Pennsylvania Use Tax: What It Is and How to Pay It

What Pennsylvania use tax is

Use tax is owed by any person or business that buys a taxable good or service used in Pennsylvania when the seller does not collect PA sales tax. It is the direct counterpart to sales tax: the same purchases are taxable, and the goal is for the state to collect the same amount whether or not the seller charged tax at the register.

The common triggers are purchases where a seller has no obligation, or simply fails, to collect PA tax — internet orders, toll-free phone orders, mail-order and catalog purchases, and out-of-state purchases brought into Pennsylvania to use here.

If PA sales tax was already properly paid on the item, no use tax is due. Use tax exists only to fill the gap when that tax was never collected.

• Applies to the same goods and services that are taxable for PA sales tax purposes.
• Triggered when the seller does not collect PA sales tax.
• Most common on internet, phone, mail-order, catalog, and out-of-state purchases.

Who owes use tax

Use tax reaches both individuals and businesses. The obligation follows the buyer, not the seller, so it can apply even when the seller is out of state and has no Pennsylvania presence.

If you brought taxable property into Pennsylvania to use here, or sent property out of state for a taxable service and brought it back, use tax can apply to that transaction as well.

• Pennsylvania consumers who buy taxable goods or services and are not charged PA sales tax — internet, mail-order, catalog, toll-free phone, and out-of-state purchases delivered into or used in PA.
• Businesses operating in Pennsylvania that buy taxable items or services for their own use where the seller does not charge PA sales tax.
• Anyone bringing taxable property purchased out of state — for example, in a tax-free state like Delaware — into Pennsylvania to use here.
• Purchasers who send property out of PA for a taxable service and bring it back into PA.

How the use tax rate works

The use tax rate mirrors the sales tax rate. There is a statewide state rate, plus an additional local add-on for items purchased in, delivered to, or used in Allegheny County and a larger local add-on for Philadelphia. Confirm the current combined rate at revenue.pa.gov before relying on it, since these figures can change.

The local portion is determined by where the item is delivered to or used, not by where the seller is located. A Philadelphia or Allegheny County resident or business can owe the local add-on even on an out-of-state purchase, as long as the item is used there.

The taxable amount is the entire purchase price, and that includes any shipping and handling fees the seller charged. Do not subtract delivery charges before calculating what you owe.

How individuals report and pay use tax

Individuals have two main ways to report use tax. The first is the annual method: report and pay it on a dedicated use tax line of the PA-40 Personal Income Tax Return, or through myPATH Fed/State e-File. A use tax line was added to the PA-40 beginning with tax year 2011. The exact line number can change from year to year, so check the current year's PA-40 instructions.

The second is the any-time method: file the department's Online Use Tax Return at myPATH and pay directly from a bank account. This is useful for a larger one-off purchase, or for any purchase the PA-40 annual method cannot cover.

• Annual method: use the use tax line on the PA-40 (check the current year's instructions for the exact line), or myPATH Fed/State e-File.
• Any-time method: file the Online Use Tax Return at myPATH and pay from a bank account.
• Do not use the PA-40 line for vehicles, boats, ATVs, imported goods, cigarettes, or anything under a Notice of Potential Use Tax Due.

How businesses report and pay use tax

Businesses report use tax differently from individuals, and the right path depends on whether the business is already registered for sales tax.

A business already registered for a sales tax account reports and remits its own use tax liability on its sales and use tax return — on line 6 of that return — filed through myPATH.

A business not registered for a sales or use tax account can file the department's Online PA-1 Use Tax Return at myPATH. The PA-1 is due with payment on or before the 20th day of the month after the month in which the purchase was made. Businesses that regularly incur use tax are encouraged to register for a sales/use tax account number through the Pennsylvania Online Business Tax registration process in myPATH.

• Registered businesses: report use tax on your own purchases on line 6 of the sales and use tax return in myPATH.
• Unregistered businesses: file the Online PA-1 Use Tax Return in myPATH, due by the 20th of the month after the month of purchase.
• Recurring liability: register for a sales/use tax account through Pennsylvania Online Business Tax registration in myPATH.

Exemptions and common pitfalls

Use tax only applies to items that are taxable for PA sales tax purposes. Non-taxable items — for example, most groceries and clothing under PA rules — do not generate use tax. And if PA sales tax was already properly paid on the item, no use tax is due.

The pitfalls tend to be assumptions. Do not assume every online retailer collects PA tax. Since the Wayfair decision and marketplace rules, many now do, but when a seller does not, you still owe use tax on the purchase.

Two other traps: forgetting the local Allegheny County or Philadelphia add-on on out-of-state purchases used there, and forgetting that seller-charged shipping and handling is part of the taxable base. And do not try to use the PA-40 annual line for a car, boat, ATV, imported goods, or cigarettes — those are excluded and handled through separate notices and returns.

What happens if you don't pay

When the Department of Revenue finds use tax that is owed but unpaid, it can assess the purchaser for the tax plus penalty and interest. It can also assess additional use tax if the amount you reported — for example on your PA-40 — is less than the actual purchase amount.

The practical takeaway is to report accurately and keep records of what you bought and what tax, if any, was charged. For large or recurring liabilities, or when you are unsure whether an item is taxable, it is worth consulting a PA-licensed tax professional rather than guessing. Confirm the current rate and the current PA-40 line at revenue.pa.gov before you file.