwise known as Pennsylvania House Bill 262, which has brought a number of changes in the way the commonwealth collects sales taxes.
What is House Bill 262?
The Pennsylvania Department of Revenue has created a page on their website to help synthesize the ramifications of House Bill 262. The page can be found here. HB 262 mandates that businesses that generate at least $100,000 in revenue in the commonwealth must register, collect, and remit sales tax. The law go further to define what this means. The law states that “vendors who have no physical presence but whose direct sales and facilitated marketplace sales attributed to Pennsylvania exceed $100,000.” The law is written broadly to ensure that no methods of generating revenue in this manner are excluded, such as companies that make sales through mail order catalogs or companies that make sales over the phone. However, it is clear that the largest sector of companies affected by this law is companies that generate revenue through online sales.
The Pennsylvania Department of Revenue goes on to define a “marketplace facilitator.” A marketplace facilitator according to the Department of Revenue is as follows: “a marketplace facilitator contracts with marketplace sellers to list or advertise the sellers’ goods and services for sale through a marketplace.” Some examples of a marketplace facilitator would include companies such as Amazon, eBay, etc. A marketplace seller is the individual or company who contracts with the marketplace facilitator to sell their goods on the facilitators platform.
House Bill 262 applies to sellers and facilitators that “have no physical presence but whose direct sales and facilitated marketplace sales attributed to Pennsylvania exceed $100,000.” The Pennsylvania Department of Revenue goes on to explain that the law applies to “all marketplace facilitators and online sellers who maintain a place of business by having economic presence.” That is to say that the sellers and facilitators are not located within the commonwealth, but maintain an economic presence in the commonwealth. Maintaining an economic presence in the commonwealth is defined by the Department of Revenue as determining on a year-to-year basis, using a calendar year, if the seller or facilitator has reached the sales threshold of $100,000. Economic presence is solely determined on the basis of the yearly sales threshold; the number of transaction made by the facilitator or seller within the commonwealth is irrelevant.
Ensuring Compliance with House Bill 262
There are a number of factors to consider to determine if you must comply with this particular law. Ask yourself these questions about your operation:
- Do you maintain a physical presence in Pennsylvania?
- Are you considered a marketplace facilitator or a marketplace seller?
- Do you maintain an economic presence in Pennsylvania?
- Does that economic presence exceed the sales threshold?
If you answered yes to the first question, then go no further. If you maintain a physical presence in Pennsylvania you must register, collect, and remit Pennsylvania sales tax whether your sales occur online or in a physical location. If you do not maintain a physical presence in Pennsylvania then you must ask yourself the next three questions listed. If you answer no to the first question but yes to the final three (you do not maintain a physical presence in the commonwealth, but you are considered a marketplace facilitator or seller, you do maintain an economic presence in Pennsylvania, and that economic presence exceeds the $100,000 sales threshold), then you also must register, collect, and remit Pennsylvania sales tax. There are a number of resources available to you if you are a seller or facilitator with no physical presence in the commonwealth but the other conditions of the law do apply to you to help ensure you are in compliance. The link referenced above has a section that lists a number of approved Certified Service Providers that you can use to report and remit the sales tax to the Pennsylvania Department of Revenue.
The wheels of progress are always turning and technological advances alter the way that certain aspects of life operate. The rise of online shopping has made it easy and convenient to do your shopping from the comfort of your own home. However, governments must adjust their laws in order to keep up with this ever changing society. Pennsylvania House Bill 262 is a prime example of this. Take the necessary steps to ensure compliance with this law so that your business can continue to operate and thrive in an ever changing world.
References:
https://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?sYear=2019&sInd=0&body=H&type=B&bn=262
https://www.inquirer.com/news/pa-online-sales-tax-effective-july1-compliance-software-20190702.html
Photo References:
https://www.consumerreports.org/sales-tax/online-sales-tax-ruling/
https://www.revenue.pa.gov/Pages/default.aspx
Dylan-
This is a well written and very informative post! You did a great job of describing House Bill 262, as well as how to determine whether or not this will apply to one’s business. I thought the use of factors was also especially effective because it gives businesses an easy way to make this determination. Lastly, I found it very influential when you discussed the possible ramifications this will have on online businesses to show the far reaching impacts of the Bill. Great job!
I think this will be helpful to any small online businesses that have yet to find out about the PA House Bill. I liked the questions and yes/no line of determining whether the House Bill applies to a particular business as this can make the law’s provisions easier to understand for a layperson business owner. Although there were a couple of grammatical errors, the post was an easy, interesting read.