City of Philadelphia and Allegheny County Sales Tax – Important Update

Businesses selling taxable products or services in Pennsylvania should be aware of an important change to local sales and use tax collection requirements.

The City of Philadelphia imposes an additional 2% sales and use tax, while Allegheny County imposes an additional 1% sales and use tax on taxable transactions. These local taxes are reported and remitted to the Commonwealth of Pennsylvania along with the state’s sales tax.

Previously, responsibility for collecting these local taxes was generally based on the seller’s location, commonly referred to as origin-based or point-of-sale sourcing. Under these rules, businesses located in Philadelphia or Allegheny County were generally required to collect the applicable local tax.

As part of Pennsylvania’s budget legislation signed on July 12, 2026, local tax sourcing has shifted to a destination-based model. Under the new rules, the applicable local tax is determined by where the taxable product or service is delivered, rather than where the seller is located.

Although the legislation applies to tax periods beginning after December 31, 2025, the Pennsylvania Department of Revenue has announced it will delay enforcement until October 1, 2026, to allow businesses time to update their billing systems, tax collection processes and reporting procedures.

The Department of Revenue is expected to provide additional guidance to taxpayers through MyPATH and other communications in the coming months.

To maintain compliance, businesses should review their sales tax procedures and begin applying Philadelphia’s 2% local tax and Allegheny County’s 1% local tax to taxable products and services delivered to customers in those jurisdictions. Businesses should also ensure they properly report and remit the applicable local taxes to the Department of Revenue.

If you have any questions or concerns regarding these new requirements, please contact me at Jason@pivotsalt.com.