Sales tax can feel confusing—but the basics are simpler than they seem. This guide will help you understand what to collect, when to collect it, and what to watch out for.
What is Sales Tax?
Sales tax is a tax business owners collect from customers at the time of sale when selling certain goods or services. It is a customer-paid tax, meaning sales tax is paid by your customer—not you. The business acts as a middleman to collect it, report it, and send it to the government.
Do You Need to Collect Sales Tax?
If your business is connected to Pennsylvania, you may need to collect sales tax. This is called having “nexus.”
You likely have nexus if:
- You have a physical presence in PA (store, office, employees), OR
- You sell more than $100,000 to PA customers in a year
Collecting
The amount of sales tax is determined by state and local rates. In Allegheny County, Pennsylvania, the total sales tax is 7%:
- 6% Pennsylvania state tax
- 1% Allegheny County local tax
To give an example, say you sell a taxable product for $100. Since the product is taxable, the customer pays $107. You, the business owner, collect $107, but only keep $100. The additional $7 is the sales tax that will be sent to the government. Remember the business owner is the middleman of sales tax.
*If you don’t collect sales tax from the customer when required, you may have to pay it yourself*
Before Collecting, Register
Before you collect sales tax, you must register with the PA Department of Revenue. A license is required before making taxable sales, rentals, or leases.
Register online HERE.
Sales Tax Exemption Certificates
In some situations, sales tax does not need to be collected. However, this only applies when the customer provides proper documentation.
A Sales Tax Exemption Certificate allows certain customers to make tax-exempt purchases in Pennsylvania.
Customers may use this certificate if they are:
- Purchasing items for resale
- A tax-exempt organization (such as qualifying nonprofits or government entities)
What you must do:
- Obtain a fully completed exemption certificate from the customer
- Keep the certificate on file for your records
*If no valid exemption certificate is provided at the time of sale, sales tax must be charged. *
Find the form HERE.
What is Taxed in Pennsylvania
Sales tax in Pennsylvania applies to certain products and services, while others are exempt(nontaxable).
Common taxable and exempt items:
Products:
- Taxable products: Most tangible goods are taxable, including electronics, books, cosmetics, household items, and prepared or ready-to-eat food and beverages.
- Exempt products: Essential items are often exempt, such as most everyday clothing, groceries, prescription medications, and many medical supplies.
Services:
- Taxable services: Services tied to taxable goods are generally taxed, including repairs, digital products (like apps or streaming), and certain subscriptions.
- Exempt Services: Many standalone personal and professional services are not taxed unless they involve selling, installing, or repairing taxable property.
Services: Where Most Confusion Happens
Understanding taxable vs. exempt is usually straightforward for products, but services can be more nuanced. With services, transactions frequently involve a blend of materials and labor, making it harder to determine what is taxable. A useful rule of thumb is that if you are cleaning, repairing, installing, or maintaining tangible property, it’s often taxable.
Examples:
- Retail sale: $100 item → customer pays $107
- Cleaning service: $150 house cleaning → customer may pay $160.50 if taxable supplies are included
- Home repair: $150 labor + $50 materials → materials are taxable, but labor may or may not be taxable depending on the job. If only the materials are taxable the customer would pay $203.50, but if materials and labor are taxable the customer would pay $214.
*Practical approach: Always charge tax on materials, and confirm whether your labor is taxable for your specific type of service. *
To determine what’s taxable for your business, refer to the Pennsylvania Department of Revenue’s REV-717.
Sales Tax Filing Frequency, Due Dates, Penalties, and Discounts
Filing Frequency:
In Pennsylvania your filing frequency depends on how much sales tax you reported during the third calendar quarter (July through September) of the previous year. For example, the sales tax your business collects in Q3 of 2025 will determine the frequency of filing for 2026.
|
Filing Frequency |
Sales Tax Collected |
|
|
Monthly |
$600 or more |
|
|
Quarterly |
$75 – $599.99 |
|
|
Semi-Annual |
Less than $75 |
Due Dates:
The Pennsylvania Department of Revenue sets sales tax payment due dates. Payments are generally due by the 20th of the month following your reporting period. For full details, review REV-819.
Penalties and Discounts:
If sales tax in Pennsylvania is not filed or paid on time, penalties and interest may apply. These costs increase the longer the balance remains unpaid, and interest continues to accrue until the tax is fully paid.
However, Pennsylvania also offers a 1% discount for filing and paying on time, which can slightly reduce the total tax due.
*The best practice is to always file on time, even if you cannot pay the full amount, filing on time helps to avoid additional late penalties. *
For more details on penalties and discounts, click HERE.
Key Takeaways
- The business acts as a middleman, collecting sales tax and sending to the government – this is not your money
- Make sure you understand which products and services are taxed. If you are unsure review PA’s Department of Revenue REV-717.
- Understand your filing frequency and file before your due date to earn a 1% discount for filing on time and avoid any late penalties.
Bottom line: Stay organized, understand what’s taxable, and file and remit on time to keep your business compliant and avoid unnecessary costs.