Pennsylvania’s statewide sales tax is 6%, with Philadelphia adding 2% and Allegheny County adding 1%, but a Pennsylvania sales tax exemption can eliminate that charge in two ways: some goods are untaxed for every buyer, and qualifying organizations can apply for a certificate that removes tax from purchases tied to their exempt mission. Which path applies to you depends on what you’re buying and who’s buying it.
What’s Exempt for Every Buyer
You don’t need a certificate or any special status to skip sales tax on these everyday categories:
- Grocery food, as long as it isn’t sold ready to eat. Buy ingredients and cook at home, no tax. Buy a hot meal or a deli sandwich, tax applies.1Commonwealth of Pennsylvania. Sales, Use and Hotel Occupancy Tax
- Everyday clothing and shoes, plus fabrics, thread, buttons, and zippers used to make clothing. Formal evening wear, fur articles, accessories like jewelry and handbags, and costumes stay taxable.2Pennsylvania Code and Bulletin. 61 Pa. Code Chapter 53 – Clothing
- Prescription and nonprescription medicines. Most medical equipment remains taxable unless it qualifies as a prosthetic or therapeutic device.3Legal Information Institute. 61 Pa. Code 52.1 – Purchases of Medicines, Medical Supplies
- Textbooks bought for use in schools, colleges, and universities through the institution.
- Residential heating fuels: oil, electricity, natural gas, coal, and firewood used to heat your home.1Commonwealth of Pennsylvania. Sales, Use and Hotel Occupancy Tax
- U.S. and Pennsylvania flags.
Candy and gum are also exempt, which catches people off guard if they’ve shopped in other states. Between untaxed groceries, clothing, and medicine, most routine household spending in Pennsylvania never sees the sales tax.
Which Organizations Qualify
Some organizations can avoid sales tax on nearly all their purchases, provided the purchases serve the organization’s exempt mission. The qualifying categories are:
- Charitable organizations
- Religious organizations
- Nonprofit educational institutions
- Volunteer fire companies
- Volunteer ambulance services
- Volunteer rescue squads4Legal Information Institute. 61 Pa. Code 32.21 – Charitable, Volunteer Firemens and Religious Organizations, and Nonprofit Educational Institutions
The exemption covers tangible personal property and services billed directly to and paid for by the organization: office supplies, furniture, motor vehicles, utilities, food and beverages for organizational events, and fundraising supplies. The purchase has to be on the organization’s account. If a church member buys flowers with personal funds and donates them, that purchase is taxable because it was made on the individual’s account.4Legal Information Institute. 61 Pa. Code 32.21 – Charitable, Volunteer Firemens and Religious Organizations, and Nonprofit Educational Institutions
Sales to the United States government, the Commonwealth of Pennsylvania, and Pennsylvania’s political subdivisions are also exempt.5Legal Information Institute. 61 Pa. Code 32.22 – Sales to the United States Government or Within Areas Subject to the Jurisdiction of the Federal Government
Business Exemptions
Businesses have their own paths to buying tax-free.
Purchases for Resale
Goods bought to be resold, either as-is or as a component of another product, are exempt at the wholesale level. Tax gets collected once, at the final sale to the consumer. Present a completed REV-1220 to the seller with your eight-digit Pennsylvania Sales Tax License ID.6Commonwealth of Pennsylvania. Pennsylvania Exemption Certificate REV-1220
Manufacturing and Processing
Machinery, equipment, parts, foundations, and supplies used directly and predominantly in manufacturing or processing are exempt. “Directly” means involved in actual production. “Predominantly” means more than 50% of the time. The exemption runs from the first production step through packaging for the end consumer, and covers equipment that transports, conveys, handles, or stores the product during that window.7Legal Information Institute. 61 Pa. Code 32.32 – Manufacturing, Processing
Farming
The same “directly and predominantly” standard applies to farming. Equipment, machinery, parts, and supplies used more than 50% of the time in actual farm production are exempt. When one piece of equipment splits time between farming and non-farming use, the farmer needs to show that farming use exceeds 50%. Repair parts that become an integral part of exempt equipment also qualify.8Legal Information Institute. 61 Pa. Code 32.33 – Farming
How an Organization Applies
Organizations apply through the Department of Revenue on Form REV-72, either through myPATH online or on a paper form by mail. Every section must be completed, and the required supporting documents depend on how the organization is set up.9Commonwealth of Pennsylvania. Apply for Non-Profit Sales Tax Exemption
- Incorporated organizations: a copy of the articles of incorporation. The articles must include a provision that prohibits surplus funds from benefiting any private individual if the organization is sold or dissolved.
