Pennsylvania Governor Delays a Tax Policy That Could Stop the Presses

StopPress

With only a couple of days to spare before the state unleashed its tax collectors to trample Constitutional and Court protections for interstate commerce, Pennsylvania’s Governor delayed the imposition of sales tax demands on retailers with no presence whatsoever in the state.  Had this tax grab not been delayed, it would have threatened the livelihood of reporters and struggling media outlets across the Keystone State.

Back in December, the Pennsylvania Department of Revenue issued a “clarification” that imputes physical presence for any out-of-state retailer who places any paid advertisement with any Pennsylvania media publisher.  That includes all local newspapers, magazines, TV, and radio stations, and Internet websites.

Pennsylvania tax collectors claimed that any ad placed with a state media publisher creates a physical presence for the advertiser.  The new tax grab didn’t require that the ad be commission-based or that the publisher do any kind of “solicitation.”  There was not even a dollar threshold for annual sales, so this rule would have covered even an occasional advertiser who serves Pennsylvania customers.

With this rule, Pennsylvania was set to go further than any other state to expand the meaning of physical presence — which limits how states can impose tax collection burdens on remote businesses.

When advertisers are confronted with the burdens of collecting, remitting, and facing sales tax audits, they’ll do the only thing that makes sense: they’ll stop advertising with Pennsylvania-based media and websites.

Had the Department of Revenue not delayed the rule, out-of-state advertisers would have become targets of Pennsylvania tax collectors.   And when advertisers are confronted with the burdens of collecting, remitting, and facing sales tax audits, they’ll do the only thing that makes sense: they’ll stop advertising with Pennsylvania-based media and websites.   That will be bad news for Pennsylvania’s local papers, magazines, TV and radio stations, and any website publisher who relies on ad revenue.

This new tax regime would have discouraged retailers like NBAStore.com from running ads in the Pittsburgh Post Gazette. It could have meant ShamWow no longer buying TV time on Comcast.  And it would mean that a California vintage clothing retailer might stop buying spots on all those Oldies radio stations in Pennsylvania.

For reporters and other employees at those media outlets, fewer ad dollars means lower salaries, smaller staffs, and fewer resources for long-term investigative reports.  In essence, it means that Pennsylvania’s tax collectors are cutting into the livelihood of local journalists.

We’re glad the Governor and Department of Revenue gave this last minute reprieve.  But this was only a delay — not a repeal of the tax grab.

We hope that Pennsylvania’s reporters and publishers can convince the Governor to withdraw this policy,  before it stops the presses for many Pennsylvania publishers.

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