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SMART TAX USA - Pennsylvania Exemption Certificate

In Pennsylvania, the sales tax rate is 6%. Allegheny County levies an additional 1% sales tax and as of October 8, 2009, the City of Philadelphia’s total sales tax amounted to 8%. The Pennsylvania sales tax applies to the retail sale, consumption, rental or use of tangible personal property unless the purchaser is exempt. A 6% use tax applies to specific business services sold in Pennsylvania.

Manufacturers that have a facility located in Pennsylvania can claim sales tax exemptions on property purchased for incorporation into products. Materials or supplies used predominantly and directly to produce products are also exempt. However if a single item of property is used in two or more different production activities, the property may not be exempt from sales tax unless it is used more than 50% of the time in the manufacturer’s primary processing operations. According to Section 32.32 of the Pennsylvania Code, property, materials or supplies must be used directly to produce a product for sale in order to qualify for a sales tax exemption.

Pennsylvania State Sales Tax Exemptions for Manufacturers

If tangible personal property is directly related to manufacturing or processing of a product for sale, the purchase price of such property may be exempt from sales tax.

Purchases of machinery, equipment, parts and foundations that are either utilized in production or used to transport, convey, handle or store a product from the beginning of production to the time the product is packaged for the consumer are exempt from Pennsylvania sales tax.

Repair parts that become an integral component of exempted machinery, equipment, parts and foundations are exempt from Pennsylvania sales tax.

Purchases of equipment, machinery and supplies that are used to control, abate or prevent air, water or noise pollution generated during manufacturing or processing operations are exempt from sales tax.

Property that is used to test and inspect a product through the production cycle is considered to be part of the manufacturer’s predominant use and is exempt from sales tax.

Wrapping equipment and supplies used to package products that are purchased by consumers with the packaging intact are exempt from sales tax.

Property used to wash, sterilize or inspect returnable containers prior to their being filled are exempt from sales tax if the container is delivered to consumers as part of their purchase.

Property used for manufacturing research is exempt from Pennsylvania sales tax if the objective of the research is the development of new or improved product. This exemption does not apply to market research or to research conducted to improve administrative efficiency.

According to Section 32.25 of the Pennsylvania Tax Code, the purchase and use of steam, natural and manufactured gas, electricity, bottled gas, fuel oil or kerosene by a person engaged in the business of manufacturing or processing may be exempt from sales tax but it is necessary to apportion these costs between taxable and exempt use. To apportion the usage, an analysis of exempt usage must first be made and then the resulting percentage of exempt use may be claimed by the purchaser after providing a Pennsylvania Exemption Certificate to the vendor.

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