PA Local Sales Tax Changes 2026: What Act 21 Means for Your Business

Pennsylvania changed how local sales tax works, and most business owners we talk to have not heard about it yet. The Department of Revenue sent notices in August. We have already fielded a stack of questions. Some of those came from businesses this does not touch at all, which tells you how much confusion is out there.

Here is what happened and what to do about it.

What changed

Act 21 of 2026 moved local sales tax from origin-based sourcing to destination-based sourcing.

Under the old rule, local sales tax followed the seller. A Media appliance store selling to a customer in Philadelphia charged only the 6% state rate. The customer technically owed the 2% Philadelphia tax as use tax, which almost nobody paid.

Under the new rule, local sales tax follows the delivery address. That same Media store delivering to a Philadelphia address now collects 8%, the 6% state rate plus the 2% Philadelphia local rate. A delivery into Allegheny County is 7%, the state rate plus the 1% county rate.

This is how Pennsylvania has always handled the state portion. The local piece has now been brought in line with it.

Who this actually affects

If you sell taxable products or services and deliver them into Philadelphia or Allegheny County, this applies to you. Your own location does not matter. A business in Delaware County, Chester County, or out of state entirely can now have a Philadelphia collection obligation, as long as it is already required to collect Pennsylvania sales tax.

The businesses most likely to be caught off guard are the ones with tax software configured years ago under the origin rule. If your point-of-sale system charges by store location, it is charging the wrong rate right now.

The part that gets missed

This cuts both ways, and the other direction is good news with a catch.

For decades, a Philadelphia retailer had to charge the local tax on a sale shipped to Bucks County while a competitor in Bucks County did not. That disadvantage is gone. Philadelphia and Allegheny County businesses no longer charge local tax on sales delivered outside their county.

The catch is the same retroactive date that applies to everyone else. If you are a city-based business that has been collecting local tax on out-of-county deliveries since January, you have likely been collecting tax you did not owe and remitting it. Tax collected from a customer generally cannot simply be kept, so that is a correction and refund question, not a pricing adjustment. It is worth getting in front of.

The two dates that matter

This is where it gets uncomfortable.

1. January 1, 2026. The law was enacted July 12, 2026, but the effective date reaches back to tax years beginning after December 31, 2025. The change is retroactive to the start of the year.

2. Thursday, October 1, 2026. The Department of Revenue has said it will not begin enforcing the new rules until this date.

Read those together. The law has technically applied to every qualifying sale you made since January, but the state is giving you until October 1 to get compliant. That leaves nine months of 2026 transactions sitting in a gray zone and a narrow window to decide what you are doing about them.

The department has not published guidance on how it will treat the retroactive period. Waiting to find out is not a strategy.

What has not changed

• State sales tax rules are the same. The 6% still applies to taxable sales.

• Use tax rules are the same. If tax is not collected at purchase, the buyer still owes use tax on taxable items used in either county.

• Several categories keep their own sourcing rules, including motor vehicles, motorboats, aircraft, mobile telecommunications services, and certain construction contracts. If your business sits in one of those, do not assume the general rule applies to you.

What about restaurants?

We have also heard from restaurant owners wondering whether they need to raise their sales tax. For a suburban restaurant serving customers on site, generally no. Sales where the customer takes possession at your location are still sourced to your location. Where it can get complicated is delivery into the city. If that is a meaningful part of your business, it is worth a conversation.

What to do before October 1

1. Pull your 2026 sales into Philadelphia and Allegheny County. You cannot size the exposure until you know the number.

2. Check your tax software settings. Most systems were configured under the origin rule and will not fix themselves.

3. Look at your customer address data. Destination sourcing is only as good as your ship-to information.

4. Decide how you are handling the retroactive period. Whether that means absorbing it, correcting filings, or documenting your position, make the decision deliberately.

5. If you are in Philadelphia or Allegheny County, look at what you have collected this year. You may be sitting on local tax you no longer owed on out-of-county deliveries.

Where we come in

Most of this is not complicated once someone tells you which bucket you are in. The hard part is the retroactive window and knowing whether your systems are actually doing what you think they are doing.

If you sell into Philadelphia or Allegheny County and you are not sure where you stand, reach out to your Brinker Simpson & Company advisor. Better to answer it now than in an assessment notice later.