Reed Smith Client Alerts

A group of fireworks retailers have brought a constitutional challenge to Pennsylvania’s Act 43 of 2017. The retailers are specifically challenging provisions of Act 43 dealing with Pennsylvania’s regulation of fireworks sales. If the retailers are successful, it could result in the invalidation of the whole of Act 43, which included a number of important Pennsylvania tax changes. This makes this suit an important one for Pennsylvania taxpayers to watch.

Fulfilling a prediction made by Reed Smith’s State Tax Group, Phantom Fireworks Showrooms and a group of other fireworks companies have sued the state in Pennsylvania’s Commonwealth Court arguing that Act 43 of 2017 is unconstitutional.1 Act 43 made several changes to Pennsylvania’s tax law.2 In our view, the four most important tax changes in Act 43 are:

  • Online platforms. Act 43 imposed collection and reporting requirements on marketplace facilitators and sellers3
  • Nextel NOL fix. Act 43 adopted the “Nextel fix,” which increased the net loss cap to 35% (in 2018) and 40% (in 2019)4
  • Non-employee withholding. Act 43 imposed withholding requirements on certain non-employee payments to nonresidents5
  • Help desk sales tax fix. Act 43 fixed the sales tax to make clear that help-desk services are generally not taxable6