United States: Deadline Quickly Approaching: Pennsylvania Law Requires Marketplace Facilitators And Remote Sellers To Make Election By March 1, 2018

Last Updated: February 8 2018
Article by Lee Zoeller, Jonathan E. Maddison and Sebastian C. Watt

At a Glance...

By March 1, 2018, certain marketplace facilitators, remote sellers and referrers must make an election to (1) comply with Pennsylvania's new sales tax notice and reporting requirements or (2) collect and remit sales tax on sales to Pennsylvania customers. The election becomes effective for sales made on and after April 1, 2018. In anticipation of this deadline, the Pennsylvania Department of Revenue released guidance on its website. Taxpayers subject to the new law should carefully consider the compliance burdens and penalty implications before making an election.

On October 30, 2017, Governor Tom Wolf signed House Bill 542 into law, making Pennsylvania the fourth state to impose sales tax collection or reporting obligations on platforms (e.g., ebay.com, Amazon.com).1 The law imposes tax collection or reporting obligations on marketplace facilitators and on remote sellers who have no physical presence in Pennsylvania. The law reaches only those marketplace facilitators and remote sellers who facilitate or make annual sales over $10,000 into Pennsylvania. If your business is making sales into Pennsylvania, you need to consider whether your business is subject to the law, and if so, what it needs to do before March 1, 2018, to be prepared to comply with the law by April 1, 2018.2

Marketplace facilitators and remote sellers

The legislation applies to marketplace facilitators and remote sellers.3 A marketplace facilitator sells goods or services on behalf of a marketplace seller through a platform, collects payment from purchasers and transmits the payment to the marketplace seller.4

A remote seller is a person who does not maintain a place of business in Pennsylvania but sells goods or services to customers in Pennsylvania.5 A remote seller is different from a marketplace seller—a remote seller makes sales directly to customers, but a marketplace seller makes sales to customers in Pennsylvania through a platform.

A marketplace facilitator or a remote seller is subject to the law if it facilitated or sold at least $10,000 of taxable goods or services in the immediately preceding 12-month period.6

Deadline to elect

Marketplace facilitators and remote sellers must make an election by March 1, 2018, to (1) comply with the notice and reporting requirements described below or (2) collect and remit sales tax to the Department of Revenue.7 If a marketplace facilitator or remote seller does not make an election, it is deemed to have elected to comply with the notice and reporting requirements.8 However, an election to comply with the notice and reporting requirements can be changed to an election to collect and remit at any time.9

Before making an election, businesses should consider the potential compliance burden and penalties associated with each election.

Notice and reporting

A marketplace facilitator or remote seller that elects to comply with the notice and reporting requirements is required to (1) notify Pennsylvania purchasers before they make a purchase and, at the time they make their purchase, that they may be liable for sales or use tax on that purchase; (2) submit an annual report to each Pennsylvania purchaser providing a list of all sales to that purchaser; and (3) submit an annual report to the Department of Revenue providing a list of all Pennsylvania purchasers, their addresses and their total Pennsylvania purchases.10

A person who has elected to comply with the notice and reporting requirements is subject to a penalty of the lesser of $20,000 or 20% of total Pennsylvania sales during the previous 12 months. The penalty is imposed separately for each violation.11 The statute is unclear as to what constitutes a violation––meaning that the Department of Revenue could interpret the law to impose a penalty for each separate failure to deliver an annual report to each customer, as well as for any failure to deliver an annual report to the department. In our view, this interpretation may result in significant penalties for compliance failures—and those penalties may be so significant that they are constitutionally suspect. The ambiguity regarding the penalty provision makes it difficult for marketplace facilitators and remote sellers to quantify their exposure under the notice and reporting regime.

Collect and remit

A marketplace facilitator or remote seller that elects to collect and remit sales tax will need to obtain a Pennsylvania sales tax license from the Department of Revenue and will be subject to all the collection and remittance requirements, and the penalty regime, of Pennsylvania's sales and use tax law.12

Under Pennsylvania's law, marketplace sellers are not required to make an election. The tax burden with respect to platforms is imposed solely on the marketplace facilitator.13 However, a person may be a marketplace seller with respect to some sales (e.g., those made to via a marketplace to Pennsylvania customers), but may be a remote seller required to make an election with respect to other sales (e.g., those made directly to Pennsylvania customers).

What's next?

Platform regimes like Pennsylvania's raise issues under the Commerce Clause and Due Process Clause of the United States Constitution, as well as the Internet Tax Freedom Act. Taxpayers complying with Pennsylvania's new law should closely monitor the South Dakota v. Wayfair case, currently pending before the United States Supreme Court. The Wayfair case will provide the Court with an opportunity to change the scope and reach of Quill's physical presence rule, which may impact Pennsylvania's ability to impose sales tax collection obligations on sellers with limited contacts with the state.

Taxpayers should also monitor litigation brought by a group of fireworks retailers challenging the constitutionality of House Bill 542. If successful, the litigation could result in the invalidation of House Bill 542 in its entirety—including the obligations on marketplace facilitators and remote sellers.


Minnesota, Pennsylvania, Rhode Island and Washington have recently enacted regimes requiring companies that facilitate sales by providing an online marketplace to collect sales tax on sales certain remote sellers or comply with burdensome reporting regimes.

2  Note, however, that a collection obligation for sales of digital goods does not begin until April 1, 2019. It may also be possible to delay collection obligations for non-digital goods past April 1, 2018.

3 Pennsylvania's law also imposes collection or reporting obligations on referrers, generally a person other than a newspaper that agrees with a marketplace seller or a remote seller to advertise its products and receives a commission for referring a purchaser to the marketplace seller or remote seller to complete a sale. For simplicity, we do not discuss referrers in further detail here.

4  72 P.S. § 7213(c). A forum is defined as "a place where sales at retail occur, whether physical or electronic. The term includes a store, a booth, a publicly accessible internet website, a catalog or similar place." 72 P.S. § 7213(b).

5  72 P.S. § 7213(h).

6  72 P.S. § 7213.1(a).

7 72 P.S. § 7213.1(a). The election is made on Form Rev-1830, available on the department's website.

8  72 P.S. § 7213.1(f).

9  72 P.S. § 7213.1(e).

10  72 P.S. §§ 7213.2-7213.4

11 72 P.S. § 7213.5(a).

12  72 P.S. § 7213.5(b).

13  This is unlike Washington's platform legislation, which imposes obligations on both marketplace facilitators and marketplace sellers.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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