Online Advertising, Including Click-Thru, Does Not Establish PA Nexus

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[author: James L. Fritz]

 

With Pennsylvania’s September 1 deadline approaching for the commencement of sales tax collection by online vendors having in-state affiliates or PA-based website sales agents, the Department of Revenue issued a letter ruling on August 28 clarifying the line between online solicitation and mere advertising.  The ruling indicates that simply having ads on a PA website does not equate to in-state solicitation by a representative that would create nexus for the advertiser.

Furthermore, nexus is not created even if the ad includes a link to the website of the seller, so long as the host of the click-thru ad is not compensated on the basis of sales generated.  If compensation is based on a percentage of sales generated, the seller will have nexus and be required to collect PA sales tax.

In a press release issued August 30, Secretary of Revenue Dan Meuser was quoted as saying, “We are very pleased with the response we received from e-commerce companies so far.”  With multiple sources reporting that Amazon.com is complying, it would appear that Pennsylvania’s mainstreet retailers may  have a more even playing field for the prime fall selling season.