.jpg)
An in-depth reference for businesses in 2023, offering insights into Pennsylvania sales tax compliance, rates, and regulations.
Sales tax at a glance
Pennsylvania sales tax rates & calculations in 2023
The Pennsylvania sales tax rate in 2023 is 6% state plus 2% local in Philadelphia. This comprises a base rate of 6% plus a mandatory local rate of 2%. Depending on the local sales tax jurisdiction, the total tax rate can be as high as 8% in Philadelphia.
List of local sales tax rates in Pennsylvania (table)
Recent tax rate changes in Pennsylvania
On October 1, 2022, the tax rate on other tobacco products (OTP), including vapor products, was adjusted from 55% to 56% of the wholesale cost.
This change brought the OTP tax rate in line with the effective cigarette tax rate. Since 2016, Pennsylvania's cigarette tax has been a fixed $2.60 per pack of 20. But as average cigarette prices have increased, the effective tax rate has declined, helping maintain the prices.
FAQs
How do you calculate Pennsylvania sales tax?
To calculate Pennsylvania sales tax, you can use the following formula:
Sales tax = (6% base rate + local rate) * purchase price
For instance, if the local rate is 2% (Philadelphia) and the purchase price is $100, then the sales tax would be $8.
What are the penalties for not paying Pennsylvania sales tax?
The penalties for not paying Pennsylvania sales tax can include:
- Interest of 5% per month on unpaid tax
- Penalty of 5% per month up to a maximum of 25% of unpaid tax
- The minimum penalty will be $5
- Criminal penalties for tax evasion include fines and imprisonment
What’s the difference between destination-based and origin-based sales tax states?
- Destination-based sales tax is collected based on where the purchaser is located. The purchaser's location determines the tax rate.
- Origin-based sales tax is collected based on where the seller is located. The seller's location determines the tax rate.
Is the Pennsylvania sales tax destination-based or origin-based?
Pennsylvania is a modified origin-based sales tax state. For a Shopify seller based in Pennsylvania, sales and use tax is charged based on the seller’s location. For out-of-state sellers, Pennsylvania charges the sales and use tax based on where the products are delivered.
Is Pennsylvania a streamlined sales tax state?
Pennsylvania is not a Streamlined Sales and Use Tax Agreement (SSUTA) member. This agreement standardizes and simplifies sales tax administration and collection for internet and mail order sales across member states.
Sales tax nexus table in Pennsylvania
Type of nexus
Threshold
Physical presence
Any physical presence such as an office, warehouse, employees, etc.
Economic nexus
$100,000 in sales or 200 transactions as per the South Dakota vs Wayfair verdict.
FAQs
Do I need a Pennsylvania seller's permit if I’m only a wholesaler?
You need a Pennsylvania sales tax license and a wholesaler's certificate. The wholesaler is responsible for collecting and remitting sales tax when making sales to resellers.
Do I need a Pennsylvania seller's permit if I only sell temporarily in the state?
Yes, if you sell in Pennsylvania, even temporarily, you need a PA sales tax license if you meet the nexus thresholds. There is no exception for temporary sellers.
What's taxable and what's exempt
Let’s look at the different taxable and exempt products and services in Pennsylvania
What’s Taxable in Pennsylvania
- Tangible personal property (goods)
- Digital products like music, ebooks, apps
- Restaurant meals
- Alcoholic beverages
- Hotel stays
- Utility service for commercial use
- Certain services like dry cleaning, telecom
Exemptions from sales tax in Pennsylvania
- Food and beverages
- Clothing and footwear
- Textbooks
- Disposable diapers
- Prescription and over-the-counter medicines
Some other notable exemptions in Pennsylvania:
- School supplies during tax holiday
- Diapers and feminine hygiene products
- Personal hygiene products during tax holiday
- Flag sales
FAQs
Are groceries taxable in Pennsylvania?
No, groceries are exempt from sales tax in Pennsylvania. Prepared foods are taxable though.
Is clothing taxable in Pennsylvania?
No, articles of clothing and footwear designed for everyday wear are exempt from sales tax. Some exceptions include formal wear.
Are digital products taxable in Pennsylvania?
Yes, digital products like music, ebooks, apps, and streaming services are taxable in Pennsylvania.
Is software-as-a-service (SaaS) taxable in Pennsylvania?
Yes, SaaS is considered a digital product and is taxable.
Are services taxable in Pennsylvania?
Pennsylvania does not have a general tax on services. Some specific services like telecom and dry cleaning are taxable as they require tangible property.
Collecting sales tax in Pennsylvania
Let’s look at the steps to collect sales tax in Pennsylvania now.
How to collect sales tax in Pennsylvania if you are not based in Pennsylvania (Out-of-State)
Even if your Shopify store doesn't have a physical presence in the state, you must register with the PA Department of Revenue if you’re considered "engaged in business" in Pennsylvania. You can voluntarily register to collect and pay use tax for your Pennsylvania customers.
There are five common ways to be considered as ”engaged in business” in Pennsylvania:
- Having a physical location in Pennsylvania like an office, warehouse, etc.
- Having representatives, agents, or contractors working in Pennsylvania.
- Receiving rental payments on property located in Pennsylvania.
- Owning or leasing real or personal property in Pennsylvania.
