WHICH GOODS AND SERVICES ARE TAXABLE?
Determining whether or not the products or services your company sells are taxable in Pennsylvania is the first step in sales tax compliance.
Traditional Goods or Services
Goods that are subject to sales tax in Pennsylvania include physical property, like furniture, home appliances, and motor vehicles.
Prescription and non-prescription medicine, groceries, gasoline, and clothing are all tax-exempt.
Some services in Pennsylvania are subject to sales tax. For a detailed list of taxable services download this PDF from the Pennsylvania Department of Revenue.
Digital Goods or Services
A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.
Pennsylvania requires businesses to collect sales tax on the sale of digital good such as Photos, books, games and other downloads.
HOW TO REGISTER FOR PENNSYLVANIA SALES TAX
If you determined that you need to charge sales tax on some or all of the goods and services your business sells, your next step is to register for a seller's permit. This allows your business to collect sales tax on behalf of your local and state governments.
In order to register, you will need the following information:
- Enterprise Information (name, date of operations, etc.)
- Taxes you’re applying for
- Business structure
- Owners/Partners/Shareholders etc. information
- Business activity information
- Transient vendor certificate, if applicable
- Promoter license, if applicable
Save Money with a Resale Certificate
With a resale certificate, also known as a reseller's permit, your business does not have to pay sales tax when purchasing goods for resale.
COLLECTING SALES TAX
After getting your seller's permit and launching your business, you will need to determine how much sales tax you need to charge different customers. To avoid fines and the risk of costly audits, it's important for business owners to collect the correct rate of sales tax.
When calculating sales tax, you'll need to consider the following kinds of sales:
- Store Sales
- Shipping In-State
- Out-of-State Sales
For traditional business owners selling goods or services on-site, calculating sales tax is easy: all sales are taxed at the rate based on the location of the store.
Here's an example of what this scenario looks like:
Mary owns and manages a bookstore in Altoona, Pennsylvania. Since books are taxable in the state of Pennsylvania, Mary charges her customers a flat-rate sales tax of 6% on all sales. This includes Pennsylvania's state sales tax rate of 6%, Blair county’s sales tax rate of 0%, and Mary’s local district tax rate of 0%.
The state of Pennsylvania follows what is known as an origin-based sales tax policy. This means that goods shipped within Pennsylvania are taxed according to the address of the buyer. This policy applies to state, county, and city sales taxes.
Consider the following example:
Steve runs his own business selling electronics on eBay out of his home in Lancaster, Pennsylvania. A customer living in Harrisburg finds Steve’s eBay page and purchases a $350 pair of headphones. When calculating the sales tax for this purchase, Steve applies the 6% tax rate for Pennsylvania with no other forms of sales tax due to Pennsylvania not having city, county, or local sales tax applications. Thus the total cost of sales tax is $371 ($21.00 sales tax).
Pennsylvania businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.
Common types of nexus include:
- A physical location, such as an office, store, or warehouse
- An employee who works remotely or who is a traveling sales representative
- A marketing affiliate
- Drop-shipping from a third party seller.
- A temporary physical location, including festival and fair booths.
FILE YOUR SALES TAX RETURN
Now that you’ve registered for your Pennsylvania seller's permit and know how to charge the right amount of sales tax to all of your customers, you are all set to file your sales tax return. Just be sure to keep up with all filing deadlines to avoid penalties and fines.
Recommended: Hiring a business accountant can help your business file tax returns as well as issue payroll and manage bookkeeping. Schedule a consultation with a business accountant today to save thousands of dollars on your taxes.
How to File
Pennsylvania requires businesses to file sales tax returns and submit sales tax payments online.
Register for Local Sales Tax
The City of Philadelphia and the County of Allegheny are the only locations that administer additional sales taxes. Both districts collect their respective sales taxes from the business owner directly.
How Often Should You File?
For all businesses, when they are first formed and obtain their seller’s permit, their will be required to file their sales tax quarterly. Annually, the state of Pennsylvania will determine if the filing frequency needs to be changed. This determination is done in November based on the collected sales tax for the third quarter (July through September).
- Monthly filing: if your business collects more than $600 in sales tax during the third quarter then your business should file returns on a monthly basis.
- Quarterly filing: if your business collects between $75.00 and $600 in sales tax during the third quarter then your business should file returns on a quarterly basis.
- Semi-annual filing: if your business collects less than $75.00 during the third quarter then your business should file returns on a semi-annual basis.
- For all semi-annual accounts, the state of Pennsylvania will determine the filing frequency of the business based upon the sales tax collected during the months of July through December, and January through June.
- If the amount of sales tax reported during either of those time periods is $2,400.00 or greater, the account will be required to file and pay on a monthly basis in the upcoming tax year.
- If the amount of sales tax reported during either of those time periods is less than $2,400.00, but greater than $299.99, the account will be required to file and pay on a quarterly basis in the upcoming tax year.
- If the amount of sales tax reported during either of those time periods is less than $300.00, the account will be required to file and pay on a semi-annual basis in the upcoming tax year.
Note: Pennsylvania requires you to file a sales tax return even if you have no sales tax to report.
All Pennsylvania sales tax return deadlines fall on the 20th day of the month, unless it is a weekend or federal holiday, in which case the deadline is moved back to the next business day.
Semi-annual filing: January 20 and July 20
- Q1 (Jan. - Mar.): Due April 20
- Q2 (April - June): Due July 20
- Q3 (July - Sept.): Due October 20
- Q4 (Oct. - Dec.): Due January 22
Monthly filing: the 20th of the following month, or the next business day, e.g. April 20 for the month of March, or May 22 for the month of April.
For a complete list of deadlines, check out the Tax Due Date Reference Guide on the Pennsylvania Department of Revenue website.
Penalties for Late Filing
Pennsylvania charges a late payment penalty that is equal to 5% per month up to a maximum of 25 percent.
Pennsylvania charges a partial payment penalty at a rate of 3 percent a month on the unpaid tax balance from the date filed to the date paid to a maximum of 18 percent.
Pennsylvania Helpful Resources
Pennsylvania Business Tax Helpline: