PA Sales Tax Changes 2026: What Businesses Need to Know

Pennsylvania sales tax changes in 2026 are affecting businesses that sell taxable products or services to customers in Philadelphia and Allegheny County. Under Act 21 of 2026, local sales tax now follows where a product or service is delivered rather than generally following the seller’s location.

The Pennsylvania Department of Revenue began enforcing these new rules on October 1, 2026. Businesses throughout Carlisle, Mechanicsburg, Cumberland County, and the rest of Pennsylvania should review their sales tax collection procedures if they have customers in either affected county.

Here’s what changed, how the new rules work, and what your business should do to stay compliant.

Understanding Pennsylvania’s Sales Tax Rates

Pennsylvania has a statewide sales tax rate of 6%. However, two jurisdictions impose additional local sales taxes.

• Philadelphia: 6% state sales tax plus 2% local sales tax, for a combined rate of 8%.
• Allegheny County: 6% state sales tax plus 1% local sales tax, for a combined rate of 7%.
• All other Pennsylvania counties: The standard 6% state sales tax applies.

These rates have not increased under Act 21. Instead, Pennsylvania changed how businesses determine which local rate applies to a taxable transaction.

That distinction matters for companies that ship products, operate online stores, or provide taxable services in multiple Pennsylvania counties.

What Did Pennsylvania Act 21 of 2026 Change?

Act 21 of 2026 changed Philadelphia and Allegheny County’s local sales tax rules from generally origin-based sourcing to destination-based sourcing.

Previously, local sales tax was generally determined by the seller’s location or point of sale. Under the new rules, the local tax generally depends on where the taxable product or service is delivered.

For example, a business located in Cumberland County that delivers a taxable product to Philadelphia must now collect the applicable 2% Philadelphia local sales tax in addition to Pennsylvania’s 6% state sales tax.

The reverse also applies. A Philadelphia business delivering a taxable product to a customer in Cumberland County generally collects only the 6% state sales tax because the delivery destination is outside Philadelphia.

The Pennsylvania Department of Revenue’s local sales tax guidance confirms that this change applies to vendors already required to collect Pennsylvania sales tax.

How Destination-Based Sales Tax Works in Pennsylvania

The easiest way to understand Pennsylvania’s new sales tax sourcing rules is to compare two transactions.

Example 1: A Carlisle Business Selling to Pittsburgh

Imagine a furniture retailer in Carlisle sells a $2,000 dining set to a customer in Pittsburgh, located in Allegheny County. The retailer delivers the furniture to the customer’s Pittsburgh address.

Under the previous sourcing rules, the retailer generally collected Pennsylvania’s 6% state sales tax, totaling $120.

Under the new destination-based rules, the transaction is subject to the combined 7% sales tax rate for Allegheny County.

• Purchase price: $2,000
• Pennsylvania state sales tax (6%): $120
• Allegheny County local sales tax (1%): $20
• Total sales tax: $140

The customer pays $20 more in sales tax collected by the retailer because the furniture is delivered to Allegheny County.

Example 2: A Philadelphia Business Selling to Cumberland County

Now consider a Philadelphia print shop selling $2,000 worth of taxable signage to a customer in Mechanicsburg.

Under the previous rules, the transaction generally included Philadelphia’s 2% local sales tax, resulting in a combined 8% rate.

Under destination-based sourcing, the business generally collects only Pennsylvania’s 6% state sales tax because the signage is delivered to Cumberland County.

• Purchase price: $2,000
• Pennsylvania state sales tax (6%): $120
• Philadelphia local sales tax: $0
• Total sales tax: $120

In this example, the customer’s sales tax decreases by $40.

Both examples assume the transaction is taxable and that the seller is required to collect Pennsylvania sales tax. Specific sourcing and exemption rules may affect other transactions.

When Did Pennsylvania’s New Sales Tax Rules Take Effect?

Act 21 of 2026 was signed into law on July 12, 2026. The legislation includes a retroactive effective provision applying to tax years beginning after December 31, 2025.

However, Pennsylvania recognized that businesses needed additional time to adjust their accounting systems, online stores, and tax collection procedures.

As a result, the Department of Revenue delayed enforcement of the new local sales tax sourcing rules until October 1, 2026.

That enforcement date has now passed. Businesses that make taxable sales into Philadelphia or Allegheny County should already have the appropriate local sales tax collection procedures in place.

Importantly, the delayed enforcement date does not change the law’s retroactive effective provision. Businesses concerned about transactions between January 1 and September 30, 2026, should review the applicable guidance and consult a tax professional before making corrections.

You can review Act 21 of 2026 through the Pennsylvania General Assembly.

Which Pennsylvania Businesses Are Affected?

The new rules can affect businesses of different sizes, including companies operating primarily outside Philadelphia and Allegheny County.

Businesses that should review their sales tax procedures include:

• E-commerce businesses: Online retailers shipping taxable products to customers in Philadelphia or Allegheny County.
• Retail stores: Businesses that deliver merchandise to addresses outside their own county.
• Manufacturers and distributors: Companies making taxable retail sales to customers in the affected jurisdictions.
• Contractors and service providers: Businesses providing services that are subject to Pennsylvania sales tax and sourced to either jurisdiction.
• Out-of-state sellers: Businesses with a Pennsylvania sales tax collection obligation that sell taxable goods or services into Philadelphia or Allegheny County.

Not every service or business-to-business transaction is taxable. Pennsylvania provides exemptions for certain products, services, and qualifying resale transactions.