- Having over $100,000 in sales delivered to Pennsylvania.
Register for a sales tax license online using Pennsylvania's PA-100 registration system. Once you obtain the license in Pennsylvania, you can do business in the state and begin collecting sales tax even if you’re not physically based in Pennsylvania.
Should you collect sales tax on shipping charges in Pennsylvania?
Yes, Pennsylvania's shipping charges are taxable, even if stated separately. Some exceptions apply to returnable containers.
Filing & paying sales taxes
Ready to file taxes in Pennsylvania? Let’s understand their filing schedules and return dates.
Filing and paying sales taxes in Pennsylvania
Sales tax returns in Pennsylvania can be filed online through myPATH at mypath.pa.gov. Tax payments can also be made electronically through myPATH, ACH Credit, ACH Debit, or credit card.
Sales tax return filing schedule and due dates in Pennsylvania
The PA Department of Revenue assigns a filing frequency to businesses based on their anticipated taxable sales. This schedule is either monthly, quarterly or semi-annually.
The following due dates apply to Pennsylvania sales tax returns:
Monthly:
Quarterly:
Semi-Annually:
Filing penalties in Pennsylvania
Businesses that fail to file their sales tax returns on time may be subject to penalties. The penalties are based on the amount of tax due and the number of days late.
For late or incorrect tax filings, the state charges a 5% monthly penalty up to 25% of unpaid tax.
When are returns due in Pennsylvania?
The due date for filing returns in Pennsylvania is the 20th day of the month following the period end date.
For instance, if you file quarterly and the filing period ends on March 31, your return filing due date will be April 20.
Similarly, for yearly billing, where the filing period ends on December 31, you can file your taxes by February 20.
FAQs
What are the Pennsylvania sales tax due dates?
The due dates for filing sales tax returns in Pennsylvania vary depending on the filing frequency:
- Monthly: 20th of following month
- Quarterly: 20th of April, July, October, January
- Semi-Annual: August 20 and February 20
I didn’t collect any Pennsylvania sales tax during this period. Do I still need to file a return?
Yes, you still need to file a sales tax return even if you didn't collect any sales tax. This is because you may be eligible for a refund.
Can I get an extension on filing my Pennsylvania sales tax return?
You can request a 30-day extension to file your Pennsylvania sales tax return by submitting REV-426. However, you still must pay any tax due on time to avoid penalties.
Can I amend a Pennsylvania sales tax return?
Yes, you can file an amended return in Pennsylvania using form REV-1170. You may need to pay additional tax along with interest or penalties.
What is the penalty for filing and/or paying Pennsylvania sales tax late?
Pennsylvania charges a 5% monthly penalty up to 25% for late filing or incorrect filings. An additional penalty of $500 may apply if you do not file by the due date. However, the total penalty will not exceed 25% of your tax amount during the period.
Audit & appeals process
The audit & appeals process is a series of steps a business must go through if the Pennsylvania Department of Revenue audits them.
Pennsylvania sales tax audit process
The Pennsylvania sales tax audit process begins with the auditor contacting the business to schedule an audit.
The auditor will then review the business's records and tax returns to determine if sales tax was not paid. If the auditor finds any discrepancies, they will report their findings.
The business then has the opportunity to appeal the findings. The business can appeal to the Pennsylvania Commonwealth Court if the appeal is denied.
Here’s the process:
- Notification letter sent to taxpayer scheduling the audit
- Entrance conference where the scope of the audit is discussed
- Information and records requested from the taxpayer
- Audit fieldwork conducted reviewing records and transactions
- Closing conference to discuss audit results
- Assessment issued if any underreported tax is found
What to expect during the audit?
During the audit, the auditor will review your financial records, invoices, bank statements, and other documents to verify you calculated, collected, reported, and paid the correct sales tax amounts.
The auditor may also inspect your physical premises and inventory. You will have opportunities to provide documentation supporting any exemptions claimed.
After the audit – Appealing the results
If you disagree with the audit assessment, you have 60 days to file a petition for reassessment with the Board of Appeals. The appeals process includes:
- Filing a petition stating why you disagree with the assessment
- Mediation conferences to resolve the dispute
- Formal hearings with testimony and evidence
- Decisions from the Board of Appeals
- Option to appeal to the PA Commonwealth Court
Contesting audit findings early often leads to a reduced assessment amount. But you still have appeal options after the audit closes.
Cost of registration for a Pennsylvania sales tax license
There is no fee to register for a Pennsylvania sales, use, and hotel occupancy tax license. Registration can be completed online through the PA-100 registration system.
Agencies to register within Pennsylvania
The central agency to register with for a Pennsylvania sales tax license is:
- Pennsylvania Department of Revenue
You may also need to register with local agencies if you have nexus in a locality with additional business taxes:
- City of Philadelphia for the Philadelphia business income and receipts tax
- City of Pittsburgh for the Pittsburgh business privilege tax
More Information & Contacts
For sales tax filing and appeals in Pennsylvania, you would contact:
- Authority: Pennsylvania Department of Revenue
- Phone number: 1-888-PATAXES (1-888-728-2937)
- Website: revenue.pa.gov
There you have it—a comprehensive guide on Pennsylvania's sales tax rules and regulations. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.
