Do I charge sales tax on consulting and programming in Pennsylvania, USA?

Question

I live in Pennsylvania (in the United States), and I am not sure if I should be collecting sales tax for my part-time consulting and web development business.

I'm registered as a Sole Proprietorship with the state and have applied for and received my federal EIN from the IRS.

I've tried reading the state.pa.us site for our state IRS rules, but there was a lot there, I'm not a lawyer, and it was overwhelming.

I've heard that services are not taxable unless you provide tangible goods, but the PA IRS site makes this confusing and really doesn't just come right out and say what I need to understand.

Is there tax on my web development but not on my consulting? Neither? Both? Would it be acceptable to take the easy way out and place the verbiage "Please pay all applicable Use Tax for services provided" at the bottom of my invoice?

Answer 1

Consulting and programming services are not subject to sales tax in Pennsylvania as far as I understand, however you're in a better position to judge than I am.

According to the Pennsylvania Department of Revenue website, tangible goods, services on those goods, and specific other services require sales tax.

Extract from How do I know which items or services are subject to Pennsylvania Sales Tax? (emphasis mine)

Generally, the purchase of an item by the ultimate consumer is subject to sales tax. Likewise, services performed on taxable items are subject to sales tax, along with some specifically designated services set forth in the law.

The list of specifically designated services are mentioned on the page Is there a list of services subject to PA sales tax?:

Following is a list of taxable services in Pennsylvania.

1. Printing or imprinting of tangible personal property of another.
2. Washing, cleaning, waxing, polishing or lubricating of motor vehicles.
3. Inspecting motor vehicles as required by law.
4. Repairing, altering, mending, pressing, fitting, dyeing, laundering, dry-cleaning or cleaning tangible personal property other than wearing apparel or shoes.
5. Applying or installing tangible personal property as a repair or replacement part of other tangible personal property.
6. Lobbying services.
7. Adjustment services, collection services or credit reporting services.
8. Secretarial or editing services.
9. Disinfecting or pest control services.
10. Building maintenance or cleaning services.
11. Employment agency services or help supply services.
12. Lawn care services.
13. Self-storage services.
14. Mobile telecommunications services.
15. Premium cable and video programming services including streaming of videos.
16. Non-residential electric, steam, and gas services.
17. Intrastate and interstate telecommunications services billed to PA service addresses except subscriber line charges and basic local residential phone service for residential use and payphone service.

Since consulting and programming aren't on this list, my understanding is that you're in the clear, however I don't have a complete understanding of the services you offer. You're in a better position to judge if your business falls into one of the above categories.

Answer 2

You charge sales tax on tangible products, not services. If you were selling packaged software, then sales tax would apply.

In your case, you would not charge sales tax on web development nor consulting (though I don't understand how you define one vs the other).

Here's a parallel. When you get something fixed at your local mechanic, you pay sales tax on replacement parts and materials (oil, brake fluid, transmission fluid, etc) but not the labor.