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Starting March 1, 2018, a remote seller, marketplace facilitator, or referrer, with no physical presence in Pennsylvania but with $10,000 of annual sales into Pennsylvania, must elect to either collect sales tax on transactions, or to abide by various notice and reporting requirements. See HB 542, Act 43 of 2017. If no election is made, the remote seller, marketplace facilitator, and/or marketplace seller is deemed to have elected to comply with the notice and reporting requirements. The Department has begun mailing forms to taxpayers it believes qualify as referrers, marketplace sellers, or remote sellers. If a company receives a form, but does not believe it qualifies under any of the definitions, please contact us to seek further advice.
Remote Seller. A person, other than a marketplace facilitator, marketplace seller or referrer, that does not maintain a place of business in Pennsylvania that, through a forum, sells tangible personal property at retail.
Marketplace Facilitator. A person that facilitates the sale at retail of tangible personal property. A person facilitates a sale at retail if the person or an affiliated person: (1) lists or advertises tangible personal property for sale at retail in any forum; and (2) either directly or indirectly through agreements or arrangements with third parties, collects the payment from the purchaser and transmits the payment to the person selling the property. The term includes a person that may also be a vendor.
Marketplace Seller. A person that has an agreement with a marketplace facilitator pursuant to which the marketplace facilitator facilitates sales for the person.
Referrer. A person, other than a person engaging in the business of printing or publishing a newspaper, that, pursuant to an agreement or arrangement with a marketplace seller or remote seller, does the following: (1) agrees to list or advertise for sale at retail one or more products of the marketplace seller or remote seller in a physical or electronic medium; (2) receives consideration from the marketplace seller or remote seller from the sale offered in the listing or advertisement; (3) transfers by telecommunications, internet link or other means, a purchaser to a marketplace seller, remote seller or affiliated person to complete a sale; (4) does not collect a receipt from the purchaser for the sale. The terms explicitly does not include a person that: (1) provides internet advertising services; and (2) does not provide the marketplace seller’s or remote seller’s shipping terms or advertise whether a marketplace seller or remote seller collects a sales or use tax. The term includes a person that may also be a vendor.
Act 43 of 2017 provides that, on or before March 1, 2018 (and before June 1 of each calendar year thereafter), a remote seller, marketplace facilitator, or referrer that has aggregate sales at retail of tangible personal property subject to tax within Pennsylvania or delivered to locations within Pennsylvania worth at least $10,000 during the immediately preceding twelve calendar month period must file an election with the Department of Revenue to collect and remit the sales tax, or to comply with the notice and reporting requirements.
• If an election is made, the individual must obtain a sales tax license.
• An election made on or after March 1, 2018 will be deemed to be in effect for the balance of the 2017-2018 fiscal year and for the 2018-2019 fiscal year. An election may be changed to elect to collect and remit the tax at any time during a fiscal year.
The notice requirement of Act 43 of 2017 requires that a remote seller or marketplace facilitator post a conspicuous notice on its forum that includes all of the following:
• Sales and use tax may be due in connection with the purchase and delivery of the tangible personal property;
• The Commonwealth requires the purchaser to file a return if use tax is due in connection with the purchase and delivery; and
• The notice is required.
A referrer must post a conspicuous notice on its platform that includes all of the following:
• Sales or use tax may be due in connection with the purchase and delivery;
• The person to which the purchaser is being referred may or may not collect and remit sales tax to the Department in connection with the transaction;
• Pennsylvania requires the purchaser to file a return if use tax is due in connection with the purchase and delivery and not collected by the person; and
• The notice is required.
The referrer’s notice must be prominently displayed and may include pop-up boxes or notification by other means that appears when the referrer transfers a purchaser to another person to complete the sale.
Two types of reports are required under the new legislation – one to purchasers and one to the Department.
Reports to Purchasers.
− A remote seller or marketplace facilitator that does not elect to collect and remit the tax must, no later than January 31 of each year, provide a written report to each purchaser required to receive the notice that includes the following:
• A statement that the remote or marketplace facilitator did not collect sales tax in connection with the purchaser’s transactions and that the purchaser may be required to remit use tax to the Department;
• 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 whether and how to remit use tax to the Department; and
• A statement that the remote seller or marketplace facilitator is required to submit a report to the Department that includes the name of the purchaser and the aggregate dollar amount of the purchaser’s purchases.
The report must be mailed by first-class mail, in an envelope prominently marked with words indicating that important tax information is enclosed, to the purchaser’s billing address, if known, or, if unknown, to the purchaser’s shipping address.
• If both the billing and shipping address are unknown, the report must be electronically sent to the purchaser’s last known email address with a subject heading indicating that important tax information is being provided.
− A referrer that does not elect to collect and remit the tax must, no later than January 31 of each year, provide a written notice to each remote seller to whom the referrer transferred a potential purchaser located in Pennsylvania during the immediately preceding calendar year that includes all of the following:
• A statement that a sales or use tax may be imposed by the Commonwealth on the transaction;
• A statement that the remote seller may be required to make the election;
• Instructions for obtaining additional information regarding sales and use tax from the Department.
Reports to Department.
− A remote seller or marketplace facilitator that does not elect to collect and remit tax must, by January 31 of each year, submit a report to the Department, which shall include with respect to each purchaser during the immediately preceding calendar year:
• Purchaser’s name;
• Purchaser’s billing address and, if different, the purchaser’s last known mailing address;
• Address within Pennsylvania where the products were delivered to the purchaser;
• Aggregate dollar amount of the purchaser’s purchases from the remote seller or marketplace facilitator; and
• Name and address of the remote seller, marketplace facilitator or marketplace seller that made the sales to the purchaser.
− A referrer who does not elect to collect and remit the tax must, no later than January 31 of each year, submit a report to the Department including a list of persons who received the required notice.
These required reports must be submitted by an officer of the remote seller, marketplace facilitator or referrer and must include a statement, made under penalty of perjury, by the officer that the remote seller, marketplace facilitator or referrer made reasonable efforts to comply with the notice and reporting requirements.
Liability and Penalties.
The Department can assess a penalty of $20,000 or 20% of total sales (whichever is less) in Pennsylvania during the previous twelve months against a remote seller, marketplace facilitator or referrer that makes an election to comply with the notice and reporting requirements, or is deemed to have made an election, and fails to comply. The penalty is assessed separately for each violation, but can only be assessed once in a calendar year.
Notably, starting March 31, 2018, and for five years thereafter, the Department can abate or reduce any penalty or addition due to hardship or good cause shown. Additionally, the marketplace facilitator or referrer is relieved from liability if the marketplace facilitator or referrer can show that the failure to collect the correct amount of tax was due to incorrect information given to it by a marketplace seller or remote seller.
- Shareholder, S.A.L.T. Practice Co-Chair
Jennifer Weidler Karpchuk represents companies and individuals in various matters related to state and local taxation, with an emphasis on the minimization of state and local tax obligations. She has extensive experience ...