Should you collect sales tax in Pennsylvania?
Sales tax is levied on retail selling tangible personal property to your customers, including leasing or renting tangible property. However, you will collect the sales tax if you determine the nexus in Pennsylvania. Nexus is the presence that may come physically or economically.
Physical nexus is typically created when your business has a Pennsylvania store, warehouse, or office location. An economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds are based on revenue.
Let’s explore if your business has a Physical nexus in Pennsylvania.
A physical nexus is integrated when your business is engaged in the following in Pennsylvania:
- Selling tangible personal property in Pennsylvania.
- Maintaining, occupying, or using a place of business or an office in Pennsylvania.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name called, engaged in activities relating to selling, delivering, installing, or taking business orders.
- Having a stock of goods in Pennsylvania.
Here is what the state says on business nexus in Pennsylvania.
Is it constituting an Economic nexus in Pennsylvania?
You must comply and register under sales tax rules if you are a remote seller (i.e., don’t have a physical presence in the state) or a marketplace seller. Business sales in Pennsylvania exceeded $100,000 during the current or previous calendar year.
You may also refer to the Pennsylvania Revenue Department advisory to know more about business activities that may create an economic nexus within the state.
How can you Register for Sales tax in Pennsylvania?
You need to apply online on the Pennsylvania myPATH portal to get the sales tax permit in Pennsylvania.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- FEIN and Social Security numbers of all officers, partners, or owners.
- Address details (physical and mailing).
- Business incorporation dates in Pennsylvania.
- Contact information.
- Business Structure.
- Nature of business.
Once you apply for the sales tax permit in Pennsylvania, you will receive a confirmation number and other registration details.
Is your product or services liable to Sales tax in Pennsylvania?
Tangible Property: Sales tax in Pennsylvania is imposed primarily on the retail sale of tangible personal property, e.g., furniture, giftware, toys, etc.
Services: Many services are subject to sales tax in Pennsylvania except otherwise stated. The taxable services include Lobbying, Secretarial, Employment agency services etc. Click here for official guidance.
Digital Product: Pennsylvania charges sales tax on digital products. So, you must collect sales tax if you sell digital products such as software, streaming services, e-books, etc. Here is what Pennsylvania says about digital transactions.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. This is taxable in Pennsylvania. Review the Pennsylvania Revenue Department advisory.
The state provides certain exemptions from the sales tax levy, such as food for home consumption, prescription drugs, coal, etc. Please click here (pg. 6) to see what exemptions are covered.
You can also visit the Pennsylvania Department of Revenue website for more concise information about taxability in Pennsylvania.
How should you collect and calculate state taxes in Pennsylvania?
Collecting and computing accurate sales tax to be remitted to the state may not involve those boisterous efforts as the sales tax is origin-based in Pennsylvania, which means you must collect taxes at the rate where your business is located. However, if you are not based in Pennsylvania and make any sales to a Pennsylvania-based buyer, you’ll have to collect and remit the sales tax.
However, any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will simplify your job and lighten your compliance burden.
Pennsylvania has a base sales tax rate of 6%, followed by local tax rates (1% for Allegheny and 2% for Philadelphia).
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectable = Sale value * (6% plus local tax rate)
Do you need to collect sales tax on Shipping Charges?
If non-taxable items are sold, shipping charges associated with such a sale are not subject to sales tax. However, when the sale includes taxable and non-taxable items, shipping charges need to be apportioned relatively between the taxable and non-taxable parts of the sale. Accordingly, sales tax applies to the taxable portion of the sale. For more information on inclusion of shipping charges in selling price, click here.
How should you file sales tax in Pennsylvania?
E-file: You can e-file your return using the myPATH portal.
TeleFile: You can telefile using a touch-tone telephone. To avail yourself of this facility, you must submit a TeleFile request form and cite your reasons for not filing online. Refer here for more details.
You must pay the tax along with filing. The department accepts payment through multiple modes, including EFT, debit cards, credit cards, etc. EFT is mandatory for payments over $1,000.
Let us manage all your tax compliances. We will handle all the calculations, payments, remittances, and filings. Visit the sales tax guide issued by the department, which solves all your filing-related queries (pg. 5).
Filing frequencies and due dates
Based on your reported sales tax or estimated taxable sales, the Pennsylvania Department of Revenue assigns you a Monthly, Quarterly, or semi-annual filing frequency. Quarterly frequency is assigned when your sales tax collections are less than $600 quarterly but greater than $300 annually. You can file semi-annually when your annual sales tax collections are $300 or less. According to your filing frequency, the due date for filing sales tax would be the 20th day of the month following the relevant reporting period.
Note: If the due date is a holiday or weekend, the next business day would be considered the final due date. This link (pg. 5) will take you to the official Pennsylvania government advisory, where you can see what the state says about sales tax filing due dates.
Are there any fines or penalties for default when filing or paying sales tax?
The state levies a monthly penalty of 5% of sales tax if you file or pay after the due date. The maximum penalty imposed is 25% of the tax due.
However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates. Please review the penalty and interest calculator on the Pennsylvania Revenue Department website.