Feb 26, 2018
From KPMG TaxWatch
Recently, the Pennsylvania Board of Finance and Revenue ruled that sales tax was properly assessed on fees charged by online marketplaces because the fees at issue were characterized as fees for debt collection services. The taxpayer sold tangible personal property to the general public, primarily through online marketplace platforms. These marketplaces charged the taxpayer various fees for allowing the taxpayer to sell on their platforms. The fees were structured differently depending on the marketplace, but generally were charges that allowed the taxpayer to list items for sale on the marketplace and fees charged as a percentage of items sold. For example, one marketplace charged the taxpayer a single percentage applied to all monthly sales, while others charged a fee based on a percentage of the sales price of each item. Under Pennsylvania law, sales and use tax is imposed on “debt collection services.” By regulation, collection services are defined as “an activity relating to the collection of a debt which involves a collection agency, a creditor and a debtor.” The regulation specifically excludes from the scope of taxable debt collection services any commissions charged for the transfer and collection of funds in connection with the sale of personal property.
On audit, the Pennsylvania Department of Revenue determined that the fees paid by the taxpayer to the majority of its marketplaces were for taxable debt collection services, but that fees paid to one marketplace constituted nontaxable commissions for the transfer and collection of funds. The taxpayer appealed to the Board of Appeals with no success, then appealed to the Board of Finance and Revenue. Before the Board of Finance and Revenue, the taxpayer claimed that none of the fees were for debt collection services. The taxpayer argued that the services rendered by all the marketplaces were the same, and if one constituted nontaxable commissions for the transfer and collection of funds in connection with the sale of personal property, so should the others. With little to no additional analysis, the Board of Finance and Revenue declined to reverse the assessment. For more information, please contact Joe Duch at 412-232-1578.
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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.