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Pennsylvania Sales Tax and Economic Presence

In June 2018, the U.S. Supreme Court issued an opinion in South Dakota v. Wayfair. The opinion overturned the court’s previous ruling in Quill Corp. v. North Dakota, which required a business to have a physical presence in a state in order for the business to be required to collect that state’s sales tax.

Read in conjunction with Pennsylvania's Tax Reform Code, the Supreme Court's decision in the Wayfair case creates a sales tax nexus for certain sellers of products in Pennsylvania. Previously, nexus only existed for those with a physical presence in the commonwealth.

What is sales tax nexus for sellers with an economic presence in Pennsylvania?

As outlined in Sales and Use Tax Bulletin 2019-01, Pennsylvania’s sales tax nexus is expanded to include businesses making at least $100,000 in annual Pennsylvania gross sales.

  • All marketplace facilitators and online sellers who have this economic presence (e.g. Pennsylvania annual gross sales of greater than $100,000) must now register, collect and remit Pennsylvania sales tax starting July 1, 2019.
  • The sales 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.
    • The collection period is July 1, 2019 through March 31, 2020 using Calendar Year 2018 sales to determine economic presence.
    • The collection period is April 1, 2020 through March 31, 2021 using Calendar Year 2019 sales to determine economic presence.
    • Subsequent years will follow the same collection period.
  • Sales threshold only; no transactional count requirement.
  • Sales are the gross amount on all channels.

How does this affect the provisions of Act 43 of 2017?

Act 43 of 2017 requires certain individuals or businesses facilitating, making or referring sales to Pennsylvania customers to make an election to either: (1) register to collect and remit Pennsylvania sales tax; or (2) comply with tax notification and reporting requirements. Read more at Marketplace Sales

The provisions of Act 43 remain valid law applicable to those vendors who have neither a physical presence, nor an economic presence in Pennsylvania.

  • As noted above, all marketplace facilitators and online sellers who have this economic presence (e.g. Pennsylvania annual gross sales of greater than $100,000) must now register, collect and remit Pennsylvania sales tax.
  • Marketplace facilitators and online sellers with annual Pennsylvania taxable sales of greater than $10,000 but less than $100,000 in total sales are required to make an election to: (1) register to collect and remit Pennsylvania sales tax; (2) comply with tax notification and reporting requirements.

What is the Department of Revenue doing to help vendors collect and remit sales tax?

The department is working with certified service providers to offer software and services to aid in the registration, collection, reporting and remittance of Pennsylvania sales tax. This will make it easier for certain individuals and businesses with sales tax collection obligations.

The department will distribute further information on certified service providers at a later date.