Pennsylvania Enacts Remote Seller Requirements

Pennsylvania enacts remote seller requirements and makes other changes to sales and use tax laws. Under the recently enacted legislation, certain remote sellers, marketplace facilitators, and referrers must elect to either:

  • collect and remit the sales tax; or
  • comply with specified notice and reporting requirements.

In addition, certain technical support services are not subject to sales and use tax.

Finally, other sales and use tax changes include:

  • a new exemption for beer kegs;
  • a new carsharing fee; and
  • a new fireworks tax.

Corporate and personal income tax changes are reported separately.

New Requirements for Remote Sales

The legislation requires remote sellers, marketplace facilitators, and referrers to either comply with existing sales and use tax laws, or:

  • notify purchasers regarding the sales and use tax, and
  • report certain information regarding purchasers or remote sellers to the Department of Revenue.

Remote sellers and marketplace facilitators must also provide reports to purchasers regarding their purchases. In addition, referrers must  provide reports to remote sellers.

Definitions

A “remote seller” is a person who does not maintain a place of business in Pennsylvania and who makes retail sales through a forum 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.

A “referrer” is a person who has an agreement or 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; and
  • transfer a purchaser to a marketplace seller, remote seller, or affiliated person to complete a sale.

Furthermore, a person qualifying as a “referrer” does not have to collect a receipt from the purchaser for the sale. “Referrer” also includes a person who may also be a vendor. Newspaper printers and publishers and Internet advertising services are not considered referrers. In addition, a person who does not provide the marketplace seller’s or remote seller’s shipping terms or advertise whether a marketplace seller or remote seller collects sales or use tax is not considered a referrer.

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.

Election requirements

By March 1, 2018, and by June 1 of each subsequent calendar year, remote sellers, marketplace facilitators, and referrers with aggregate sales of $10,000 or more in the previous 12-month period must file an election with the Department of Revenue to either:

  • collect and remit the sales tax, or
  • comply with certain notice and reporting requirements.

A remote seller, marketplace facilitator or referrer who does not submit an election will be deemed to have elected to comply with the notice and reporting requirements. Furthermore, remote sellers, marketplace facilitators, and referrers who elect to collect and remit the sales tax must obtain a sales and use tax license from the Department of Revenue.

For marketplace facilitators, the election requirement applies only 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:

  1. directly resulting from a referral of a purchaser to a marketplace seller that does not maintain a place of business in Pennsylvania;
  2. directly resulting from a referral of a purchaser to a remote seller; and
  3. of the referrer’s own products, if the referrer does not maintain a place of business in Pennsylvania.

The referrer’s election for retail sales under item (3) can be different from the election for retail sales under items (1) and (2).

Remote seller and marketplace facilitator notice requirements

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 a written notice to each purchaser at the time of sale (“time-of-sale notice”) that includes:

  • a statement indicating that sales tax is not being collected in connection with the purchase;
  • a statement indicating 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 the use tax.

This notice must be prominently displayed on all invoices and order forms and on each sales receipt or similar document.

Referrer notice requirements

Referrers electing to comply with the notice requirements must post a conspicuous notice on their platforms to inform Pennsylvania purchasers of sales and use tax requirements. The notice must include statements indicating 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.

In addition, the notice required of referrers must contain instructions for obtaining additional information from the department regarding the use tax. Furthermore, the notice may include pop-up boxes or another type of notification that appears when the referrer transfers a purchaser to another person to complete the sale.

Remote seller and marketplace facilitator reporting requirements

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 time-of-sale notice. The report must include:

  • a statement indicating 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 of Revenue;
  • 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 the use tax;
  • a statement indicating 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 purchases that the purchaser made from the remote seller or marketplace facilitator; and
  • additional information 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 time-of-sale 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.

Referrer reporting requirements

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 indicating that Pennsylvania may impose sales or use tax on the transaction;
  • a statement indicating 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 of Revenue.

By January 31 of each year, referrers must also provide to the Department of Revenue a report containing a list of remote sellers who received the notice.

Effective and applicable dates for meeting requirements

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.

In this context,” digital products” include electronically or digitally delivered videos, photographs, books, any other taxable printed materials, applications (commonly known as apps), games, music, any other audio such as satellite radio service, and canned software.

Technical Support Services

Support services for digital and electronically delivered products and separately invoiced help desk and call center support services for canned software are not subject to sales and use tax.

 

Exemption for Beer Kegs

Kegs used to contain malt or brewed beverages are exempt from sales and use tax as packaging materials.

Carsharing Fee

A new fee is imposed on carsharing. For rentals of:

  • less than two hours, the fee is 25 cents;
  • two to three hours, the fee is 50 cents;
  • more than three but less than four hours, the fee is $1.25; and
  • four hours or more, the fee is $2.

The fee applies to rentals of motor vehicles that are subject to sales tax.

“Carsharing” means a membership-based service that provides an alternative to personal car ownership and:

  • does not require a trip-specific written agreement each time a member rents a vehicle;
  • does not require an attendant to be present at the beginning or end of a rental;
  • offers members access to a dispersed network of shared vehicles 24-hours per day, seven days per week, 365 days per year; and
  • allows a vehicle to be rented on a per-minute, per-hour, per-day, or per-trip basis, and at per-mile or per-kilometer rates that typically include fuel, insurance, and maintenance.

Consumer Fireworks Tax

Retail sales of fireworks that are suitable for use by the public are subject to a 12% consumer fireworks tax. The tax applies to the purchase price per item sold. The consumer fireworks tax is imposed in addition to the sales and use tax.

Act 43 (H.B. 542), Laws 2017, effective October 30, 2017, except as noted

Recently, the state of Washington also has enacted similar remote seller requirements.

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CCHTaxGroup

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