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Online Purchases Dominate Revenue Department Budget Hearing

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E-commerce has muddied the waters of an already complex tax code here in the Keystone State, and Revenue Secretary Dan Meuser did his best to clear things up during Appropriations Hearings on Tuesday. 

There’s some overlap between two big Department of Revenue priorities in 2012.  First, the state is compelling online retailers with a physical presence in PA to collect and remit sales taxes.  Pennsylvania consumers are also being encouraged to report the use tax that is due for online purchases when the sales tax is not collected. 

“We’re not interested in new taxes,” Secretary Meuser told the Senate Appropriations Committee.  “We’re about enforcing the laws that exist.”  Combined, the two initiatives are expected to add $49-million dollars to the state’s balance sheet. 

Online retailers have been given until September 1st to comply with state nexus laws, while line 25 on the PA-40 tax form will capture consumers’ attention this year.  It allows you to report your use taxes for all of those taxable items you may have bought online in 2012.  If you don’t have complete records of your purchases, the instructions even provide you with a table through which you can estimate the use tax that is due. 

Revenue Secretary Dan Meuser

Revenue Secretary Dan Meuser

For instance, a tax filer who made between $15,001 and $30,000 dollars in taxable income would pay an estimated $12 dollars in use tax (assuming they don’t live in Philadelphia or Allegheny counties, where the sales & use taxes are higher). 

“90% of people pay their taxes in a voluntary, compliant manner,” Meuser says.  “So our approach is aggressive education if you will, informing in many many ways.” He tells lawmakers that consumers’ self-reporting of use taxes is expected to account for $7-million of the $49-million dollar figure.

PA Clarifies Sales Tax Rules, Eyes Online Retailers

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Businesses are pouring over a new Tax Bulletin from the Pennsylvania Department of Revenue, which clarifies existing sales tax nexus law.  The law requires businesses with a physical presence in Pennsylvania to collect and remit sales taxes on items sold online, by phone or by catalog.  “Thousands of retailers and businesses that employ people throughout the state, and collect and remit 6% sales tax – 7% in Allegheny [County] and 8% in Philadelphia – felt that they were being treated unfairly,” explains Revenue Secretary Dan Meuser. 

The bulletin informs remote sellers, which have nexus in Pennsylvania, that they have until February to become licensed to collect sales tax.  Failure to do so could result in audits, liens or other enforcement measures. 

It could have a broad application across online-only retailers that have not been collecting and remitting state sales taxes, according to Dan Hayward with the Pennsylvania Alliance for Main Street Fairness.  The Pennsylvania Retailers’ Association joins Hayward in calling it a great first step toward equity and fairness.  “Pennsylvania’s retailers, and the more than 600,000 jobs they have created, deserve fairness and a level playing field with their Internet competition,” says PRA President & CEO Brian Rider.

Testifying before the House Finance Committee in May, the Department of Revenue estimated that PA is missing out on $350-million dollars a year because online retailers aren’t collecting sales taxes. 

But just because state sales tax isn’t collected on many online purchases, it doesn’t mean taxes aren’t due.  Beginning in January the state will provide a line, on Pennsylvania personal income tax returns, which allows individuals to self-report their use tax.  Use tax rates are identical to the sales tax; they’re due when consumers make taxable purchases for which no sales tax is collected.