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.

Published In: Administrative Agency Updates, General Business Updates, Communications & Media Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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