Pennsylvania to pursue sales tax from online purchases 22 February 2006

Residents of pennsylvenia saved an estimated $228 million last year by shopping online and from out-of-state sellers that don't charge the state's sales tax.  But the savings aren't legal and actually hurt law-abiding Pennsylvania residents and businesses, Revenue Secretary Gregory C. Fajt told the House Appropriations Committee yesterday.    

The state  wants to stem that revenue loss as part of a larger plan to enforce existing tax laws requiring buyers to pay taxes on goods bought in other states but used here. It's aimed at both individuals and businesses.

"When it comes to business taxes, the consequences of tax avoidance are even more severe," he said. "For example, a business that purchases office equipment from an Internet retailer to avoid paying sales tax gains an unfair financial advantage over its law-abiding competitors. And because the business avoided taxes by buying out-of-state, a Pennsylvania office equipment retailer loses a sale.".

State  legislators want to spend $4.6 million to add 59 staff members, plus computers and office space. He believes he can parlay that expense into $40 million in increased revenue in the next fiscal year.

The expenditure is part of the governor's $25.4 billion state budget, which has yet to be approved by the Legislature.

Smokers who buy large quantities of cigarettes online would be a key target of Mr. Fajt's revenue enforcement team. By shopping online, they avoid Pennsylvania's $1.35-per-pack excise tax plus the sales tax.

Online retailer Dutyfreedepot.com, for example, charges $14.99 for a carton of Marlboro cigarettes, not including shipping. That's two thirds less less than what smokers can pay at a cigarette outlet.

The federal Jenkins Act will help identify online buyers. It requires shippers to provide tax collectors in each state with invoices of every cigarette shipment.

Customers who reside in Pennsylvania and have bought more than 100 cartons will receive notices saying they owe taxes.

The state is said to be taking a soft-glove approach initially. People may not even be aware of their tax obligation. The state wants to get them to voluntarily comply,claims state official. "We're not going to come knocking on your door if you bought one book online and didn't pay tax on it.".

"We're taking a soft-glove approach initially. People may not even be aware of [their tax obligation]. We want to get them to voluntarily comply," he said. "We're not going to come knocking on your door if you bought one book online and didn't pay tax on it."