PITTSBURGH (KDKA) – Getting ready to file your taxes?
You might be thrown a curve ball after a new reporting requirement that many Pennsylvanians are seeing for the first time.
More Pennsylvanians than ever buy products online, but online purchases are subject to the same sales tax as products bought in a store.
So what happens when an online company fails to collect that tax?
“The law requires the payment of a sales tax or use tax by a person if a sales tax is not collected by the merchant,” said Jeffrey Johnson, communications director for the PA Department of Revenue.
Bottom line: the consumer is on the hook for the uncollected tax.
KDKA heard from a number of consumers who are getting letters like these that come from companies that sold products to these individuals online.
The letters say these individuals have to pay the state sales tax now.
KDKA talked to the PA Department of Revenue, and it turns out, that’s right.
A giant loophole in the 2017 Marketplace Sales Act allows online companies to not collect sales tax at the time of purchase.
Instead, those companies can opt to send consumers letters like these listing their non-taxed purchases.
What’s a consumer to do with those letters?
“If the tax was not collected by the merchant, they can report the use tax on the PA-40, which is the Pennsylvania personal income tax return,” said Johnson. “And we also have another form called the PA-1 that folks can use to report a use tax.”
In other words, whatever the online price — and that includes shipping costs — must be reported on your Pennsylvania tax return and taxed at the appropriate rate, seven percent in Allegheny County and six percent elsewhere.
It’s a huge inconvenience to consumers and an administrative nightmare for the revenue department.
But only state lawmakers can change it.
“We want it to be a level playing field and have as little impact on the consumer as possible,” says Johnson.
If you are getting these letters, call your state senator and state representative and ask them to close the loophole.
Lawmakers, including Democratic Finance Committee chair Jake Wheatley of Pittsburgh, say they are looking at this.
The revenue department said that beginning in July, any company doing more than a $100,000 in business in the state will be required to collect the sales tax at the time of the online purchase.
That will help, but still leaves smaller companies free to stick you with the tax reporting.
Finally, don’t ignore these letters.
The companies contacting you are sending the same information to the state revenue department.