(This post originally appeared on Philly.com)
This week marks the anniversary of our country’s birth. But it also marks the birth of something else: a new sales tax requirement for the commonwealth of Pennsylvania that will affect countless small businesses across the country.
Pennsylvania’s sales tax is not new. But the way it’s collected is. Up until last year, online merchants selling their products weren’t required to collect and pay in-state and local sales taxes unless they had “nexus” in that state, which mostly means a physical location or employee there.
A year ago, the Supreme Court expanded that definition of “nexus” to also include “economic activity.” What does that mean?
It means “a never-ending labyrinth of complicated terminology, numbers and registrations,” says Jennifer Kirby, the owner of Piggyback Treats, a Philadelphia-based e-commerce business that sells its “sustainably crafted goodies for pets” nationwide. “No mere human being can understand it all.”
Kirby, like many other small merchants, have been overwhelmed by the requirements imposed on them as a result of the Supreme Court’s ruling. Why? Because there are a lot of different tax rules in this country.
According to a report issued earlier this year by sales tax software provider Vertex Inc., state and local jurisdictions have either initiated or changed 5,886 sales tax rates over the last 10 years. And 2018 alone brought 619 changes. Now it’s Pennsylvania’s turn.
That’s because, effective July 1, Pennsylvania will now require any company selling more than $100,000 worth of product (or 200 transactions) into the commonwealth to collect and pay in sales tax — and file returns. Although some states differ, most experts agree that using these criteria is a good rule of thumb to determine whether your company should be collecting sales tax for its online sales.
Philadelphia will benefit from that rule. New Jersey has had that requirement in place since November of last year. Delaware is one of four states in the country that has no sales tax.