If you’re doing business in Pennsylvania, home to the iconic Liberty Bell and beautiful Amish landscapes, there’s a lot to enjoy. But getting a handle on the state’s sales tax? It’s not always easy.
This guide breaks down everything you need to know about Pennsylvania’s sales tax, from determining the right sales tax rates to understanding exemptions and filing processes. By the end of this comprehensive guide, you’ll be equipped to handle Pennsylvania’s sales tax with confidence and ease.
Sales Tax Nexus in Pennsylvania
When a business creates either a physical or economic nexus, it is required to collect sales tax in Pennsylvania.
Physical Nexus
A physical nexus means having a significant physical presence or engaging in enough activities within a state to require the collection and payment of sales tax. The factors that determine a physical nexus in Pennsylvania include:
- Physical Location: This includes having an office, a place for distribution, sales, or showcasing products, a warehouse or storage facility, or any other place where you conduct business. This also includes securing a lease for property in the state.
- Inventory in the State: This covers situations where you store your products within the state, even if it’s done through a third-party fulfillment center or 3PL (like Amazon FBA) or an online marketplace.
- Employees, independent contractors, agents, or other representatives operating on your behalf.
To stay informed about the current criteria for establishing a physical sales tax nexus in Pennsylvania, take a look at the official regulations available right here!
Economic Nexus
States have established regulations to collect sales tax from out-of-state sellers who meet certain revenue and/or transaction thresholds. This rule is known as economic nexus.
Beginning July 1, 2019, the threshold for economic nexus in Pennsylvania is $100,000 in gross revenue on the previous calendar year.
While the nexus criteria mentioned above generally apply to most businesses, additional methods exist for establishing economic sales tax nexus. To access a comprehensive list of these rules, please refer to the Pennsylvania Department of Revenue.
Pennsylvania Sales Tax on Goods and Services
One of the first things you need to know is whether the goods you’re selling or services you’re offering are taxable in Pennsylvania.
Tangible Products
Almost all goods are taxable in Pennsylvania, including:
- Cosmetics
- Electronics
- Furniture
- Jewelry
- Automobiles
- Home Goods
The goods that are exempt from sales tax are:
- Groceries – However, soft drinks, alcoholic beverages, or food and drinks from catering businesses are taxable.
- Prescription Medications
- Clothing – However, accessories, fur articles, ornamental and formal wear, and sports clothing are taxable.
- Textbooks
- Medical Devices
- Energy-efficient Appliances – Pennsylvania provides tax exemptions for products that promote energy efficiency.
- Agricultural Supplies – Seeds, fertilizers, and machinery used directly in farming are exempt.
Services
In Pennsylvania, the majority of service-based transactions, such as professional services, advertising, and laundry and dry cleaning services, are not subject to sales tax.
However, there are specific situations where certain services are taxable. For instance, taxable services are:
- Adjustment and collection services: If both the creditor operates and the debtor resides in Pennsylvania, the total fee for collection or adjustment services, including expenses, is taxable.
- Lobbying services
- Disinfecting or pest control service
- Catering services
- Help supply services
- Credit reporting services
- Lawn care services
- Premium cable services
- Self-storage services
Software-As-A-Service (SaaS) / Digital Products
SaaS is taxable in the state of Pennsylvania. If you’re using computer software over the internet (often called cloud computing or SaaS) and you’re in Pennsylvania, you’ll have to pay sales tax. This is because Pennsylvania considers software as a physical thing, even if you’re just accessing it online. So, if you’re a company offering such software, you’ll need to charge sales tax to users in Pennsylvania.
Digital products (i.e., ebooks, downloadable video content, mobile apps, canned software) are also
taxable.
Shipping/Handling
Shipping and handling charges in the state of Pennsylvania are taxable. But if the item you’re purchasing is tax-exempt, you may not be required to pay sales tax.
Sales Tax Permits and Licenses in Pennsylvania
Now that you’ve got a handle on when sales tax nexus applies and which products are taxable in Pennsylvania, the next important step is getting your Pennsylvania Seller’s Permit, also known as a sales tax permit.
Seller’s Permit
You can register for a Pennsylvania sales tax permit online at the myPATH Pennsylvania Tax Hub.
Ensure you have specific information on hand when registering for a seller’s permit, including, but not limited to:
- Business Identification Information (name, address, phone number, email address)
- Business Entity Structure (sole proprietorship, partnership, corporation, LLC, etc.)
- Federal Employer Identification Number (EIN or FEIN)
- Owner/Partner/Officer Information
- Business Activity Details (description of products or services sold, sales volume, date of the first sale or the expected date to start dates)
Registration fee
There is no fee to register for a sales tax permit.
Renewal
In Pennsylvania, you have to renew your sales tax permit every 5 years.
Resale Certificate
A resale certificate is a document that allows businesses to buy products without paying sales tax on them, as long as they plan to resell those items to customers, who will then pay the tax. As a seller, you can also accept resale certificates from others looking to buy for resale.
In Pennsylvania, sellers use resale certificates to buy goods from their suppliers that they intend to resell. The issuance of the certificates is always done in good faith that the seller would report tax on the final sale of the items.
You can fill out the form provided by the Pennsylvania Department of Revenue or visit the Pennsylvania Department of Revenue website for more information about filling out the resale certificate. If you don’t want the hassle of registering, sign up for our all-inclusive service that includes sales tax registration.
Streamlined Sales Tax (SST)
The Streamlined Sales Tax (SST) is an initiative to simplify and standardize sales tax regulations across multiple states. However, Pennsylvania is not a party to this program, meaning it does not follow the uniform rules and definitions established by SST but has its own sales tax regulations.
