On January 8, 2019, in Sales and Use Tax Bulletin 2019-01, the Pennsylvania Department of Revenue has provided nexus guidance in the post-Wayfair environment. The provisions of the bulletin apply to transactions on or after July 1, 2019.
Current Law:
The Tax Reform Code requires every person maintaining a place of business in the Commonwealth to sell tangible personal property, or perform taxable services, to be licensed to, and collect, sales tax from its customers. 72 P.S. § 7202, 7208. “Maintaining a place of business in the Commonwealth,” includes “[h]aving any contact with this Commonwealth that would allow the Commonwealth to require a person to collect and remit tax under the Constitution of the United States.” Id.
Post-Wayfair:
In the bulletin, the Department states that in light of the United States Supreme Court’s decision in Wayfair that physical presence is not required by the United States Constitution, and that an economic nexus, such as that set forth in the South Dakota statute, is sufficient to past constitutional muster, that a substantial economic nexus satisfies the Tax Reform Code’s definition of maintaining a place of business, requiring a taxpayer to collect and remit Pennsylvania sales tax.
Vendor Protections:
The bulletin provides that economic nexus applies only to those persons who, in the previous twelve months, made more than $100,000 worth of taxable sales into the Commonwealth. There is no minimum number of transactions provided as an alternative, unlike the South Dakota statute in Wayfair.
A marketplace facilitator with no physical presence in Pennsylvania should use both facilitated and direct sales to determine whether the $100,000 threshold is met. A marketplace seller with no physical presence in Pennsylvania should use only its direct sales and those sales made through a marketplace facilitator that does not collect sales tax on its behalf, to determine whether it has met the $100,000 threshold.
The Department will certify service providers that will offer software and perform services that when relied upon by a vendor to determine whether or not the sale of a particular product or provision of a particular service is subject to sales tax will relieve the vendor of liability upon audit. The certified service provider will also aid in the registration, collection, reporting, and remittance of sales tax.
Coordination with the Marketplace Sales Act:
These new economic nexus rules do not replace or provide an alternative to the Marketplace Sales Act. The provisions of that act remain applicable to vendors that have neither physical presence nor economic nexus with the Commonwealth. One important point: if economic nexus exists, facilitators and sellers may not elect to simply provide notice–they must collect and remit sales tax. Also, if a marketplace facilitator has economic nexus, it will now be required to collect the sales tax on all sales into Pennsylvania, even if the sale is on behalf of a marketplace seller that does not individually have any nexus.
The provisions of the Bulletin shall apply to transactions that occur on or after July 1, 2019.
The Department will be adding procedural and technical guidance, as well as the certified services providers, to its website as they become available.
It is likely that much of this bulletin will become part of a legislative package. Please keep following this blog for more information and updates.