Pennsylvania has implemented significant changes to its local sales tax rules, altering how vendors determine and collect local sales tax on transactions involving Philadelphia and Allegheny County. Under Act 21 of 2026, local sales tax is now determined based on the destination of the sale rather than the seller's location. Previously, local tax applied if the vendor was located in Philadelphia or Allegheny County, regardless of where the customer received the product or service.
The new law expands local sales tax collection responsibilities by requiring vendors to source transactions based on where the customer receives the taxable product or service. Sellers delivering taxable goods or services to customers in Philadelphia or Allegheny County must collect the applicable local tax, regardless of where the seller is located. This change may create additional compliance requirements for both Pennsylvania-based and remote sellers that are registered to collect Pennsylvania sales tax
Enacted on July 12, 2026, the law is retroactively effective for tax years beginning after Dec. 31, 2025. However, the Pennsylvania Department of Revenue has stated that enforcement will begin on Oct. 1, 2026.
Businesses should review and update their tax determination processes, ERP systems, point-of-sale applications, e-commerce platforms, and address controls to ensure transactions are sourced correctly and the appropriate local tax rate is applied. Vendors that historically did not collect local tax on sales into Philadelphia or Allegheny County may now have collection and remittance obligations under the new rules. Accordingly, maintaining accurate customer location data and properly configured tax engines will be critical to minimizing compliance risks and potential audit exposure.
If you'd like to learn more about these changes as well as whether your business has compliance obligations or needs to limit its potential audit exposure, contact GBQ's state and local tax team today.