Act 21 of 2026, recently signed in conjunction with the state budget, adds an additional local sales tax for goods and services to customers in Allegheny and Philadelphia counties.

Starting October 1, consumers in Philadelphia county will pay an additional 2%, while consumers in Allegheny county will pay 1% additional tax in addition to the existing 6% sales tax. Previously, local sales taxes were charged at point of sale, which caused some residents to leave the counties to seek goods and services outside the areas to avoid the taxes. Under the new Act, the taxes will now be collected based on the point of destination.

Businesses physically located in those counties will be required to collect the tax if the purchaser takes possession of the item in the stores. If the item is delivered outside those counties, then it is not subject to the local tax.

Businesses located in Allegheny and Philadelphia counties already collected taxes on vehicle sales prior to the law change, based on where the vehicle was registered. The additional local tax was collected based on the consumer’s residence.

Parts and services are also impacted by the tax. Consumers who live in Allegheny or Philadelphia counties will be charged the additional local tax.

The Pennsylvania Department of Revenue provided the extra time for businesses to update their systems to collect the tax. Dealers should ensure the customers’ address is collected in conjunction with sales or service and have a system in place to collect the required sales tax.