- Unincorporated organizations: a copy of the bylaws or governing document containing that same prohibition on private benefit.
- All applicants: the most current financial statement showing income and expenses by source and category. A new organization can substitute a proposed budget.
- IRS 501(c)(3) determination letter, if the organization has one.
- Most recently completed IRS Form 990, if the organization files one.9Commonwealth of Pennsylvania. Apply for Non-Profit Sales Tax Exemption
Federal 501(c)(3) status isn’t technically required to apply, but having it strengthens the application. Organizations seeking federal recognition file IRS Form 1023 (or Form 1023-EZ for smaller groups) to get a determination letter.10Internal Revenue Service. About Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code
Using the Exemption Certificate
Approval doesn’t come with a card in the mail. You use Form REV-1220, the Pennsylvania Exemption Certificate, filling it out and handing it to the seller each time. The seller keeps it on file as proof the sale was legitimately exempt.11Commonwealth of Pennsylvania. Help Guides – Complete the PA Tax Exemption Certificate
The REV-1220 works two ways. A unit certificate covers a single transaction. A blanket certificate covers all current and future qualifying purchases from the same vendor, which is far more practical for organizations that buy regularly from the same suppliers. Each certificate must be properly completed and accepted by the seller in good faith within 60 days of the sale, and sellers keep them for at least four years.6Commonwealth of Pennsylvania. Pennsylvania Exemption Certificate REV-1220
Where the Exemption Stops
An approved exemption doesn’t cover everything, and the gaps are where organizations most often run into unexpected tax bills.
Construction Materials
When a contractor builds or renovates for a nonprofit, church, or government agency, the contractor pays sales tax on materials that become part of the real estate: lumber, drywall, roofing, concrete, and similar supplies. The organization’s exempt status does not transfer to the contractor’s purchases of building materials.12Pennsylvania Code and Bulletin. 61 Pa. Code 31.13 – Claims for Exemptions
A narrow exception exists for “building machinery and equipment,” such as boiler systems, conveyor systems, or sewage treatment equipment installed for qualifying entities like manufacturers, public utilities, or school districts.13Department of Revenue. Building Machinery and Equipment
Personal Purchases and Unrelated Activities
Employees or members can’t use the organization’s exempt status for personal purchases, even if they work for a church or charity. And exempt status attaches to the mission: a volunteer fire company buying tables and a refrigerator to run a bar or restaurant pays tax on those items, because the activity is unrelated to firefighting.4Legal Information Institute. 61 Pa. Code 32.21 – Charitable, Volunteer Firemens and Religious Organizations, and Nonprofit Educational Institutions
Taxable Services and Software
Pennsylvania taxes a specific list of services. Computer programming, custom software design, and computer systems integration are taxable.14Pennsylvania Code and Bulletin. 61 Pa. Code 9.3 – Additional Services Which Are Subject to Tax Prepackaged “canned” software is taxable whether delivered electronically or on a disc.15Pennsylvania Code and Bulletin. 61 Pa. Code 60.19 – Computer Software, Hardware and Related Transactions Lobbying, credit reporting, and certain lawn care are also on the taxable list. The Department of Revenue’s Retailer’s Information Guide (REV-717) covers the full list.
Penalties for Misusing a Certificate
Pennsylvania treats exemption certificate fraud as a criminal offense. A false or fraudulent statement on a certificate is a misdemeanor carrying up to one year in prison, a fine of up to $1,000, or both, plus costs of prosecution. Separate civil penalties apply under the Tax Reform Code.16Pennsylvania Code and Bulletin. 61 Pa. Code Chapter 32 – Exemptions
Buying a personal television or home furniture on an organization’s certificate is exactly the misuse the Department of Revenue audits for. Sellers who accept certificates they know are invalid can also be liable for the uncollected tax. If a purchase is a close call, pay the tax and apply for a refund afterward.