Philadelphia Sales Tax Guide for Businesses

No matter where you live or where your online business is based — if you have customers in Philadelphia, you must follow city and local sales tax rules in addition to Pennsylvania’s rules. That’s what this guide is for! This guide includes everything you need to know about digital tax laws in Philadelphia, whether your customers live in Old City or Rittenhouse.

Philadelphia Tax Jurisdiction Breakdown for 2025

• Pennsylvania State Sales Tax: 6%
• Philadelphia County Sales Tax: 2%
• Philadelphia City Sales Tax: 0%

What is the sales tax rate in Philadelphia, Pennsylvania?

The minimum combined 2025 sales tax rate for Philadelphia, Pennsylvania is 8%. This is the total of state, county and city sales tax rates. The Pennsylvania sales tax rate is currently 6%. The Philadelphia County sales tax rate is 2% and the Philadelphia city sales tax rate is 0%

These rates go for standard taxable products. But other rates might apply to your business.

If you’re selling “vice” products like tobacco or alcohol, you might have an increased rate. If you’re selling essential items, such as medicine or clothing, or educational materials, you might have an exempt or reduced rate. More on that next!

What products are exempt from Philadelphia sales tax rate?

• Computer services like custom software, programming, system design, data processing, and IT management are not taxed. However, buying physical computer equipment (hardware) or pre-made software (canned software), along with any related services, is still subject to tax.
• Groceries (Ready-to-eat products and prepared meals are taxable)
• Candy and gum
• Most clothing
• Textbooks
• Pharmaceutical drugs
• Sales for resale
• Residential heating fuels such as oil, electricity, gas, coal and firewood

What digital products are taxed in Philadelphia?

First, let’s confirm what you’re trying to sell in Philadelphia. Are you selling digital products?

A digital product is any product that’s stored, delivered, and used in an electronic format. These are goods or services that the customer receives via email, by downloading them from the Internet, or through logging into a website.

You’re probably consuming and using digital products all day long, whether or not you realize it. Here are some common ones on the market today:

• E-books, images, movies, and videos, whether buying a copy from Shopify or using a service like Netflix. In tax language, these products are in a category usually called, “Audio, visual, or audio-visual products.”
• Downloadable and streaming music, whether buying an MP3 or using a service like SoundCloud or Spotify. Of course, these products also fall in the audio category.
• Cloud-based software and as-a-Service products, such as Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS).
• Websites, site hosting services, and internet service providers.
• Online ads and affiliate marketing. Income from these services can be considered taxable under digital tax policies.

Some US states can have more specific definitions or exceptions. In Philadelphia, digital products delivered to a customer electronically, digitally or by streaming are considered taxable. However, the same exemptions that apply to tangible property apply to digital products.

Examples include:

• Purchases by charities, churches, volunteer fire departments, and nonprofit schools are usually tax-free, unless the items are used for a business that isn’t related to their main mission
• Textbooks purchased from or through accredited schools
• Newspaper and magazine subscriptions
• The resale of a digital product

How does Philadelphia sales tax compare to the rest of Pennsylvania?

Philadelphia's combined sales tax rate of 8% is the highest possible rate in Pennsylvania, where rates can vary from 6% to 8%. This reflects the city’s approach to addressing local issues and funding city services through the sales tax system.

Learn more about sales tax rules state-wide in this Business Guide to Sales Tax in Pennsylvania.

What creates sales tax nexus in Philadelphia?

Since Philadelphia is located in Pennsylvania, it follows the same state-level sales tax nexus rules. Forms of Pennsylvania state sales tax nexus include:

• Economic nexus: When a business sells goods worth $100,000 in the state within the previous or current tax year. More on that below!
• Physical location: This could be an office or a warehouse holding your inventory.
• Employee location: If you have an employee or any other type of representation based in a particular state or city, your business must register for sales tax there.
• Affiliate nexus: If you rely on in-state businesses to promote and refer your business, and you receive a substantial amount of income through these affiliates, then you have sales tax nexus.
• Trade Shows: You may be liable for collecting and remitting Pennsylvania use tax on orders taken or sales made during Pennsylvania conventions or trade shows, even if only in the state for trade show activity for one day.

