What’s so iAWFUL?

A state tax grab that makes it harder for the state’s small publishers and websites to earn advertising revenue.

This Septmber, the Pennsylvania Department of Revenue (DoR), without the approval of the Pennsylvania legislature, began enforcing its recent “clarification” of existing tax law.  This clarification imputes physical presence on any out-of-state retailer who places a paid advertisement with a Pennsylvania media publisher.

Under the clarification, any ad placed with a Pennsylvania newspaper, magazine, TV station, or internet website would create physical presence in Pennsylvania, and thus require the advertiser to collect and file sales taxes in a state where they have no physical presence.

We skewered similar state laws in previous iAWFUL lists.  But Pennsylvania has gone further than any other state to expand the meaning of physical presence.  Unlike other states, the ruling has:

    • No small business threshold. – So even those remote sellers who do only $1 of business in Pennsylvania must now comply with the filing requirements of Pennsylavia’s tax law.
    • No advertising sales thresholds. – All sales in Pennsylvania are subject to taxes even if only one sale came through a Pennsylvania referral.
    • No public hearing or comment period. – Unlike other states that rely on the legislative process of hearing from multiple stakeholders, the Pennsylvania DoR acted on their own in creating this new tax burden.  So Pennsylvania website publishers didn’t even get the chance to warn of the harm to their businesses.
    • No opportunity to rebut the presumption of “solicitation.” – In America, you are innocent until proven guilty.  But when it comes to proving you didn’t solicit business in Pennsylvania, the state assumes you’re guilty and  forces you to travel to Harrisburg to prove your innocence.

And this ruling doesn’t just apply to the internet, but to all media in Pennsylvania, like newspapers, televisions, and billboards.

This new tax regime may discourage retailers like NBAStore.com from running ads in the Pittsburgh Post Gazette. It could mean that ShamWow will no longer be 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.

Pennsylvania has gone further than any other state to expand the meaning of physical presence.

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.

As we’ve said about all these advertiser tax laws, they’re all pain and no gain.

NetChoice Statements:

Blog:

Pennsylvania Governor Delays a Tax Policy That Could Stop the Presses

In the News:

Levit Town Patch Article on PA Ruling on Out-Of-State Tax Collection – “State steps up sales tax collection

PA Independent Article on PA Ruling on Out-Of-State Tax Collection – “State steps up sales tax collection

PA Independent Article on PA Dept. of Revenue Ruling on Taxation of Remote Sales – “New online sales tax policy could boost state revenues, hurt some businesses

 

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