(Harrisburg, PA) – In order to create a fairer environment for local businesses, state Reps. Sara Innamorato, D-Allegheny, and Malcolm Kenyatta, D-Phila., have introduced legislation that would close a loophole in a Pennsylvania sales tax law.

Currently, major online retailers, like Amazon, calculate taxes based on “location of fulfillment,” which is typically a warehouse. For example, wherever Amazon has a warehouse, the sales tax of that area is included. However, two counties where Amazon does not currently operate a warehouse—Philadelphia and Allegheny—are the only counties in Pennsylvania that levy a local sales tax on top of the statewide tax.

Because Amazon doesn’t operate warehouses in Philadelphia or Allegheny counties, they don’t have to collect or remit local sales tax for orders purchased in those counties. This denies those communities of important tax revenue and gives the company a pricing advantage over local businesses that do collect local sales taxes.

“This is a loophole that ultimately hurts our local businesses. As we recover from COVID-19 and the severe negative impacts it left on our economy, this is the perfect time to close this loophole and create a fairer system to collect state and local taxes, putting our small businesses on an equal playing field with large online retailers,” Innamorato said.

The legislation, H.B. 1656, would require online sales in Pennsylvania to be finalized at the address of the purchaser, rather than the address of a retailer’s warehouse. Kenyatta noted this bill would allow for fairer competition between online retailers and the local, physical stores located in the community.

“Large online retailers evading paying their share with impunity comes at the peril of our commonwealth’s most populous counties and is a detriment to companies in these counties that employ local workers, contribute to local taxes and ultimately fuel local economies,” Kenyatta said. “By eliminating this tax loophole, our legislation is among the best opportunities for our legislature to help pull Pennsylvania and its local businesses out of this economic crisis.”

 House Bill 1656 will soon be referred to committee for further action.