Philadelphia economic nexus as a remote seller

If your business is fully located outside of Pennsylvania, then economic nexus is your main concern. Here’s how it works. The economic threshold amount refers to your total sales in the whole state, during any 12-month period. This can be a calculation of sales in the last twelve months, or a prediction of sales in the next twelve months — any rolling year-long period, past or future.

Basically, if your annual sales in Pennsylvania remain below $100,000 then you don’t need to worry about sales tax at all. Phew!

But once your sales do surpass $100,000, then you must register for sales tax and comply with all of the Pennsylvania rules around tax rate and collection, invoices, and filing returns.

Note: In Pennsylvania, all out-of-state businesses that make over $10,000 in annual sales must follow "Notice & Report" tax laws. This means they must inform certain customers that they owe taxes to the state and also report those customers and the tax amounts to the Pennsylvania revenue office. These businesses don’t have to register for sales tax, but they must follow these reporting rules.

Who needs a seller’s permit in Philadelphia?

Any business with sales tax nexus, according to the rules above, must apply for a seller’s permit in Pennsylvania right away.

The seller’s permit comes with a sales tax registration number, which establishes you in the Pennsylvania tax system as a legal business. This number tracks your business through the system: the taxes you pay, the tax credits you receive, plus the tax you charge from customers.

How to get a seller’s permit in Philadelphia

So, it turns out you do need to register for tax in Philadelphia. Don’t worry! Just follow these instructions on how to register for sales tax in Pennsylvania and that will cover you across the state.

How to calculate Philadelphia sales tax?

Once you’re registered for taxes, you’re expected to apply sales tax to every taxable sale to a Philadelphia resident. That means 8% for most products.

If your customer is a fellow business, and they’ve provided a valid sales tax exemption certificate, then adding and collecting tax isn’t necessary.

How to collect sales tax in Philadelphia

Tax-compliant receipts in Philadelphia

In order to comply with tax laws, you should include the following information on your receipts or invoices to customers in Philadelphia:

• Your business’ name and address
• Your business’ sales tax registration number
• Invoice date
• Invoice sequencing number
• Buyer’s name and address
• Buyer’s sales tax registration number, if they have one.
• sales tax (amount and rate) applied to each item
• Final amount after tax is added

The easiest solution for the sales tax receipt would be to use a sales tax software that automatically generates and sends all invoices (as soon as the sale is complete), and also stores them in the cloud for you.

Quaderno provides automatic tax invoicing for every transaction. The app sends tax-compliant receipts, invoices, and credit notes automatically, on the spot. You can also set up recurring invoicing. In fact, Quaderno helps automate many other parts of tax compliance, from adding the correct tax rate calculations to your sales to providing instant reports for filing returns. Give it a try for free.

How to file and pay sales tax in Philadelphia

Charging and collecting tax is only the first half of staying compliant. The second half is filing returns and paying whatever you might owe to the government.

Your filing frequency for tax returns in Pennsylvania is assigned when you first register for sales tax. It could be monthly, quarterly, or annually, depending on the size of your business.

There are also some differences in how you remit the sales tax that you’ve collected:

• If a business paid between $25,000 and $100,000 in sales tax, they have two options:
  • Pay 50% of what they owed for the same month last year, or
  • Pay at least 50% of what they actually owe for the current month.
• If a business paid $100,000 or more in sales tax, they must pay 50% of what they owed for the same month last year

Pennsylvania sales tax returns are due on the 20th of the month following the reporting period. So that means the April tax return is due by May 20th. If the due date falls on a weekend or holiday, then your sales tax filing is generally due the next business day.

You can usually file and pay online! Check out more instructions on how to file sales tax in Pennsylvania.