An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, in sales and use tax, further providing for exclusions from tax.

2025-2026 Regular Session Introduced by Marla Brown and 8 co-sponsors

HB 2538 broadens and clarifies sales and use tax exemptions in PA, reducing tax burden on selected goods and services.

Referred to Finance

Summary of HB 2538 (Session 2025-2026) – Pennsylvania

Purpose and intent

HB 2538 amends the Pennsylvania Tax Reform Code of 1971, specifically updating provisions in the sales and use tax area to provide additional exclusions from tax. The bill aims to modify which goods and services are exempt from sales and use tax, clarifying or expanding exemptions to reduce the tax burden on certain transactions or categories of customers.

Key provisions and changes

Alters the list of exclusions from Pennsylvania sales and use tax found in the Tax Reform Code of 1971.

The bill is positioned as “in the sales and use tax” and focuses on exclusions, meaning it does not create new taxes but removes or adds exemptions to taxable items or transactions.

While the exact text of HB 2538 is not provided here, typical reforms of this nature may:

Expand exemptions for specific categories (e.g., essentials, certain medical supplies, utilities, or educational materials).
Narrow or broaden exemptions for particular industries or consumer groups (e.g., non-profit organizations, veterans, seniors, or rural/low-income households).
Address ambiguities in what qualifies for exemption to reduce administrative disputes.

Who would be affected

Taxpayers purchasing goods or services that fall under the amended exclusions.

Retailers and businesses collecting and remitting sales and use tax, who would need to apply the revised exclusions at point of sale.

Potentially affected sectors if new or expanded exemptions target specific industries or consumer groups (e.g., households, schools, healthcare, or small businesses).

State and local tax administrators who administer and enforce the sales and use tax system in Pennsylvania.

Procedural and timeline aspects

The bill is introduced in the Pennsylvania General Assembly and carries multiple co-sponsors (including Jeff Olsommer, Robert Leadbeter, Marla Brown, Shelby Labs, Brian Smith, Milou Mackenzie, David Rowe, Brenda Pugh, and Michael Stender).

As with typical tax reform bills, if enacted, the changes would take effect on a specified effective date stated in the bill (often a future date after enactment or upon registration of exemptions). The exact effective date and transitional provisions would be defined in the bill’s text.

The bill would require potential rulemakings or administrative guidance from the Department of Revenue to implement any new or revised exclusions.

Practical impact considerations

Consumers may experience changes in the total cost of purchases that involve items or services covered by the revised exclusions.

Businesses would need to update point-of-sale systems, tax calculation logic, and training to ensure correct application of exemptions.

The fiscal impact on state revenue would depend on the scope and size of the exemptions added or modified, potentially reducing tax collections if broad, targeted exemptions are enacted.

Note: This summary is based on the bill’s title and general plant of “exclusions from tax” in the sales and use tax context. For precise provisions, text, and fiscal impact, please refer to the bill’s full language, fiscal note, and accompanying analyses as released by the Pennsylvania General Assembly.