Pa. seeks $345M cut of Internet retail sales

Starting in the spring, Pennsylvania wants taxpayers to report their Internet purchases and pay a 6 percent tax if they didn't pay sales tax online.

The state wants to stake claim to part of an estimated $345 million it says it will miss out on this year because most Internet and catalog retailers with no presence in Pennsylvania don't collect sales tax.

The 6 percent "use tax," the same rate as the state sales tax, isn't a new levy.

Few Pennsylvania taxpayers know that they are required to pay use tax if their online, catalog or out-of-state purchases on taxable items weren't taxed at the point of sale. The tax applies to merchandise bought or shipped into Pennsylvania without sales tax being charged, merchandise then "used" in the state. The use tax isn't meant to target someone who paid sales tax in another state.

Until now, people were asked to report use tax on the PA-1 form, which individual taxpayers seldom use. But the PA-40 income tax form for the 2011 tax year will contain a use-tax line for filers to enter a figure, even zero.

"It's not something that a taxpayer can skip over," said Elizabeth Brassell, spokeswoman for the state Department of Revenue. With more than six million personal income tax forms filed annually in Pennsylvania, she conceded that enforcing collections will be tough.

Most clothing purchased online is exempt from Pennsylvania sales tax, Brassell said. But many types - such as formal apparel, fur, safety clothing and sports apparel - are subject to the use tax, as are computers and many other items.

Some taxpayers don't like the idea of being asked to report web purchases.

"I don't think that's right. The Internet is everywhere - it's the thing today," said Bill Mikos of McKeesport, who buys Harley-Davidson merchandise online. In a bad economy, Pennsylvania shouldn't go after people for more sales tax, he said.

"If tax wasn't charged where you bought something from, you shouldn't have to pay it," said William Chapman of Clairton.

The state plans to educate people about declaring Internet purchases. Taxpayers can use receipts from their web shopping to calculate tax payments, or estimate what they owe based on income. Pennsylvania collected $386 million in use tax in its 2010-11 fiscal year, nearly all from businesses, Brassell said.

Several states ask taxpayers to pony up use tax. New York added a use tax line to its income tax form in 2003; Ohio did so about five years ago.