By Mark Balistrieri, CPA

***Updated Feb. 28, 2019, to reflect the revised guidance issued by the Pennsylvania Department of Revenue in Sales and Use Tax Bulletin 2019-01.

In June 2018, the U.S. Supreme Court issued a decision on the South Dakota v. Wayfair Inc. sales and use tax case. The court overturned the previous physical presence requirement for state tax nexus that had been in place for years. In place of the physical presence requirement, the court has allowed for establishment of economic nexus thresholds, such as the $100,000 in sales and 200 transaction threshold in the South Dakota law.

In response to that decision, the Pennsylvania Department of Revenue (DOR) issued SUT Bulletin 2019-01 on Jan. 8, 2019, which was revised on Jan. 11, 2019, to establish an economic nexus threshold for taxable sales into Pennsylvania, thus requiring qualified sellers to charge, collect, and remit Pennsylvania sales tax.

Effective July 1, 2019, sellers with no physical presence who over the prior 12-month period have at least $100,000 of gross sales into Pennsylvania will meet the definition of doing business in the state under the economic nexus rules. Those sellers will be required to register for sales tax, charge, collect, and remit Pennsylvania sales tax on transactions that occur on or after July 1, 2019.

Within SUT Bulletin 2019-01, the DOR has established that sellers who meet the definition of a remote seller (as defined in the bulletin) are to use their “direct sales” into Pennsylvania to determine if they meet the $100,000 gross sale threshold. Therefore, if a remote seller has sales directly with Pennsylvania businesses or residents, as well as sales into Pennsylvania through a marketplace facilitator (as defined in Act 43), only the sales made directly by the remote seller will be used to determine if the company has established economic nexus. For those defined as a marketplace facilitators, both their direct sales and the sales they facilitate for other sellers will be used to determine if the marketplace facilitator establishes economic nexus.

Additionally, Act 43 established a requirement for marketplace facilitators who had a minimum of $10,000 of sales into Pennsylvania to elect to either charge, collect, and remit Pennsylvania sales tax or to report to the DOR the details of the sales and to post a notice on their site that Pennsylvania Use tax may be due. Those requirements will remain in place after July 1, 2019. Therefore, any marketplace facilitators whose Pennsylvania sales exceed $10,000, but whose gross Pennsylvania sales are less than $100,000, will be required to make the yearly election established by Act 43. However, once a marketplace facilitator’s gross sales exceed $100,000, the Act 43 election will no longer be valid: the marketplace facilitator will have established economic nexus and will be required to charge, collect, and remit Pennsylvania sales tax. SUT Bulletin 2019-01 is silent on the issue of as to whether or not economic nexus can be retracted once it has been established.

SUT Bulletin 2019-01 establishes that the DOR will certify certain providers to offer software and services that sellers can rely on to determine taxability of goods and services. These providers will be able to assist with the registration, collection, and remittance of Pennsylvania sales tax, as well as relieve the seller of liability under audit.

Mark Balistrieri, CPA, is a senior manager of state and local tax with KPMG LLP in Pittsburgh. He is a member of PICPA’s State Taxation Committee. This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.