The Impact of Not Collecting Sales and Use Taxes from Internet Sales into Pennsylvania

Abstract

Nationally, internet commerce amounts to trillions of dollars of sales per year, and business and consumer purchases from internet retailers are increasing rapidly. However, Pennsylvania has a limited ability to compel remote vendors without a physical presence in Pennsylvania to collect and remit sales and use taxes for internet transactions, 1 and for 2012, it is estimated that such uncollected revenues range from $254 to$410 million for Pennsylvania. In addition to this uncollected revenue and its obvious impact on the Commonwealth’s finances, the non-collection of sales taxes by some internet retailers shifts sales away from tax-collecting retailers, which importantly includes in-state brick-and-mortar stores. The lower sales for brick-and-mortar stores in turn reduces the economic impact of these stores on the rest of Pennsylvania. If all internet retailers were required to collect sales tax, placing them on equal footing with taxcollecting retailers, it would increase tax receipts to Pennsylvania, and increase sales at brickand-mortar stores</p