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The Pennsylvania Department of Revenue (“Department”) issued Sales and Use Tax Bulletin 2019-01 in response to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, 585 U.S. ___ (2018). The Bulletin clarifies when marketplace and remote sellers, marketplace facilitators, and other vendors maintain a place of business in the state in light of Wayfair.
Wayfair upheld a South Dakota law that imposed economic nexus upon taxpayers who had $100,000 of sales or 200 transactions within the state in a given year. Previous U.S. Supreme Court case law, Quill Corp. v. North Dakota, 504 U.S. 298 (1992), had required a business to have a physical presence in a state in order for it to be required to collect that particular state’s sales tax.
During March 2018, Pennsylvania began implementing its marketplace sales legislation, contained in Act 43 of 2017, which required a business with $10,000 or more of sales into the Commonwealth to elect to either collect and remit the sales tax, or submit to notice and reporting requirements. Reviewing Wayfair in conjunction with Pennsylvania’s Tax Reform Code, the Department explained in its Bulletin that the economic nexus rules do not replace or provide an alternative to the provisions in Act 43; Act 43 remains valid law. However, for those marketplace facilitators who now have economic nexus with Pennsylvania, there is no longer a choice to either collect or report. Instead, marketplace facilitators and sellers who make over $100,000 in Pennsylvania sales will be required to register for a license and collect, report, and remit sales tax on sales into the Commonwealth. Further, if a marketplace facilitator has economic nexus with Pennsylvania, it will now be required to collect the sales tax on all sales into Pennsylvania, even if those sales are on behalf of a marketplace seller that does not by itself have nexus with the Commonwealth.
The effective date of the Bulletin is July 1, 2019. If you have any questions about how the Department’s new policy will affect you and your business, please reach out.