Amazon to Collect Tax on Third-Party Sales in Pennsylvania

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By Leslie A. Pappas

Amazon will collect and remit sales tax on third-party sales into Pennsylvania beginning April 1, the company recently announced.

It becomes only the second state where Amazon collects and remits sales tax on behalf of third-party vendors.

The change comes after a novel tweak that Pennsylvania made to its sales tax laws last year, which only three other states have done. Online marketplace platforms such as Amazon.com Inc. and Etsy Inc. must either collect and remit Pennsylvania’s 6 percent sales tax on sales on behalf of their third-party vendors or comply with new notice and reporting requirements.

Through a new service called Marketplace Tax Collection, Amazon said it would automatically “calculate, collect, and remit” sales tax for third-party merchants selling products to customers in marketplace provider states, beginning with Washington state, where it is headquartered. The announcement came in November 2017 through an Amazon sellers’ forum.

The Pennsylvania news was communicated to sellers through the company’s Seller Central portal, Amazon spokeswoman Jill Shatzen Kerr told Bloomberg Tax in an email March 5.

Election Deadline

Pennsylvania was among the first states to enact marketplace-provider regimes in 2017—the others were Minnesota, Washington, and Rhode Island.

Pennsylvania’s new law was enacted last year as part of a revenue package to fund the state’s budget. Act 43 of 2017 requires, in part, that remote sellers, online marketplace facilitators, and “referrers” must either collect sales tax or comply with notice and reporting requirements. The new obligations apply to remote vendors or online platforms with sales of $10,000 or more in the previous calendar year.

Companies impacted by the new rules had until March 1 to elect to collect and remit Pennsylvania’s 6 percent sales tax beginning April 1 or comply with reporting and notification requirements, according to online guidance from the Pennsylvania Department of Revenue.

The Pennsylvania Department of Revenue has estimated that the marketplace requirements will generate $8.2 million in FY 2017-18 and $50.5 million in FY 2018-19.

More States to Follow?

Some state tax practitioners have said the future of marketplace-provider laws requiring Amazon-type platforms to collect tax on third-party sales hinges on a pivotal U.S. Supreme Court case.

Liz Malm, director of strategic government relations and economist at the consulting firm MultiState Associates Inc., previously told Bloomberg Tax that marketplace-provider legislation could spike once the U.S. Supreme Court reaches a decision in South Dakota v. Wayfair. The high court is revisiting its 1992 precedent in Quill Corp. v. North Dakota, which prohibits states from imposing tax collection obligations on vendors without a physical presence in-state. Oral arguments in the case are set for April 17, and a decision is expected by late June.

Assuming the high court sides with South Dakota, Malm said she would expect marketplace-provider legislation to “be the biggest trend of 2019.”

This year, New York and Hawaii have introduced legislation containing marketplace provider provisions. New Mexico also considered similar proposals, but the bills died in session.

With assistance from Michael J. Bologna in Chicago and Ryan Prete in Washington

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at lpappas@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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