Check with the Pennsylvania Department of Revenue for the most current information on Pennsylvania’s participation in the Streamlined Sales Tax initiative.
Calculating and Collecting Sales Tax in Pennsylvania
Sales Tax Computation
In Pennsylvania, sales tax isn’t just one simple rate; it’s a combination of state and local taxes. To figure out the total sales tax for your calculation, you’ll need to add up the rates for the state, county, and city (if applicable) where your transaction occurs. Use TaxHero’s Pennsylvania Sales Tax Calculator to compute for sales tax.
Here’s an example. Suppose an out-of-state seller satisfies the economic nexus criteria in Pennsylvania and sells to a customer in Pittsburgh, PA, with a ZIP code of 15219. In that case, the seller has to charge the customer a total sales tax, which can be broken down as follows:
 |
SALES TAX FORMULA |
RATE |
| State: |
Pennsylvania |
6.00% |
| County: |
Allegheny |
1.00% |
| District: |
Fifth District |
0.00% |
| City: |
Pittsburgh |
0.00% |
| Combined Sales Tax Rate = |
7.00% |
|
Origin-based vs. Destination-Based
When making in-state sales, it is important to determine if you are located in an origin-based or destination-based state to figure out what rate to charge for sales tax.
Pennsylvania is an origin-based state, meaning sales tax is determined based on the seller’s location. That means for a Pennsylvania-based seller, sales tax is generally based on the seller’s location when selling within the state.
For out-of-state or remote sellers, the sales tax rate is always determined by the buyer’s location. For instance, if you’re selling a product from Texas to a customer in Philadelphia, Pennsylvania, where you have nexus, you’d apply Philadephia’s sales tax rate to that sale.
To make life easier, consider using sales tax software or consulting a tax professional, like TaxHero, to ensure accurate tax calculations and collections. Understanding these tax rules helps you stay compliant, whether you’re in-state or out-of-state.
Filing and Remitting Sales Tax Returns in Pennsylvania
The next step after collection is filing and remitting your Pennsylvania sales tax returns. Filing and remittance can vary in frequency, typically monthly, quarterly, or annually based on the volume of sales.
Here is the sales tax filing frequency for Pennsylvania:
- Monthly Filing: Sales tax liability between $600 and $25,000 per quarter.
- Quarterly Filing: Sales tax liability is less than $600 but more than $300 annually
- Annual/Semi-Annual Filing: Sales tax liability is $300 or less annually
Please note that these thresholds are subject to change, so it’s essential to verify the current requirements with the Pennsylvania Department of Revenue. Additionally, your specific situation, including the nature of your business and sales volume, may affect your filing frequency.
It’s crucial to keep accurate records of your sales and tax collections and adhere to the filing schedule set by the state to remain compliant with Pennsylvania’s sales tax regulations.
Due Dates
In Pennsylvania, the due date falls on the 20th day of the month. For instance, sales tax collected in January is due by February 20th for monthly filers. However, if this day is a holiday, weekend, or in the rare occurrence of a natural disaster, the deadline is typically extended to the next business day.
Another example is when you’re filing sales tax quarterly for the months of April through June, and the July 31st deadline falls on a holiday or weekend, you’d need to submit by the next business day, which would be August 1.
Monthly Prepayments
Businesses with a notable sales tax liability may need to make monthly prepayments ahead of their monthly return filings. The specifics of these so-called Accelerated Sales Tax (AST) Prepayments depend on the business’s prior year’s tax liabilities.
AST Level 1 (Tax Liability between $25,000 and $100,000 from the previous year’s third quarter): Businesses can choose between two prepayment calculation methods:
- Remit 50% of the tax liability from the same month of the preceding year.
- Remit at least 50% of the actual tax liability for the current period (new calculation method).
AST Level 2 (Tax Liability of $100,000 or more from the previous year’s third quarter): Businesses must remit 50% of the tax liability from the same month of the previous year. No alternate calculation method is available for this level.
Filing Sales Tax Returns
To file your sales tax return for Pennsylvania, a few options are available:
- File online through Pennsylvania’s website portal.
- File by calling 1-800-748-8299 if you don’t have access to a computer
- File with TaxHero – Let TaxHero take care of it so you don’t have to worry about missing a payment or return.
Timely Filing Discount
Some states offer a discount to businesses for collecting, filing, and remitting sales tax on time as an incentive to process sales taxes promptly.
Starting with returns ending after August 1, 2016, the discount vendors receive for on-time filings and payments has been capped. Monthly filers can get the lower of $25 or 1% of the tax they collect. Quarterly filers can get up to $75 or 1% of their collected tax. And for those filing every six months, the limit is $150 or 1% of the tax collected. This caps the annual discount at $300 for on-time submissions.
Sales Tax Holiday
Currently, for 2023-2024, there are no planned sales tax holidays in Pennsylvania.
Sales Tax Penalties in Pennsylvania
Like in most states, sales tax is a big part of how Pennsylvania generates revenue. Thus, maintaining compliance with sales tax regulations is of utmost importance. Failure to do so can lead to consequences and sales tax penalties. Therefore, it is crucial always to ensure you are up-to-date in filing, collecting, and remitting sales tax to the state.
Here are the specific penalties for non-compliance with sales tax regulations in Pennsylvania:
- Civil penalties amounting to 50% of the total sales tax due;
- On the criminal side, offenses can be classified as either misdemeanors or felonies, depending on the severity and specific circumstances.
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