Pennsylvania Adopts Economic Nexus Standard

Pennsylvania adopted a sales and use tax economic nexus standard in light of the U.S. Supreme Court’s Wayfair decision.

$100,000 Sales Threshold

Beginning July 1, 2019, persons making more than $100,000 in Pennsylvania sales in the previous 12 months must:

  • register for a license; and
  • collect, report, and remit sales tax.

Marketplace Facilitators

A marketplace facilitator with no physical presence in Pennsylvania should determine whether it has exceeded the threshold by using both:

  • facilitated sales, and
  • direct sales.

A marketplace facilitator that meets the $100,000 economic nexus threshold must collect tax on all Pennsylvania sales. This applies even if the sale is on behalf of a marketplace seller that does not have any nexus with Pennsylvania.

Marketplace Sellers

A marketplace seller with no physical presence in Pennsylvania should determine whether it has exceeded the threshold by using only:

  • its direct sales, and
  • sales made through a marketplace facilitator that does not collect sales tax on its behalf.

The $100,000 nexus standard does not affect marketplace sellers for whom marketplace facilitators collect and remit tax on their behalf.

Pennsylvania’s Election Requirement

Pennsylvania currently gives certain marketplace facilitators, remote sellers, and referrers the option to elect to either:

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

$10,000 Sales Threshold

Certain entities making taxable sales in Pennsylvania worth at least $10,000 in the prior 12 months must file the election. The election requirement applies to marketplace facilitators, remote sellers, and referrers that do not maintain a Pennsylvania place of business.

Election Due Dates

The initial election had to be filed by March 1, 2018. Subsequent elections are due by June 1 of each year.

Election Requirement Not Replaced by $100,000 Economic Nexus Standard

The $100,000 economic nexus standard does not replace or provide an alternative to the election requirement and related provisions. The election and related provisions remain valid and apply to vendors who do not:

  • have a physical presence in Pennsylvania, or
  • meet Pennsylvania’s $100,000 economic nexus threshold.

However, the election is not available to marketplace facilitators and remote sellers that meet the $100,000 threshold.

Certified Service Providers

The Department of Revenue plans to certify service providers. They will offer software and services that, when relied upon by a vendor, will relieve the vendor of liability on audit.

Certified service providers will also help in the registration, collection, reporting, and remittance of sales tax.

Sales and Use Tax Bulletin 2019-01, Pennsylvania Department of Revenue, January 11, 2019, ¶204-686

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All stories by: CCHTaxGroup