by Phil Yacuboski
You can call it a revenue surge – a surge no one saw coming.
Pennsylvania is raking in far more than it anticipated in revenue from Act 43 legislation, enacted by Governor Tom Wolf in fiscal year 2017-2018.
It’s now brought in $171.3 million.
Pennsylvania is now one of a handful of states across the country where online sellers must pay sales tax (or tell consumers they have to pay sales tax) on items sold to state consumers. The change in Pennsylvania law came after a U.S. Supreme Court decision overturning a lower court decision. That decision said that in order to collect sales tax, you had to have a physical presence in that state.
“It requires online remote sellers making sales to Pennsylvania customers to either collect or remit Pennsylvania sales tax or to send notices to their customers that they might have an obligation to remit the tax,” said Jeff Johnson, communications director for the Pennsylvania Department of Revenue. “That legislation has been very effective for us.”
Johnson said the initial estimate in revenue was $50.5 million for the current fiscal year and from May 2018 through the end of March, the state was at $174.5 million.
“That’s the impact that it is having,” he said.
Johnson said it hasn’t been terribly difficult collecting the tax or helping out-of-state online sellers deal with the new rules.
“We’ve been working with a lot of the online marketplaces to help them understand the law and what the requirements are,” he said. “We’ve had a lot of success with that.”
Johnson said out-of-state sellers totaling more than $100,000 in annual gross sales to state customers, are now required to submit that tax to the state.
“It’s a decision that’s really changed things,” he said.
But if you’re selling items to Pennsylvania customers from Utah, Colorado, Florida or Vermont – how does the revenue department keep track of all of those sales from all of those states?
“We’re on the verge of announcing a new project with certified service providers,” said Johnson. “Essentially, a business can outsource their sales tax collection obligations.”
He said in many states, the companies already exist.
“We are hoping that it helps meet their obligations and makes things easier,” he said.
Johnson said the Department of Revenue formulates its revenue projections based on ‘economic data that was available at the time.’
“Online marketplaces have really changed the landscape of how commerce occurs in this day and age,” he said. “That’s part of the reason why the number is so much larger than expected.”
Two years ago, Pennsylvania imposed a sales tax to online sellers. Pennsylvania’s Independent Fiscal Office believes Pennsylvania is on track to college $300 million in revenue from the new tax rules.
The U.S. Department of Commerce said in May that online marketplaces throughout the country did $137.7 billion, an increase of 3.6 percent from the previous quarter.