Philadelphia and Allegheny County Local Sales Tax: What Act 21 of 2026 Means for Your Business
Last updated: September 29, 2026
Starting October 1, 2026, the Pennsylvania Department of Revenue will begin enforcing new rules for how local sales tax is collected in Philadelphia and Allegheny counties. If your business sells taxable goods or services to customers in either county, the location of your customer now determines the local tax, wherever your business is based.
For many organizations, this is a quick systems update. For others, especially those that ship across the region or operate from multiple locations, it is a good moment to look at the full picture of how sales tax flows through the business. Here is what is changing, who it affects, and the practical steps worth taking now.
At a glance
- The law: Act 21 of 2026, enacted July 12, 2026, with a retroactive effective date of tax years after December 31, 2025.
- Enforcement date: October 1, 2026.
- The rates: 2% local sales tax for Philadelphia and 1% for Allegheny County, in addition to the 6% state sales tax.
- The big shift: Local sales tax moves from where the vendor is located (point of sale) to where the purchase is delivered (point of destination).
- Who it applies to: Vendors already required to collect and remit Pennsylvania’s 6% state sales tax.
What is changing with Pennsylvania local sales tax?
Pennsylvania has two local sales taxes on top of the 6% state rate: 2% in Philadelphia and 1% in Allegheny County. What Act 21 of 2026 changes is how a vendor decides whether those local taxes apply to a sale.
According to the Pennsylvania Department of Revenue, local sales tax was previously based generally on point of sale, meaning where the vendor was located. Under the new law, local sales tax is based on point of destination, meaning where the product or service is delivered. This aligns local sales tax with the way Pennsylvania already administers its state sales tax.
| Before Act 21 | Under Act 21 | |
|---|---|---|
| What determines local tax | Vendor’s location (point of sale) | Customer’s delivery location (point of destination) |
| Philadelphia local rate | 2% | 2% |
| Allegheny County local rate | 1% | 1% |
| State rate | 6% | 6% |
Key dates
- July 12, 2026: Act 21 of 2026 enacted, with a retroactive effective date of tax years after December 31, 2025.
- Through September 30, 2026: Grace period while vendors adjust systems and processes.
- October 1, 2026: The Department of Revenue begins enforcing the new rules.
What stays the same
While the sourcing methodology changes, Pennsylvania’s sales tax rates, taxable transactions, and use tax requirements remain unchanged.
How does the new law affect my business?
The impact depends on where you sell, where you deliver, and how your systems calculate tax today. Here is how the change tends to show up for different types of organizations.
If your business is located outside Philadelphia and Allegheny County
This is where most of the new work lands. If you already collect Pennsylvania’s 6% sales tax and you deliver taxable goods or services to customers in Philadelphia or Allegheny County, you will now collect the local tax on those sales as well. That includes businesses in neighboring counties, businesses elsewhere in Pennsylvania, and online sellers shipping into either county.
If you sell online or ship across the region
E-commerce platforms, invoicing software, and point-of-sale systems each need to identify the customer’s county from the delivery address. The Department of Revenue points vendors to ZIP code lookup resources, including the USPS Address Information System (AIS) Viewer and a Pennsylvania ZIP code directory, to help confirm county locations.
If your organization makes taxable purchases
Purchasers keep their existing use tax responsibilities. When a vendor leaves sales tax uncollected on a taxable item or service delivered into or used in Pennsylvania, the purchaser reports and remits use tax, including the 2% local portion for Philadelphia and the 1% local portion for Allegheny County. As more vendors begin collecting local tax at checkout, this is a good time to review how your accounts payable team tracks and reconciles use tax.
What about sales made earlier in 2026?
Act 21 carries a retroactive effective date of tax years after December 31, 2025, and enforcement begins October 1, 2026. The Department of Revenue’s guidance focuses on the enforcement date. If your business made taxable sales into Philadelphia or Allegheny County earlier in 2026, talk with your tax advisor about how the effective date applies to your situation.
Practical steps to take now
- Map where your customers receive their purchases. Review delivery addresses from recent sales to see how much of your activity reaches Philadelphia or Allegheny County.
- Update your systems. Confirm that your point-of-sale, e-commerce, and invoicing tools calculate local tax from the delivery address.
- Check your returns and remittance process. Make sure local tax collected is tracked and reported accurately alongside state sales tax.
- Review your purchasing side. Align accounts payable and use tax processes with the new rules.
- Look back at 2026 activity. Work with your advisor to understand how the retroactive effective date relates to sales made since January 1, 2026.
- Use the Department of Revenue as a resource. Questions can go to the Online Customer Service Center or call 717-787-1064.
Frequently asked questions
What is Act 21 of 2026 in Pennsylvania?
Act 21 of 2026 is a Pennsylvania law that requires vendors who collect the state’s 6% sales tax to also collect Philadelphia’s 2% and Allegheny County’s 1% local sales taxes on sales to customers in those counties, based on where the purchase is delivered.
When do the new Philadelphia and Allegheny County sales tax rules take effect?
The law was enacted July 12, 2026, with a retroactive effective date of tax years after December 31, 2025. The Pennsylvania Department of Revenue begins enforcing the new rules on October 1, 2026.
What does destination-based sourcing mean?
Destination-based sourcing means the tax is determined by where the customer receives the product or service. Before Act 21, Pennsylvania local sales tax was generally based on where the vendor was located.
Does the new law change what is taxable?
The Department of Revenue states that state sales tax rules remain the same. The change focuses on how local sales tax is sourced, moving from the vendor’s location to the delivery location.
How hfco can help
A change in sourcing rules touches more than a tax rate. It reaches your sales systems, your invoicing, your purchasing, and the way your finance team closes each month. At hfco, we start by listening to how your business actually operates, then help you turn a rule change like this into a clear, manageable plan.
For privately held organizations, nonprofits, and family-owned businesses, our team can help you:
- Assess how much of your sales activity reaches Philadelphia and Allegheny County
- Review how your point-of-sale, e-commerce, and invoicing systems calculate local tax
- Strengthen sales and use tax processes across accounts receivable and accounts payable
- Evaluate 2026 activity in light of the retroactive effective date
- Build sales tax considerations into your broader tax planning
If you have questions about how Act 21 applies to your business, reach out to your hfco advisor or contact our team.
This article offers general information for educational purposes and reflects Pennsylvania Department of Revenue guidance as of September 2026. For guidance on your specific situation, please consult a qualified tax advisor.
Sources
- Pennsylvania Department of Revenue, Local Sales Tax
- Pennsylvania Department of Revenue, Use Tax
