Start of online sales tax collection by Pennsylvania delayed

| Saturday, Feb. 4, 2012

Surfing the Internet to do some shopping may cost you more beginning Sept. 1.

Pennsylvania has set that deadline for Internet retailers who have a physical presence in the state to begin collecting and remitting sales tax for items they ship to customers in the state.

The Internet sales tax-collection issue has been a sore point with scores of small, store-based merchants.

This week, state officials extended the effective date when some online sellers will have to comply with sales tax requirements from Feb. 1. That date was set when Pennsylvania announced in a tax bulletin on Dec. 1 which types of retailers are required to collect and turn over 6 percent, or sometimes more, in sales tax when they sell to Pennsylvania customers.

"We thought 60 days was enough time," Elizabeth Brassell, state Revenue Department spokeswoman, said Friday. "But a lot of retailers approached us and, while they demonstrated a willingness to comply, they said operationally the Feb. 1 deadline wouldn't work."

The Alliance for Main Street Fairness, representing traditional merchants, expressed disappointment with the extension.

Still, "It's welcome news that Amazon and companies like it will be collecting and remitting sales tax in Pennsylvania as of Sept. 1," Dan Hayward, a spokesman for the group, said yesterday. Those failing to comply risk enforcement actions such as audits, liens and referrals to collection agencies or to the state attorney general, the group said.

An Inc. spokesman couldn't be reached for comment. Amazon operates a huge warehouse in Pennsylvania's Lehigh Valley on Route 100 near Interstate 78, where books, CDs and various other products are packed and shipped to customers who order from the world's largest online retailer.

Pennsylvania said it lost out on $345 million in sales tax revenue last year because Internet and catalog sellers with no "nexus," meaning warehouses or other facilities, in the state don't have to handle sales tax, under terms of a 1992 U.S. Supreme Court decision.

"But Pennsylvania's definition of nexus is broad enough to include not only brick-and-mortar stores, but things like distribution and fulfillment centers, delivery trucks and sales forces," Brassell said. She doesn't know how many retailers plan to start collecting the tax, but said a "couple dozen" contacted the state to ask for more time.

"This is a one-time deadline extension" designed to allow the retailers to adjust their software, but to get collections in place for this year's holiday shopping season, she said.

Judy DiNardo said the sales tax issue doesn't affect her Golf for Her Inc. business in Greensburg as much as it does other small retailers. The women's golf clothing she sells at her store and online isn't taxable in Pennsylvania, but "my biggest ticket items are golf bags. They are taxable," she said.

That means a store such as hers can effectively become a local showroom for Internet retailers. A visitor to her store can jot down details about a $150 to $300 bag, search for it online and buy it without paying sales tax, she said. Customers don't know that many stores would be willing to match a web retailer's lower price, she added.

"This is taking sales away from our small businesses, and revenue away from the state," DiNardo said. "The sooner we can get this fixed, it's going to be better for everyone."

Pending federal legislation would empower states to collect sales tax from online retailers outside their borders.

In addition to setting the Sept. 1 compliance deadline, Pennsylvania has included a "use tax" line for the first time in 2011 state tax return forms, to urge consumers who bought items online or out of state, and didn't pay tax, to declare and pay the 6 percent levy when they file their returns.

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