— Tax-free online purchases will be curtailed in Pennsylvania starting next month, but activists pushing for a federal law say much more needs to be done to address the issue of tax-free Internet shopping, and the millions in sales tax that states are missing out on.
Pennsylvania alone would lose between $254 million and $410 million in uncollected revenues this year without legislative intervention, according to a 2011 study by Carnegie Mellon University professor Robert Strauss.
But starting Sept. 1, online retailers with a physical presence in the state will have to pay at least 6 percent sales tax for items purchased by Pennsylvanians. And for those shoppers in Allegheny County, the online sales tax would be 7 percent -- a 6 percent share going to the state, and an additional 1 percent for Allegheny County. In Philadelphia, they tack on an extra 2 percent, meaning the online sales tax -- just like the regular, bricks-and-mortar sales tax -- would be 8 percent.
Taxes would apply to all purchases made in the state, delivered to the state or used within the state. Items shipped to and from in-state distribution centers and warehouses, sales and services provided by people from out of state, and advertising relationships where compensation is based on sales and website clicks are also subject to being taxed under the new law.
A spokesman from the Pennsylvania Department of Revenue said the state estimates next month's change will bring in an additional $42.8 million for the 2012-13 fiscal year. The adjustment will allow the state to collect from major retailers such as Amazon, which has a distribution center outside of Allentown, Pa., and eBay, which has a warehouse in Chester, Pa.
Dan Hayward, spokesman for the national coalition Alliance for Main Street Fairness, called the legislation a "great first step" in closing the loophole, but said legislation pending in various federal government committees could finally solve the problem.