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State Hopes to Recover Tax Losses from Online Sales

The tax forms in Pennsylvania for 2012 will feature a new line item intended to collect a "use tax" that has been on the books for more than a half century, but has recently become a problem.

The use tax has been part of the tax code since 1953, but has grown into a larger issue as online shopping has become a bigger percentage of the retail market.

Elizabeth Brassell, a spokeswoman for the Pennsylvania Department of Revenue, said that with the growth of online shopping, the state misses out on a large amount of collectable dollars annually.

"We anticipate that in calendar year 2012, up to $380 million will be forgone in sales and use tax to e-commerce purchases," Brassell said. "So it's certainly a significant number."

Purchases made over the Internet, through toll-free numbers, from mail order catalogs, or from an out-of-state locations are subject to the use tax if the sales tax was not paid or the sales tax was paid to another state and it's less than Pennsylvania's rate.

The new line will fit in with all other tax lines on the PA-40 form. The use tax was formerly on the PA-1 form. Brassell said that the tax booklet will include instructions explaining the item. She said that an explanation of what is taxable and mandatory to report can also be found on the department's website.

Brassell said that collecting the tax has a number of benefits.

"If everyone pays his or her share, it helps keeps tax rates low for everyone," Brassell said. "But additionally, the payment of sales and use tax also helps level the playing field for brick and mortar retailers, who often feel that they are put at a competitive disadvantage by e-retailers who can sort of … promote that it's tax free and a discount to consumers."

Brassell said that it's important that commonwealth residents understand that purchases are never tax free and should be included on tax forms.