Amazon recently notified sellers that the marketplace would begin collecting and remitting sales tax on behalf of 3rd party sellers. This decision is the result of a new Pennsylvania “Marketplace Facilitator Law.” Previously Washington enacted a similar law, and Amazon begin collecting and remitting Washington sales tax for 3rd party sellers on January 1, 2018. You can read more about this in Amazon Seller Central here.
This is a good news! However, just as we saw with Washington, it may turn out to be a bit of a mixed bag.
We always get a ton of questions when Amazon makes a big announcement like this, so let’s dig in to what this means:
Why is Amazon now collecting and remitting sales tax on behalf of 3rd party sellers in Pennsylvania?
Pennsylvania’s Marketplace Facilitator Law recently went into effect. Under this law, Amazon is considered a “marketplace” because they do the following:
- Advertise goods and services for sale in a physical or electronic forum.
- Collect payment from the purchaser on behalf of the seller either directly or indirectly.
- Remit payment back to the seller.
According to the new law, marketplaces that meet the above criteria are required to:
- Collect and remit sales tax on its own taxable sales; and
- Collect and remit sales tax on the taxable sales made through its forum by any marketplace seller using the forum.
In other words, Amazon has chosen to comply with Pennsylvania law and collect sales tax on behalf of 3rd party sellers using the platform.
Why did this happen now?
Pennsylvania’s new law specified that marketplaces were required to begin collecting sales tax on behalf of 3rd party sellers April 1, 2018.
Will other marketplaces also begin collecting sales tax on my behalf?
Most likely. Walmart and Etsy are both now collecting Washington sales tax on behalf of 3rd party sellers. Etsy and Walmart sellers may reasonably expect to be notified about sales tax collection, though both marketplaces missed the January 1, 2018 deadline.
I understand that Amazon will collect and remit sales tax on my behalf. Do I still have to file a Pennsylvania tax return?
This answer is unclear so far, but we’re waiting on word from the Pennsylvania Department of Revenue.
If this goes anything like the Washington case, Amazon FBA or other 3rd party sellers with sales tax nexus in Pennsylvania will still be required to file a Pennsylvania sales tax return by their regular due date.
Can I cancel my Pennsylvania sales tax permit?
If you only sell on Amazon and no other channels, it is unclear whether you will be able to cancel your Pennsylvania sales tax permit. However, we’ve seen this happen similarly with Washington. In that case, the Washington Department of Revenue instructed sellers with sales tax nexus in the state to continue to remain registered for a sales tax permit.
Further, storing inventory in a fulfillment center in Pennsylvania still creates sales tax nexus. So, if you sell on other channels like Shopify, Bigcommerce, or Squarespace then you’d still be required to collect sales tax from Pennsylvania buyers on those channels.
To sum it up, that means that your business could create sales tax nexus by selling on Amazon FBA, even though Amazon collects Pennsylvania sales tax on your behalf. This is a rather bizarre scenario, and it’s exactly what we are seeing in the state of Washington.
What do I need to do in my Amazon Seller Central account to prepare for this change?
Fortunately, nothing. Amazon will take care of this change in your account.
Pennsylvania recently took an aggressive stance when it comes to sales tax from remote sellers. What else do I need to know?
Pennsylvania is serious about collecting sales on purchases made by in-state buyers. That’s whether the sales tax comes from out-of-state online sellers or from consumers in the state in the form of consumer use tax.
They recently passed a “notice and report law” requiring remote sellers who have no sales tax nexus in the state but who make more than $10,000 in gross sales in a calendar year in the state to choose one of the following options:
- Register for a Pennsylvania sales tax permit and collect sales tax from Pennsylvania buyers
- Comply with Pennsylvania’s notice and reporting requirements
Pennsylvania’s new notice and reporting requirements are particularly onerous in that they require sellers to do things like post specific notices on websites, send notices with each transaction, provide an annual tax form to their customers, and provide an annual report to the Pennsylvania Department of Revenue informing on customers who owe use tax.
And for more on notice and report laws in general, check out the webinar we did with sales tax expert Michael Fleming of Peisner Johnson.
This is a breaking news story, so we will continue to update this blog post as we learn more information. In the meantime, if you have any questions or something to say start the conversation in the comments!