What is the sales tax rate in Pennsylvania?
Pennsylvania has a statewide sales tax rate of 6%. However, Allegheny County imposes an additional 1% local sales tax, and Philadelphia County imposes an additional 2% local sales tax. As a result, the total sales tax rate in these areas is 7% and 8% respectively.
When should your business collect Sales Tax in Pennsylvania?
Businesses are required to charge sales tax in Pennsylvania only if they have a sales tax nexus, which means a connection in the state. There are only two factors that establish this nexus: a physical connection or an economic connection.
Unraveling Pennsylvania Physical Sales Tax Nexus
A Physical Sales Tax Nexus in Pennsylvania exists when a business has a substantial physical connection in the state. But this is no longer as simple as owning a storefront or office in the digital-driven business landscape.
Your sales tax Physical Nexus checklist for Pennsylvania
Here are some circumstances that could establish a physical nexus in Pennsylvania:
- Owning or leasing property in Pennsylvania
- Employees residing and working in Pennsylvania
- Inventory stored in a warehouse in Pennsylvania
- Regularly conducting business in Pennsylvania
- Being part of an affiliate program with a Pennsylvania company
- Using a Pennsylvania-based courier company
Understanding Pennsylvania Economic Nexus: Revenue, Thresholds and Transactions
Pennsylvania has enacted an economic nexus law that requires out-of-state sellers who make more than $100,000 in gross sales in the state in the previous twelve-month period to collect and remit Pennsylvania sales tax. The concept of economic nexus was introduced to Pennsylvania legislation following the 2018 South Dakota v. Wayfair Supreme Court ruling that granted states the right to require out-of-state businesses to collect sales tax, a vital change amid the rise of eCommerce.
Which services are taxable in Pennsylvania?
Most services in Pennsylvania are not taxable. However, a few exceptions do exist. A few key taxable services include:
- Adjustment and collection services
- Credit reporting services
- Secretarial or editing services
- Employment agency services
- Lawn care and landscaping services
Pennsylvania Sales Tax on Products: How to Calculate What Your Business Should be Charging
You calculate sales tax by adding the sales price of the taxable product to the appropriate sales tax rate. For instance, if you sell a taxable product for $100 in Philadelphia County, you would charge $106 ($100 sale price, plus the $6 state rate and the additional 2% local rate).
Is there a Pennsylvania clothing tax?
Clothing is generally not subject to sales tax in the state of Pennsylvania according to Pennsylvania Rev-717 that exempts “wearing apparel” from sales tax. There are a few exceptions to this rule, however, which does subject the sale of items such as formalwear and fur to sales tax, so retailers have to check the taxability of clothing items nonetheless to protect themselves from exposure.
Pennsylvania Online Sales Tax: Are SaaS and Digital Services Taxable?
Yes, digital products, including Software as a Service (SaaS), are considered taxable in Pennsylvania.
Since 106, Pennsylvania has applied a 6% sales tax on digital products according to the Digital Products: Act 84, when digital products are delivered electronically, digitally, or via streaming.
SaaS Sales Tax Pennsylvania: Does my Business Need to Charge Sales Tax for SaaS in Pennsylvania?
Yes. The state does require the collection of Pennsylvania SaaS sales tax, along with the taxation of other digital goods and services. But the taxability of SaaS and cloud computing services varies depending both on the location of the user, as SaaS is only taxable on in-state customers. This is an important distinction to keep in mind when offering SaaS products to out-of-state clients.
How can a business get a sales tax permit in Pennsylvania?
Businesses can register for a sales tax permit in Pennsylvania through the PA-100 Pennsylvania Enterprise Registration Online on the Pennsylvania Department of Revenue’s website.
Collecting Sales Tax in Pennsylvania as a Business
Businesses should apply the correct rate based on the location of the buyer (destination-based sales tax) when collecting sales tax in Pennsylvania.
Pennsylvania Tax Return Due Dates Explained
The due dates for filing sales tax returns in Pennsylvania are generally on the 20th day of the month following the end of the reporting period. It’s recommended to refer to the Pennsylvania Department of Revenue website or consult with a tax professional for the specific due dates for other Pennsylvania taxes.
What is the required frequency for sales tax returns in Pennsylvania?
The required frequency for filing sales tax returns in Pennsylvania depends on the business’s tax liability. Monthly filers have collected over $600 in sales tax, quarterly filers have collected between $601 to $2,400, and yearly filers have collected less than $600.
