Pennsylvania’s marketplace facilitator sales tax law, explained
by May 4, 2024
Please note: This blog was originally published in 2018. It’s since been updated for accuracy and comprehensiveness.
The state of Pennsylvania requires marketplaces to collect sales tax on behalf of sellers on online marketplaces like Amazon and eBay.
This means that if you sell on a platform like Amazon, then Amazon will collect sales tax from your Pennsylvania buyers on your behalf, and remit it to the state.
But as usual, there are always a few wrinkles here when it comes to e-commerce sales tax.
This post will explain what online sellers need to know about the Pennsylvania marketplace facilitator law, and answer your frequently asked questions.
Overview of the Pennsylvania marketplace facilitator law
Pennsylvania’s marketplace facilitator law states that marketplace facilitators in Pennsylvania either collect Pennsylvania sales tax on behalf of third-party sellers or elect to comply with Pennsylvania notice and report requirements.
Quick facts about the Pennsylvania marketplace facilitator law
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Effective date: April 1, 2018
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Threshold: Pennsylvania’s marketplace facilitator law states that marketplace facilitators in Pennsylvania either collect Pennsylvania sales tax on behalf of third-party sellers or elect to comply with Pennsylvania notice and report requirements.
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State law information: Read the full text of the Pennsylvania Marketplace Facilitator Law
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Marketplaces that have adopted this law:
Frequently asked questions about marketplace facilitator laws
What exactly is a marketplace facilitator in Pennsylvania?
Pennsylvania law defines marketplace facilitators as an entity that contracts with marketplace sellers to list or advertise the sellers’ goods and services for sale through a marketplace. The facilitator directly or indirectly collects the payment from the purchaser, and transmits the payment to the marketplace seller.
Online sales platforms like Amazon and eBay are considered marketplace facilitators under Pennsylvania law.
Does this mean I can stop collecting Pennsylvania sales tax?
It depends. Every business’s sales tax situation is unique to that business.
Let’s look at a couple of common scenarios for businesses who have sales tax nexus in Pennsylvania.
Example #1: You only make sales on online marketplaces.
In this example, you only sell on Amazon and eBay. Because Amazon and eBay are both now collecting sales tax from buyers on your behalf, you are not required to collect sales tax from your buyers. (However, you may still be required to file periodic sales tax returns. See “Does this mean I can cancel my Pennsylvania sales tax permit?” below.)
Example #2: You sell on online marketplaces and your own online store and/or brick and mortar store.
In this case, you’d still be required to collect sales tax from buyers who purchase from you through your own online store (for example, via your BigCommerce or Shopify store). And you would still be required to collect sales tax from your brick and mortar customers.
Marketplace facilitator laws only cover marketplaces. The state still requires that merchants collect sales tax from buyers via sales channels where the marketplace facilitator laws do not apply.
Does this mean I can cancel my Pennsylvania sales tax permit?
No, marketplace-only sellers should not cancel their sales tax permits.
Do I still need to file a Pennsylvania sales tax return?
If you are registered to collect sales tax in Pennsylvania (i.e. you have an active Pennsylvania sales tax permit) then the state still requires that you file sales tax returns.
If you only make sales via marketplaces, and all of your marketplaces collect sales tax from buyers on your behalf, then you may only be required to file a “zero return.” (This is a return showing that you do not have any sales tax to remit to the state.)
If you no longer have any sales tax to remit to the state of Pennsylvania, we recommend checking directly with the state to determine if you can cancel your sales tax registration.
Be cautious here. If you are registered for a sales tax permit and do not file, the state can assess penalties even though you don’t have any sales tax to remit! We have, unfortunately, talked to too many sellers who have found this out the hard way when a tax penalty bill arrives.
What do I do with any Pennsylvania sales tax I have already collected?
If you have already collected Pennsylvania sales tax from buyers, it is vital that you remit that amount to the state. The only way to get in serious criminal trouble in sales tax is to collect sales tax from buyers on the state’s behalf but keep it in your own pocket.
Example:
Let’s say you sell on Amazon and Pennsylvania requires you to file and remit sales tax quarterly. Though Amazon began collecting sales tax on your behalf on April 1, if you have any sales tax in your bank account that you collected from Q1 2018, you will still need to remit that to the Pennsylvania Department of Revenue or face a penalty.
Does TaxJar handle this for me?
Yes.
TaxJar AutoFile handles Pennsylvania sales tax automatically
TaxJar AutoFile automatically compiles your sales tax data the way the state of Pennsylvania wants it filed. For example, many states, Pennsylvania included, want sellers to break down their sales tax collected interstate (sales originating in Pennsylvania sent to another state) and intrastate (sales made from Pennsylvania to Pennsylvania.)
If a marketplace has collected sales tax on your behalf, TaxJar reports that directly to the state so that the state is aware you have met your sales tax obligations.
If you currently AutoFile your Pennsylvania sales tax returns, you don’t need to do a thing. It’s handled!
TaxJar reports give you all the info you need to file manually
If you prefer to file manually, your TaxJar Reports also reflect what the Pennsylvania Department of Revenue wants to see on your tax return.
Also don’t worry that you will double pay. TaxJar accounts for sales tax collected on your behalf, and only shows you the amount you owe to the state out of your pocket.
