Nonprofit Sales Tax Exemption for New PA Nonprofits – HB 2305

What happened:
The Pennsylvania House Finance Committee unanimously passed House Bill (HB) 2305, sponsored by Rep. Ben Waxman (D-Philadelphia), which would give newly-formed nonprofits a two-year provisional window to obtain a standard five-year sales tax exemption. The bill now advances to the full House for a vote. PANO supports this legislation.

The problem it solves:
Under current law, nonprofits must demonstrate at the time of formation that they qualify as purely public charities to receive a sales tax exemption from the Revenue Department. Start-up nonprofits often lack the financial history and documentation to make that case at formation — even when they clearly will qualify once operational. The result: the Revenue Department regularly denies exemptions to new organizations that would ultimately qualify, creating an unnecessary financial burden during the most vulnerable stage of development.

What the bill would do:
HB 2305 provides newly-formed nonprofits a provisional two-year window to apply for and obtain a standard five-year sales tax exemption, giving organizations time to build the record needed to demonstrate their public charity status. The bill includes a safeguard allowing the Revenue Department to recoup unpaid taxes if a nonprofit later fails to meet the standard exemption requirements.

Why it matters:
This removes a real and practical barrier for new organizations — particularly small, grassroots nonprofits in underserved communities operating on extremely tight budgets. Paying sales tax on supplies, equipment, and services during early years diverts scarce resources away from mission. Organizations that conduct raffles should contact their House member and communicate the value of this fix before a floor vote.

Where things stand:
HB 2305 passed the House Finance Committee 23-0 and is now awaiting a full House floor vote. It has not yet been assigned to a Senate committee.