Pennsylvania sees online sales taxes soar after court ruling
HARRISBURG, Pa. (AP) — Pennsylvania is getting an unexpected windfall as internet sales tax revenues are coming in at a rate of nearly four times what had been projected for the current fiscal year.
The state estimated about $50 million from the tax on online transactions, but it’s now looking more like $200 million will actually be collected, according to Pennsylvania’s Department of Revenue.
Two years ago, the state gave businesses that use online marketplaces to sell their goods the option of paying the sales taxes or passing it on to their customers.
A U.S. Supreme Court decision last June cemented the state law, requiring businesses that don’t have a physical presence in the state to pay online sales taxes.
That ruling was considered a win for large retailers with a presence in many states, as they generally were collecting sales taxes on online purchases before the decision.
The mandate to register, collect and remit sales taxes now applies to businesses that do at least $100,000 in gross annual sales in Pennsylvania.
Revenue spokesman Jeff Johnson said Monday the estimate for this year was based on data from 2015, and online commerce has been growing rapidly, making it difficult to predict.
“One other important factor to consider is the department, in crafting its estimate, analyzed revenue data for specific online companies and had to estimate the percentage of their online sales that are taxable in Pennsylvania. This was done to account for items, such as clothing, that are not subject to Pennsylvania sales tax,” Johnson said.
The state had previously taxed other online transactions, including downloading music or books.
Pennsylvania’s budget year ends June 30.
Independent Fiscal Office director Matthew Knittel tells The Philadelphia Inquirer the U.S. Supreme Court decision probably helped make people aware of the new rules, and the overall growth in online sales generally is driving up tax revenues.
Last year’s high court decision meant states could require businesses to collect sales tax for the state on purchases shipped to areas they do not have a physical presence. Previously, customers had generally been responsible for paying any sales taxes, but most did not realize they owed them and few paid.
States had said leaving tax payments up to online customers, rather than the sellers, had cost them billions.