Pennsylvania Sales Tax Handbook

RATE OF SALES TAX:

6.00%

LOCAL & COUNTY MAXIMUM RATES:

2.00%

What Are the Taxable Goods and Services?

The first step in sales tax compliance is determining if the items or services your firm offers are taxable in Pennsylvania.

Traditional Products and Services

Physical property, such as furniture, household appliances, and automobiles, is subject to sales tax in Pennsylvania.

Medicine, both prescription and non-prescription, food, fuel, and apparel are all tax-free.

In Pennsylvania, certain services are subject to sales tax. Download this PDF from the Pennsylvania Department of Revenue for a full list of taxable services.

Digital Products and Services

A digital item or service is anything that is supplied electronically, such as a music downloaded from iTunes or a movie bought from Amazon.

Businesses in Pennsylvania are required to collect sales tax on the sale of digital goods such as photos, books, games, and other downloads.

How to Register for Sales Tax in Pennsylvania

If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.

This enables your company to collect sales tax on behalf of the municipal and state governments.

You will need the following information to register:

Business Information (name, date of operations, etc.)
Taxes you want to file Business structure Owners/Partners/Shareholders, etc. information
Data on business activities
If appropriate, a transient vendor certificate
If appropriate, a promoter license

A Resale Certificate might help you save money.

When acquiring items for resale, your firm does not have to pay sales tax if you obtain a resale certificate, also known as a reseller’s permit.

Sales Tax Collection

After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.

When computing sales tax, consider the following types of transactions:

Store Sales Shipping Within-State Sales Outside-State Sales

Retail Sales

For conventional company owners who sell products or services on-site, calculating sales tax is simple: all sales are taxed at the rate determined by the store’s location.

Here’s an illustration of how this situation may look:

In Altoona, Pennsylvania, Mary owns and operates a bookshop. Because books are taxable in the state of Pennsylvania, Mary charges a 6% flat-rate sales tax on all purchases. This includes Pennsylvania’s 6% state sales tax, Blair County’s 0% sales tax, and Mary’s 0% local district tax.

Sales inside the state

The Commonwealth of Pennsylvania has an origin-based sales tax policy. This implies that items transported inside Pennsylvania are taxed based on the buyer’s address. This regulation applies to sales taxes levied by the state, county, and city.

Consider the following scenario:

Steve operates his own eBay electronics company from his home in Lancaster, Pennsylvania. A buyer from Harrisburg discovers Steve’s eBay website and buys a $350 set of headphones. Steve calculates the sales tax for this transaction using the 6% Pennsylvania tax rate and no additional kinds of sales tax since Pennsylvania does not have municipal, county, or local sales tax applications. Thus, the total sales tax expense is $371 ($21.00 sales tax).

Out-of-State Purchases

Businesses in Pennsylvania must only pay sales tax on out-of-state sales if they have nexus in other states.

Nexus indicates that the company has a physical presence in another state.

Common nexus types include:

A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.

Submit Your Sales Tax Return

You’re ready to submit your sales tax return now that you’ve obtained your Pennsylvania seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.

How to File a Claim

Businesses in Pennsylvania are required to file sales tax forms and make sales tax payments online.

Apply for Local Sales Tax

Only the City of Philadelphia and the County of Allegheny are subject to extra sales taxes. Both districts collect their respective sales taxes directly from the company owner.

How Frequently Should You File?

All companies must submit their sales tax quarterly when they are initially founded and acquire their seller’s licence. The state of Pennsylvania will decide whether or not to adjust the filing frequency on an annual basis. This judgment is made in November based on the third-quarter sales tax collected (July through September).

Monthly filing: If your company collects more than $600 in sales tax during the third quarter, you must submit monthly returns.
Quarterly filing: If your company receives between $75.00 and $600 in sales tax during the third quarter, you must submit quarterly reports.
Semi-annual filing: If your company collects less than $75.00 in the third quarter, you must submit returns on a semi-annual basis.
The state of Pennsylvania will calculate the filing frequency of the company for all semi-annual accounts based on the sales tax received during the months of July through December, and January through June.
If the amount of sales tax recorded during any of those time periods is $2,400.00 or more, the account must submit and pay monthly in the next tax year.
If the amount of sales tax recorded during any of those time periods is less than $2,400.00 but more than $299.99, the account must submit and pay quarterly in the future tax year.
If the amount of sales tax recorded during any of those time periods is less than $300.00, the account must submit and pay semi-annually in the next tax year.

Deadlines for Filing

The deadline for all Pennsylvania sales tax returns is the 20th of the month, unless it is a weekend or federal holiday, in which case the deadline is postponed to the following working day.

Penalties for Filing Late

Pennsylvania imposes a late payment penalty of 5% each month, up to a maximum of 25%.

Pennsylvania imposes a partial payment penalty of 3% per month on the outstanding tax bill from the date filed to the date paid, up to a maximum of 18%.