United States

Pennsylvania: Taxpayers Are Not “Referrers” Subject to Use Tax Notice and Reporting Requirements

Jun 11, 2018
From KPMG TaxWatch

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In a recent letter ruling, the Pennsylvania Department of Revenue ruled that two taxpayers did not meet the definition of a “referrer,” as specified under the recently enacted Marketplace Sales Act. Under the act, effective for transactions occurring after March 31, 2018, if a business qualifies as a “referrer,” it must make an election to either collect sales tax or comply with use tax notice and reporting requirements. The act defines a “referrer” as a person, other than a person engaged in the business of printing or publishing a newspaper, who pursuant to an agreement with a marketplace seller:  (1) agrees to list or advertise for sale at retail one or more products of the marketplace seller in a physical or electronic medium; (2) receives consideration from the marketplace seller from the sale offered in the listing or advertisement; (3) transfers by telecommunications, Internet link or other means, a purchaser to a marketplace seller or affiliated person to complete a sale; and (4) does not collect a receipt from the purchaser for the sale. Excluded from the definition of a referrer is a person who:  (1) provides Internet advertising services; and (2) does not provide the marketplace seller’s shipping terms or advertise whether a marketplace seller collects a sales or use tax.

The ruling addressed two separate taxpayers. One operated a computer software services company and the other conducted an online search and display advertising business. Both taxpayers listed advertisements on their websites that included hyperlinks transferring potential customers to advertising sellers’ websites. The taxpayers received consideration from the sellers for the advertisements, but did not collect receipts from customers of the sellers. Although the taxpayers did not leverage user data to display shipping or tax charges applicable to a particular user, advertisers could include generic statements regarding shipping and taxes such as "plus applicable taxes" or "free shipping on orders over $50." The Department determined that, while the taxpayers met the four criteria for a referrer, they also met the two criteria for exclusion from the definition of a referrer. The taxpayers did not provide sellers’ shipping terms or advertise whether those sellers collected sales tax. For more information on this ruling, 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.