Legislation would close sales tax loophole

Legislation recently introduced in the state House of Representatives would close a loophole in the sales tax law.

Under current law, major online retailers calculate taxes based on the location of fulfillment, which is generally a warehouse.

Philadelphia and Allegheny are the only counties in the state that levy a local sales tax in addition to the statewide tax. Companies that do not operate warehouses in those counties
do not collect or remit local sales tax for orders purchased in those counties.

House Bill 1656 would require online sales to be finalized at the purchaser’s address instead of the warehouse address.

State Reps. Sara Innamorato (D-Allegheny) and Malcolm Kenyatta (D-Philadelphia) introduced the bill.

“Large online retailers evading paying their share with impunity comes at the peril of our commonwealth’s most populous counties and is a detriment to companies in these counties that employ local workers, contribute to local taxes, and ultimately fuel local economies,” Kenyatta said. “By eliminating this tax loophole, our legislation is among the best opportunities for our legislature to help pull Pennsylvania and its local businesses out of this economic crisis.”

Closing the loophole would put small businesses on an equal playing field, Innamorato said.

The bill will be referred to committee for further action.