Pennsylvania's "Use Tax", the End of Tax-Free Shopping

If you haven't already done your Pennsylvania state income tax yet this year, when you do, take note of a little addition to the form on line 25 called the "Use Tax".  It is a tax levied on purchases that you made with retailers who did not collect sales taxes on your purchases.  

Remember all of those Christmas presents you bought on Amazon or eBay?  Or how about that trip to the Christiana Mall in sales tax-free Delaware? Yes, that's what they mean.  Retailers without a presence or store in the state generally do not collect sales taxes on your purchases, thus making those purchases susceptible to the Use Tax.  Many online retailers like HP, Dell, and Barnes and Noble should have charged you sales tax since they do have stores within our borders.

According to the Pennsylvania Department of Revenue, 

When Pennsylvania sales tax is not charged by the seller on a taxable item or service delivered into or used in Pennsylvania, the consumer is required by law to report and remit use tax to the Department of Revenue.  The use tax rate is the same as the sales tax rate: 6 percent state tax, plus an additional 1 percent local tax for items purchased in delivered to or used in Allegheny County and 2 percent local tax for Philadelphia.

What items are taxable?

Here is a list detailing many common items and designating them as either "T" for taxable or "NT" for nontaxable.  This list mirrors the sales tax list for the state so you can expect to see common items like computers, books, appliances, cigarettes, anything you would expect to be charged tax for if you purchased it in a local store in our state.

What about Governor Corbett's "No New Taxes" Pledge?

While this is a new addition to our state tax forms this year, the tax was first introduced in 1953 so it really isn't a new tax.  He is attempting to enforce it more than the previous method, the PA-1 form, has done in past years.  By making this a part of our annual income tax form, it now becomes apparent that it is required and misstating your liability means you can be subject to a tax audit. 

How can I possibly remember all of the purchases I've made this year and whether or not they were taxed?

Many websites keep your ordering history and you can log in to see your purchases to determine if sales tax was levied.  Websites like Amazon will even prepare a downloadable report for purchases made within specified date ranges, such as the 2011 calendar year.

If you have incomplete or inaccurate records of your purchases, the state offers you a chart to estimate your Use Tax liability, but only if you believe your purchases totaled less than $1,000.  This chart can found in your PA-40 instructions.

While many people are claiming this tax is unconstitutional, Massachusetts has been successfully doing this for years, as well as many other states.  Don't hold your breath waiting for this tax to go away anytime soon.  I think it's here for the long haul.