Selling Online: What You Need to Know About PA Sales Tax
The Commonwealth of Pennsylvania just passed a new law impacting out-of-state vendors selling online or remotely through other facilitators (think Amazon or Etsy) to PA customers.
This new law requires out-of-state sellers to either collect and remit PA 6% sales tax or follow these new notice and reporting requirements. Failure to do either can result in substantial penalties, taxes, and interest.
What to do?
If you or your business is located outside of PA and sells through a facilitator, first check with them about including sales tax on purchases and their process of remitting to the proper state agency. Second, if you are not currently charging sales tax, then be aware that in PA (and some other states) you must provide a notice to the buyer with each transaction that PA tax is due and should be included on their tax return (this is called “use tax”). You may also be required to send an additional notice by January 31 of each year to PA buyers who purchased over a certain dollar threshold in the previous year.
What are the consequences?
The penalties for not complying can add up quickly. There is a fine for each failure to provide the notice upon purchase for every individual transaction. There is also an additional fine for each failure to provide the proper annual notification. PA will require an out-of-state seller to provide its list of PA buyers who received the notifications. Remember that notification is not required if you are charging, collecting, and remitting PA sales tax.
Will you lose a competitive advantage?
More states are taking this notification approach. Online marketplaces are concerned and beginning to warn their users of the need to pay, collect, and remit sales tax. So, in the long run, having a pricing advantage by excluding sales tax is diminishing.
Sure. Some PA buyers may be exempt from PA sales tax. You must request and receive a signed exemption certificate to be safe. Also, Colorado has already won legal challenges against its notice reporting requirements. More states are taking this path to help fund budget shortfalls.
Do not be caught unaware—protect your business and hard earned income by understanding what needs to be done.