The Pennsylvania Legislature modifies its state sales and use tax laws with the enactment of House Bill 542. The changes affect remote sales, fireworks, carsharing, and more.
Tax on marketplace facilitators, referrers, and remote sellers
At its inception, HB 542 was centered on imposing a tax obligation on out-of-state vendors. Although it ultimately achieves more, it does impose new requirements on marketplace facilitators, referrers, and remote vendors that do at least $10,000 worth of annual sales in Pennsylvania: They have an obligation to collect and remit tax on sales delivered into Pennsylvania starting March 1, 2018.
However, rather than mandate compliance, HB 542 gives qualifying businesses the option to comply with the use tax notice and reporting requirements described below.
Use tax notice and reporting requirements
Instead of registering with the Department of Revenue and collecting and remitting Pennsylvania tax, marketplace facilitators, referrers, and remote vendors doing at least $10,000 worth of annual sales in Pennsylvania can opt to comply with use tax notice and reporting requirements that include:
- Posting conspicuous notice on websites and sales forums that inform customers that sales or use tax could be due and Pennsylvania requires consumers to remit any owed use tax
- Providing written notice to purchasers at the time of sale informing them that sales tax isn’t being collected and they may be required to remit use tax to the Department of Revenue
- Providing an annual report of sales transactions to all customers by Jan. 31 of each year
- Providing an annual customer report to the Department of Revenue by Jan. 31 of each year
The department assumes qualifying remote vendors that don’t register with the Department of Revenue by March 31, 2018, will be complying with use tax notice and reporting requirements.
New sales and use taxes
HB 542 spends a lot of ink on legalizing the retail sale of consumer fireworks — those suitable for use by the general public. Sales are permitted each year from June 15 to July 8, and from Dec. 21 to Jan. 2.
The measure also imposes a special consumer fireworks tax of 12 percent of the purchase price, which includes state and local sales taxes. Fees for licenses to sell consumer fireworks vary.
“Consumer fireworks” do not include “ground and hand-held sparkling devices, novelties, or toy caps.”
New fees are imposed on carsharing under HB 542. “Carsharing” is defined as “a membership-based service that provides an alternative to personal car ownership” and:
- Does not require a trip-specific written agreement each time a member rents a vehicle
- Does not require an attendant to be present at the beginning or end of a rental
- Offers members access to a dispersed network of shared vehicles 24 hours per day, 7 days per week, 365 days per year
- Allows a vehicle to be rented by the minute, hour, day, trip, or per mile or kilometer rates
The fees are as follows:
- $0.25 for rentals of less than 2 hours
- $0.50 for rentals of 2 to 3 hours
- $1.25 for rentals of 3 to 4 hours
- $2.00 for rentals of 4 hours or more
New sales tax exemptions
Call center support for digital products
Pennsylvania has taxed the transfer of certain digital products since Aug. 1, 2016. According to the Department of Revenue, taxable digital goods include apps, books, canned software, games, music, and video. HB 542 specifies that, as of Oct. 30, 2017, taxable caned software includes support services, “except separately invoiced help desk or call center support” [emphasis mine].
Kegs used to contain malt or brewed beverages are exempt from retail sales and use tax as of Oct. 30, 2017.