Pennsylvania recently enacted legislation that requires remote sellers, marketplace facilitators, and referrers with annual Pennsylvania sales of $10,000 or more to elect annually whether to collect and remit sales tax or comply with notice and reporting requirements.  The first election is due March 1, 2018.  The second election is due June 1, 2019, and subsequent elections are due June 1.

A “remote seller” is a person with no Pennsylvania locations that sells taxable goods via a catalogue, website, or similar means.  “Marketplace facilitators” are essentially businesses like Amazon that facilitate taxable sales of goods by:

• Listing or advertising goods for sale on a website or similar forum;
• Collecting payments from purchasers directly or through a third party, and
• Remitting the payments to the person selling the property (the “marketplace seller”).

A “referrer” is a person that, for a fee:

• Agrees to list or advertise for sale at retail a remote or marketplace seller’s products in a catalogue, website, or similar medium;
• Transfers by telecommunications, Internet link, or other means a purchaser to the remote or marketplace seller (or affiliate) to complete a sale; and
• Does not collect payment from the purchaser.

A referrer does not include a newspaper printer or publisher.  It also does not include a person that provides Internet advertising services but does not provide the marketplace or remote seller’s shipping terms.

Notice requirements for remote and marketplace sellers include the following:

• Posting a conspicuous notice on the seller’s platform informing purchasers that sales tax may be due, and the purchaser might be required to file a use tax return;
• Stating prominently on the invoice, order form, sales receipt or similar document:
  1. That sales tax is not being collected;
  2. That the purchaser may be required to remit use tax; and
  3. How to find more information
• By January 31, sending each purchaser a notice covering the preceding year that includes:
  1. A statement that sales tax was not collected and use tax may be due;
  2. A list of purchases made by the purchaser including date and price;
  3. Instructions for obtaining more information; and
  4. A statement that the seller is required to submit to the Tax Department the purchaser’s name and purchase information.

Remote and marketplace seller reports to the Tax Department are due January 31 and must include for each purchaser:

• The purchaser’s name and address
• The delivery address
• The aggregate dollar amount of purchases

Notice and reporting requirements for referrers are similar.

Persons subject to the new legislation who neither collect sales tax nor comply with the notice and reporting requirements are subject to a penalty equal to the lesser of 20% of the total amount of Pennsylvania sales over the previous 12 months or $20,000.

The legislation generally applies to transactions occurring after March 31, 2018.  For electronically delivered, streamed or accessed video, photographs, books or other printed matter, apps, games, music or other audio (including satellite radio), and canned software, the legislation applies to transactions occurring after March 31, 2019.

For more information, contact our expert Steve.