Use Tax for Businesses
If your business buys items or services subject to Pennsylvania sales tax, for which the seller does not charge and collect the tax, your business is required by law to report and remit use tax directly to the PA Department of Revenue.
Purchases made over the Internet, through toll-free numbers, from mail-order catalogs and from out-of-state locations are examples of purchases subject to use tax when Pennsylvania sales tax is not paid but the property or services is delivered into or used in Pennsylvania. The tax rate is the same as the sales tax, 6 percent state, plus 1 percent local tax for items purchased in, delivered to or used in Allegheny County or 2 percent local tax in Philadelphia.
Many businesses believe they save money by making “tax-free” purchases from out-of-state vendors, unaware that these transactions are often assessed upon audit by the department. Since assessments include interest and penalty on top of tax, in these cases businesses actually increase operational costs by not voluntarily addressing use tax obligations.
How to pay your Use Tax
- Use tax liabilities can be reported on a PA-1 Use Tax Return, which is due along with the payment of tax on or before the 20th day of the month after the month in which the purchase was made. NOTE: businesses that do not regularly incur use tax liabilities should not mark the YES registration block on the PA-1.
- Any business that incurs use tax liabilities on a regular basis is encouraged to register for a sales/use tax account number by completing the PA Enterprise Registration Form, PA-100.
- Businesses currently registered for the collection of sales tax are required to report and remit use tax liabilities when filing sales and use tax returns.
To review examples of business purchases commonly subject to use tax, review the Use Tax for Businesses Brochure or the searchable Retailer’s Information Guide (REV-717) for an extensive list of taxable items and services. See also the Business Use Tax Voluntary Compliance Program for more information.
Sample Use Tax Transactions
When you or your business purchase taxable property or services over the Internet, from catalogs or by phone without paying Pennsylvania sales tax, and when the seller delivers the property or services into Pennsylvania, you are required to pay use tax.
Example: You buy computers and accessories for your business from a website that does not collect Pennsylvania sales tax. The items are delivered by the website through a freight company to you in Pennsylvania. You owe Pennsylvania use tax on the entire purchase price of the computers and accessories, including any shipping and handling fees charged by the seller. If you live in Allegheny County or Philadelphia, you also owe an additional 1 or 2 percent local use tax.
When you purchase taxable property from a seller who is located outside of Pennsylvania and the property is delivered into or used in Pennsylvania, you are required to pay use tax.
Example: You buy office furniture in Delaware and you bring it into Pennsylvania to use in your business. You owe use tax on the furniture.
Example: An out of state company provides pest control services to your Pennsylvania business. The company does not charge sales tax. You owe Pennsylvania use tax, and if the services are provided to an Allegheny or Philadelphia County location, local use tax on the total purchase price is also due.