Philadelphia closes online sales-tax loophole for out-of-city sellers—full 8% starts July 1

Philadelphia says it is closing an online sales-tax “loophole” tied to the Commonwealth’s 2026–2027 budget. Starting July 1, the city says out-of-city online sellers that already collect Pennsylvania’s 6% state sales tax on orders delivered into Philadelphia must also collect the city’s 2% add-on—so the checkout reflects the full 8% combined rate.

What the “loophole” was

The city’s sales and use tax fact sheet says that, until now, businesses located outside Philadelphia generally only had to charge the state’s 6% sales tax on online purchases delivered into Philadelphia—while the city’s local businesses must collect the full 8% total rate (the 6% state portion plus the 2% city portion).

Mayor Cherelle L. Parker tied the change to the state budget, saying it requires out-of-city and online sellers who already collect Pennsylvania’s 6% state sales tax on sales delivered into Philadelphia to also collect Philadelphia’s added 2%.

What sellers must collect starting July 1

Philadelphia’s tax guidance explains the basic structure of the local tax: the city’s Sales, Use, and Hotel Occupancy Tax is added to Pennsylvania’s corresponding tax, with a combined total of 2% (City) + 6% (Commonwealth) = 8% (Total) for sales and use.

In practical terms for shoppers, the city’s materials focus on who collects the city portion. Starting July 1, Philadelphia says qualifying remote sellers must charge the city’s 2% along with the 6% state amount on covered online purchases delivered into the city.

The city’s tax page also explains how the use tax fits into the sales/use structure: use tax generally applies when a vendor doesn’t collect sales tax, and in that situation purchasers file returns and pay the tax themselves. The city’s stated goal is to improve compliance so more transactions reflect the correct combined collection at the point of sale.

How this could show up for shoppers

NBC10 Philadelphia reported that the change could increase costs slightly for consumers while adding revenue to the city’s budget. For shoppers, the most noticeable effect should be what appears on receipts and checkout totals—especially for online orders delivered to addresses within Philadelphia.

• If the seller previously collected only Pennsylvania’s 6% for Philadelphia deliveries, the city says checkout should now reflect the full 8% combined rate for covered items.
• If a seller already collected the full local rate before the change, the city’s aim is that those businesses keep operating on a level playing field.

Why Philadelphia says it matters for local businesses

Mayor Parker says the city expects the policy to improve compliance, add local, recurring revenues (an estimated $1.5 million per year), and create a more level playing field for Philadelphia businesses that already collect the full 8% combined sales tax.

What businesses and buyers should do next

If you run an online business that sells taxable goods into Philadelphia and already collects Pennsylvania’s 6%, Philadelphia says you will need to update your tax collection settings and remittance practices so the city’s 2% add-on is included for eligible deliveries starting July 1.

For buyers, watch your next online purchase receipt or order total after July 1 to see whether the city portion of sales and use tax shows up for Philadelphia-delivered orders.

Sources

• NBC10 Philadelphia — Reported: Philadelphia closes online sales-tax loophole
• City of Philadelphia — Mayor Parker statement on passage of the 2026–2027 Pennsylvania budget (sales/use tax loophole closure)