Earlier this month, the Pennsylvania Department of Revenue (DOR) took to social media to make an important clarification: “If you receive a letter from a business letting you know that you may owe Pennsylvania use tax,” the tax agency’s Facebook post read, “it is not a scam.”
Under a PA pre-Wayfair state law enacted in 2017 that went into effect in 2018 (Act 43), marketplace facilitators and remote sellers with equal to or greater than $10,000 in aggregate sales into the state during the prior 12-month calendar year are required to either collect and remit sales tax or comply with the state’s requirement to notify residents that PA sales and use tax may be due on their online purchases. Those that opted to comply with the notification are required to send letters to customers by January 31 each year that use tax may be due. To date, the PA DOR has received 439 marketplace sales election forms of which 243 have elected the notice and reporting option over collecting and remitting the tax.
Welcome to the confusing post-Wayfair world. As Paige Jones, who reports on state tax issues for Tax Notes, points out, the Pennsylvania DOR’s “move is yet another wrinkle to appear in the aftermath of the Supreme Court’s June 2018 ruling in South Dakota v. Wayfair Inc.”
Given that Wayfair hardly qualified as earth-shattering news for most state residents, remote sellers and marketplace facilitators should expect many taxpayers to be surprised and/or confused by any communications regarding their tax liability.
Wayfair has yet to affect online purchases in Pennsylvania, but that will change on July 1, 2019 when the DOR requires remote sellers and marketplace facilitators that post more than $100,000 in Pennsylvania sales to begin collecting, reporting and remitting sales tax. This does not replace the provisions of Act 43 above, as this will still apply to those vendors who do not meet Pennsylvania’s Wayfair threshold. Once the DOR’s guidance takes effect on July 1, 2019, the forecast by the DOR is that most marketplace facilitators will fall under these new threshold guidelines.
While these types of distinct but somewhat related rules make sense to tax professionals, they can spark questions and confusion from consumers that use these marketplaces that tax functions and their companies should be prepared to address. As such, more states may have the need to issue similar explanations and amplifications in 2019 and beyond.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.