Pa. targets businesses over use tax

Associated Press

HARRISBURG, Pa.

Buying furniture and office supplies online from an out-of-state company might be cheaper than buying in Pennsylvania. But those items are not exempt from the state’s use tax, which applies to purchases made online, through mail-order catalogs and from out-of-state retailers.

The state Department of Revenue is trying to collect that money.

The agency is targeting businesses that have paid no use tax to the commonwealth in recent years, suspecting they likely bought taxable items from out-of-state companies.

This is part of the agency’s efforts to find every scrap of tax revenue as the state scrambles to address a budget deficit of more than $4 billion.

Even with this push, though, the state is not going after Amazon or other big online national retailers that do business in the state but do not collect sales tax from their Pennsylvania customers. Revenue Department lawyers say such a mandate likely wouldn’t withstand a court challenge because of a previous court ruling.

But the agency is trying to get Pennsylvania businesses to pay the use tax on purchases from out-of-state companies.

Pennsylvania is missing out on as much as $345 million annually in use-tax revenue on products or services purchased online from out-of-state companies, the department says.

The use tax is similar to the state’s 6 percent sales tax and is applicable to the same items. It applies to purchases made from companies outside the state.

If a Pennsylvania resident buys computers or cleaning supplies from out-of-state companies, he is supposed to report that use tax to the Revenue Department and pay a 6 percent tax.

Granted, asking people to self-report a tax — a tax that only they know they incurred — is a tall order.

Still, the Revenue Department said the law requires them to report and pay it.

Since July 1, the department has mailed out more than 100,000 notices to Pennsylvania businesses to remind them about their responsibility to report and pay the use tax.

A Harrisburg businessman who received one of the notices bristled at its wording, as well as the expense the state incurred in sending it to him.

It states, “Department of Revenue records indicate your company has not reported or remitted use tax in the past three years.” The eight-page letter included a tax form to report the tax, along with literature about what the use tax is and examples of products and services subject to it.

The business owner, who asked to remain anonymous for fear that the department might become more vigilant about auditing his tax records, insists he truthfully reported that he incurred no use-tax liability in the past three years. He resented filing yet another form verifying it.

He said he understands that not reporting or paying the use tax when it is owed is stealing from the commonwealth. “But to send out a blanket form saying you haven’t paid your taxes in three years to everybody with a sales-tax license seems like a waste,” he said.

Revenue spokeswoman Elizabeth Brassell said the department has tried to target small businesses that most likely incurred use-tax liabilities.