For example, a wholesale transaction supported by a valid resale exemption may be treated differently from a taxable retail sale.

The Department of Revenue maintains additional information about Pennsylvania sales and use tax requirements, including taxable transactions and exemptions.

What Should Businesses Do Now?

Because Pennsylvania began enforcing the destination-based sourcing rules on October 1, 2026, affected businesses should review their procedures rather than assume their existing systems are compliant.

1. Review Your Point-of-Sale and Invoicing Systems

Check whether your point-of-sale software, accounting platform, or e-commerce system calculates local sales tax using the correct delivery destination.

Businesses that previously relied on their physical location to determine local tax may need configuration changes.

2. Verify Customer Delivery Addresses

Review your customer records to identify taxable sales delivered to Philadelphia or Allegheny County.

Do not assume a ZIP code or mailing city always identifies the correct taxing jurisdiction. Use reliable address information when determining whether a delivery falls within one of the affected areas.

3. Review Sales Made Earlier in 2026

Because Act 21 includes a retroactive effective provision, it is worth reviewing transactions made before October 1, 2026.

Look for sales where local tax may have been collected under the previous sourcing approach. Keep records of potential differences and seek professional guidance before amending returns or issuing adjustments.

4. Confirm Your Sales Tax Reporting

Collecting the correct tax is only part of compliance. Businesses must also report and remit the amounts appropriately.

Review how your accounting system categorizes Pennsylvania state sales tax and the local taxes collected for Philadelphia and Allegheny County.

Make sure the applicable amounts are accurately reflected in your Pennsylvania sales tax filings.

5. Work With a Pennsylvania Tax Professional

Sales tax rules can become complicated when a business serves multiple counties, offers different products or services, or processes exempt transactions.

Professional guidance can help identify potential collection errors, review filing obligations, and establish consistent procedures for future sales.

Contact Cohick & Associates to discuss how Pennsylvania’s sales tax changes may affect your business.

Does Pennsylvania’s 6% State Sales Tax Still Apply?

Yes. Act 21 did not increase Pennsylvania’s statewide 6% sales tax rate.

It also did not change which products and services are generally subject to Pennsylvania sales tax.

Instead, the legislation changes how the additional local sales taxes for Philadelphia and Allegheny County are sourced.

For qualifying taxable transactions, the applicable combined rates remain:

• Philadelphia: 8%
• Allegheny County: 7%
• Other Pennsylvania counties: 6%

Pennsylvania’s existing state and local use tax obligations also remain in place. When a seller does not collect required sales tax, the purchaser may still be responsible for paying use tax.

Frequently Asked Questions About Pennsylvania Sales Tax Changes

What is Pennsylvania Act 21 of 2026?

Act 21 of 2026 changes how Philadelphia and Allegheny County local sales taxes are sourced. Instead of generally using the seller’s location, the applicable local sales tax now follows the destination of the taxable product or service.

When did Pennsylvania’s new local sales tax rules start?

The legislation was signed into law on July 12, 2026, with a retroactive effective provision applying to tax years beginning after December 31, 2025. The Pennsylvania Department of Revenue began enforcing the new sourcing rules on October 1, 2026.

Do I need to charge Philadelphia sales tax if my business is outside Philadelphia?

Generally, yes, if your business is required to collect Pennsylvania sales tax and delivers a taxable product or service to a destination in Philadelphia. The applicable combined rate is 8%.

What is the sales tax rate in Allegheny County in 2026?

The combined sales tax rate in Allegheny County is 7%, consisting of Pennsylvania’s 6% state sales tax and a 1% local sales tax.

Did Pennsylvania increase its statewide sales tax in 2026?

No. Pennsylvania’s statewide sales tax remains 6%. Act 21 changed local tax sourcing rules for Philadelphia and Allegheny County rather than increasing the statewide rate.

Does Act 21 affect small businesses in Cumberland County?

It can. A business based in Carlisle, Mechanicsburg, or elsewhere in Cumberland County may need to collect additional local sales tax when delivering taxable products or services to customers in Philadelphia or Allegheny County.

Do online businesses need to collect Philadelphia sales tax?

Online businesses already required to collect Pennsylvania sales tax generally must also collect Philadelphia’s 2% local sales tax when delivering taxable purchases to Philadelphia addresses.

Does the new law apply to services?

Yes, when the service is taxable under Pennsylvania law and the applicable sourcing rules place the transaction in Philadelphia or Allegheny County. The law does not make otherwise exempt services taxable.

What if my business collected the wrong local sales tax earlier in 2026?

Review the affected transactions and consult a tax professional before making adjustments. The legislation includes a retroactive effective provision, but the Department of Revenue delayed enforcement until October 1, 2026. The appropriate corrective action depends on the specific facts and applicable guidance.

Make Sure Your Business Is Collecting the Correct Pennsylvania Sales Tax

Pennsylvania’s 2026 sales tax changes may seem minor, but they can create accounting and compliance problems for businesses that sell across county lines.

Collecting too little tax can create an unexpected liability. Collecting too much can lead to customer billing problems and potential corrections.

If your business sells taxable products or services to customers in Philadelphia or Allegheny County, now is the time to confirm that your sales tax procedures reflect Act 21 of 2026.

Contact Cohick & Associates or call (717) 249-5321 to discuss your Pennsylvania sales tax obligations. Our team works with businesses throughout Carlisle, Mechanicsburg, Cumberland County, and Central Pennsylvania to help keep their accounting and tax reporting accurate.