Pennsylvania Sales Tax and Online Internet Sales
Business, Individual, Tax Law | February 5, 2016
Do I have to pay a sales tax on my internet purchase when it is not already made a part of my purchase?
This is a common tax question and it can be confusing. In this day and age, many people sell products online on various websites in an effort to make money. However, some sellers do not understand the law regarding sales tax and their obligations to collect sales tax in online sales. Furthermore, sellers ignore sales tax law at their own peril, as failure to collect sales tax on online sales can result in a tax audit and a large sales tax bill.
While sellers must collect sales tax in online sales in some transactions, it need not be collected in all transactions. Quill Corp. v. North Dakota is a 1992 United States Supreme Court case which holds that a company only has a duty to collect sales tax on a sale to a customer in a state if the company has a physical nexus in that state. In other words, this case stands for two important propositions. The first is that the seller’s duty to collect sales tax only arises if the seller has a physical presence in the state in which the buyer resides. In other words, if a seller only has a business presence in Pennsylvania but the buyer resides in New Jersey, the PA seller does not have a duty to collect sales tax on the transaction. The second important point to be gleaned from this is that the state to which the tax is paid is determined by the residence of the buyer, not the seller. In other words, if a seller and buyer both reside in PA, the seller would have a duty to collect sales tax and remit it to Pennsylvania. However, if the seller resides in Pennsylvania and has no physical nexus to another state, the seller would not have any duty to collect sales tax on any transaction in which the buyer resides outside of Pennsylvania.
If you have a question regarding a sales tax issue, contact one of the experienced attorneys at Trinity Law today. Our attorneys routinely handle tax matters in York, Lancaster and surrounding counties. Trinity Law 717.843.8046.