Pennsylvania’s Economic Nexus Provision for Sales and Use Tax

On January 8, 2019, the Pennsylvania Department of Revenue issued Sales and Use Tax Bulletin 2019-01, clarifying how the Department will apply economic nexus standards for sales and use tax based on the United States Supreme Court’s opinion in South Dakota v. Wayfair issued last June.  The new provisions are effective July 1, 2019.

The Department has indicated that it will use an economic nexus threshold of $100,000 in sales to Pennsylvania residents during the previous 12 months.  The legal basis cited for this by the Department is 72 P.S. §§ 7202, 7208.

The Code defines “maintaining a place of business in this Commonwealth to include having any contact with this Commonwealth which would allow the Commonwealth to require a person to collect and remit tax under the Constitution of the United States.

The bulletin discusses how Pennsylvania law complies with the simplification features identified in the Wayfair opinion.  The Department also indicated that it 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 new economic nexus rules do not replace or provide an alternative to the provisions of Act 43 regarding remote vendor use tax reporting or registration requirements.  Remote sellers who chose the use tax reporting option under Act 43 must register with the Department and begin collecting tax once they meet one of the two referenced thresholds during the previous 12- month period.

Any questions regarding Pennsylvania’s new economic thresholds and sales tax registration should be directed to your state and local tax professional.