Pa. Sales Tax Push Puts Heat On Online Retailers
HARRISBURG, Pa. (AP) – Pennsylvania’s push to force online retailers to collect sales taxes has hit serious pay dirt – a commitment to do so by Internet giant Amazon.com Inc. – but the struggle is far from over.
Gov. Tom Corbett is eager to collect tens of millions of dollars in new state revenue without technically raising taxes. But consumers still look for tax-free merchandise on the Internet and sellers are happy to fill the orders, pocketing profits while Pennsylvania’s bricks-andmortar retailers are sandbagged by taxes they cannot evade.
Saturday was the deadline for online retailers to register with the state Revenue Department and begin collecting the 6 percent state tax on orders shipped to Pennsylvania – plus local sales taxes of 2 percent in Philadelphia and 1 percent in Pittsburgh – or face potential audits and penalties like instate merchants.
Officials expect steppedup compliance to generate $43 million for Pennsylvania’s battered state treasury during the 10 months left in the fiscal year that ends June 30.
The department acknowledges that it does not know how many businesses should be collecting the tax.
“There is no database or resource that allows us to identify all businesses or all those that should have Pennsylvania sales-tax licenses,’’ said department spokeswoman Maia Warren.
Many online retailers can ignore Saturday’s deadline because they lack a physical presence in the state and do not engage in certain business activities here – either of which requires them to collect the tax.
The physical-presence standard was established by a 20-year-old U.S. Supreme Court decision. In a December directive, the department spelled out commercial activities – such as company sales-people regularly visiting the state – that it says also constitute a Pennsylvania “nexus’’ and requires retailers to collect the taxes.
Seattle-based Amazon, which had long refused to collect the tax, reversed itself and agreed to start collecting the Pennsylvania tax on orders shipped Saturday. Amazon has a clear physical presence, operating six fulfillment centers in Cumberland, York, Lehigh and Luzerne counties.
“We believe that (Pennsylvania) customers will continue to come to Amazon because we offer the best prices with or without sales tax,’’ said Amazon spokesman Scott Stanzel.
EBay Inc. says it is not subject to the law.
“The obligation to collect and remit sales tax in the state of Pennsylvania is a requirement on retailers,’’ said Brian Bieron, senior director of federal government relations for the California-based company. “EBay is not a retailer, eBay is a marketplace that is used by shoppers, retailers and other sellers.’’
Several bills pending in Congress would make it easier for states to recover an estimated $20 billion in sales taxes that go uncollected by online merchants every year.
Corbett is one of seven Republican governors who in July endorsed the Marketplace Fairness Act, a Senate bill that has bipartisan support. It would authorize all states to require online retailers with $500,000 or more in annual sales to collect sales taxes, so long as states simplify their tax procedures and certify tax- collection software for use by Internet companies.
If it passes, “states’ rights will be respected and the states will gain new revenue without new taxes or federal spending,’’ said Stanzel at Amazon, which supports the measure.
Rachelle Bernstein, a vice president and tax counsel for the Washington-based National Retail Federation, said developments in technology make it possible for online merchants to collect and remit taxes as easily as their conventional competitors.
Bernstein, who lobbies for the federation, said there has been “a lot of momentum behind this issue’’ but that it’s unclear whether Congress will take it up in this election year, especially in light of a looming year-end partisan showdown over federal tax cuts, debt and spending.
“There’s a chance. I don’t think it’s impossible,’’ she said.