Pa. Use-tax Appeal Aimed At Internet Buyers
HARRISBURG, Pa. (AP) – For Pennsylvanians who are fretting over not paying enough in state taxes, the Revenue Department aims to make life a little easier.
The 2011 personal income tax return will provide a line asking taxpayers to declare – under the same oath they annually take in reporting their income – how much they owe in “use tax” on purchases they made online without paying the state sales tax.
State officials hope the change will educate Pennsylvanians about the use tax and inspire them to voluntarily fork over an additional $6 million to $8 million next year.
“We feel that (among) the good taxpayers of the commonwealth, the better they're educated on tax laws, the vast majority of them would feel an obligation to comply,” said Revenue Secretary Dan Meuser.
The sales tax and use tax are both 6 percent. By law, sellers are supposed to collect the sales tax at the time of purchase; if they don't, buyers are expected to pay the state the same amount in use tax.
The holiday-season appeal to consumers' conscience is the smaller part of a two-pronged campaign to capture at least some of an estimated $380 million that otherwise would go uncollected on Internet purchases in 2012.
The department, which expects to collect about $9 billion in sales and use tax next year, is also intensifying efforts to goad more Internet companies into collecting the sales tax at the point of sale, as Pennsylvania-based companies have to do.
Many of the biggest online retailers already collect the Pennsylvania tax, including Staples and Walmart, but many others are not registered to do so, including No. 1-ranked Amazon, department officials said.
The debate over the taxation of Internet commerce is raging in many state capitals. In Washington, a group of senators are pushing legislation to allow states to require online retailers that sell more than $500,000 a year to collect sales taxes for them regardless of where the companies are headquartered.
The department created a stir earlier this month by issuing a bulletin updating its interpretation of laws governing the taxation of online retailers and other remote sellers.
Advocates for Pennsylvania businesses hailed the move as an incremental victory in their ongoing campaign against what they see as unfair tax-free pricing by online competitors.
Many tax lawyers see the directive as an attempt by the Corbett administration to pressure Internet companies into collecting Pennsylvania sales tax without any corresponding change in state law.
“I'm not sure they have the authority to expand their authority,” said Robert Louis, a partner in the Saul Ewing law firm in Philadelphia.
The Washington-based anti-tax group Americans for Tax Reform, whose no-newtaxes pledge was signed by Gov. Tom Corbett during his 2010 election campaign, said in a commentary published in The Philadelphia Inquirer this week that the move represents “a tax increase that skirts the legislative process.”
Meuser insists the bulletin is neither a tax increase nor a policy change, but rather seeks to clarify the nuances of the law as it steps up enforcement efforts in response to widespread complaints from Pennsylvania businesses.
“We're doing our best to make Pennsylvania a very business-friendly state,” Meuser said.
In the past, out-of-state retailers have been required to collect the tax on purchases by Pennsylvanians if the companies have a physical presence – a warehouse, for example – that creates a “nexus” with the state.
The bulletin spells out activities that the department says also constitute a nexus with Pennsylvania and trigger tax-collection obligations for remote sellers.
Examples include contracting with Pennsylvaniabased Web site operators to encourage purchases of the seller's products and regularly soliciting orders from Pennsylvania customers through an in-state Web site using “click-through” technology.
The department has given companies with a Pennsylvania nexus until Feb. 1 to register or face possible actions ranging from audits to criminal prosecution.
Individual consumers are less likely to be punished for failing to pay the use tax.
“This is a voluntary compliance initiative,” said department spokeswoman Elizabeth Brassell.
Those who do pay would be wise to review the very long list of goods and services that are exempt from taxation – clothing, groceries and prescription or over-thecounter medicines are among them – before they write a check. Go to www.revenue.state.pa.us/use tax.
No one wants to pay more taxes than they have to.