For the latest news and updates on Pennsylvania state and local tax
September 16, 2022
Pennsylvania Ruling Exempts Fulfillment by Amazon Vendors from Sales and Income Tax
On September 9, 2022, the Pennsylvania commonwealth court ruled for non-Pennsylvania businesses that sell merchandise through Amazon’s Fulfillment by Amazon (“FBA”) program were not required to collect and remit Pennsylvania sales tax or pay income tax. In order to participate in the FBA program, a taxpayer has to submit a list of inventories to Amazon, which is then shipped to a location a decision made solely by Amazon. FBA sales are administrated by Amazon which collects payments from customers and ships the merchandise directly to warehouses’ Amazon. Since the connections to the commonwealth were demonstrated to be limited to the storage of merchandise by Amazon in one of Amazon’s Pennsylvania warehouses. The Pennsylvania Secretary of Revenue failed to provide sufficient justification that non-Pennsylvania businesses selling merchandise through the FBA program would necessitate collection and remittance of sales tax or payment of income tax. If you have questions about how this ruling may affect your business, please contact a member of the Withum SALT Team.
September 2, 2022
Student Debt Forgiveness Taxable in Many States
On August 24,2022, President Biden announced that the Federal government will enact a wide-scale student loan forgiveness program. The loan forgiveness will be exempt from federal taxation. However, the forgiveness is taxable at the state level in many states.
States are expected to fix this significant tax disparity but must act quickly because many state legislatures have adjourned for the year. Currently, 13 states do not fully comply with the student loan debt provisions of the American Rescue Plan Act. These states include Arkansas, Hawaii, Idaho, Kentucky, Massachusetts, Minnesota, Mississippi, New York, Pennsylvania, South Carolina, Virginia, West Virginia and Wisconsin.
August 29, 2022
Pennsylvania Business Taxes Coming to myPATH in Late November 2022
The Pennsylvania Department of Revenue will be transitioning all business taxes including employer withholding tax, sales tax, and corporation taxes into thePennsylvania Tax Hub (myPATH)system. The Department is adding more tax types to their new online system to make filing and paying quick and easy for taxpayers. Included in this transition is the Pennsylvania Online Business Entity Registration (PA-100), which will be replaced by the newmyPATHregistration service. The current online filing system for business taxpayers (e-TIDES), will be replaced beginning in late November 2022. Taxpayers are encouraged to establish theirmyPATHprofile as soon as possible during this transition period to become familiar with the system. The new myPATH system will require users to set up multi-factor authentication. Additionally, taxpayers will be able to opt into electronic correspondence, change filing frequencies, update addresses, and request statements of account through the new myPATH system.
August 4, 2022
Pennsylvania Corporate Enacts Major Changes to State Sourcing Rule, Corporate Income Tax Rate and Nexus
On July 8, 2022, Pennsylvania Governor Tom Wolf signed an amendment to the Pennsylvania Tax Code. This legislation reduces corporate net income tax from 9.99% to 8.99% effective January 1, 2023. The corporate net income tax will continue to decrease by 0.5% annually until 2031 when it reaches 4.99%. For tax years beginning after December 31, 2022, sales of certain intangible property will be sourced under market-based rules rather than cost-of-performance. Finally, this bill establishes a bright-line economic nexus threshold for income taxes. Taxpayers with gross receipts from Pennsylvania sources of $500,000 or more will be deemed to have nexus in the state beginning after December 31, 2022.
July 15, 2022
New Tax Rates Announced for the City of Philadelphia
The Philadelphia City Council has approved new tax rates for Business Income and Receipts Tax (BIRT), Net Profit Tax (NPT) and resident and non-resident wage tax. Effective for Tax Year 2023, the new BIRT tax rate, affecting the net income portion of the tax, will drop from 6.20% to 5.99%. The new tax rates for wages and earnings of Residence/Non-Residence will go from 3.8398%/3.4481% respectively to 3.79%/3.44% respectively and will take effect on July 1, 2022. Employers are expected to adjust their withholdings after June 30, 2022. The Net Profits Tax rate has been adjusted to 3.79% and 3.44% for residents and non-residents, respectively, for tax year 2022.
June 30, 2022
Philadelphia Business Income and Wage Tax Cuts
On June 23. 2022 Philadelphia City Council passed business income and receipts tax (BIRT) and wage tax cuts. BIRT taxes will drop from 6.2% to 5.99%, this is the first time since 1988 that they are below 6%. Wage tax cuts will drop from 3.83% to 3.79% for residents and 3.448% to 3.44% for non-residents. The intention is to help the small business community. The City Council is also aiming to offset the increased property tax burden based on the 31% increase in home assessments across the city. They have also increased the Homestead Exemption to $80k to aid property owners that will owe more property tax based on the increased value of their property.
March 18, 2022
Philadelphia Wage Tax Refund Requests
For tax year 2021, the City of Philadelphia Department of Revenue (DOR) has announced that they will be accepting tax refund requests from businesses on behalf of their employees who were mandated to work outside of the city due to the pandemic. Before submitting, employers should submit qualified employees W-2 form to the Philadelphia Tax Center and understand that employees with severance, bonus pay, or stock options do not qualify for wage tax relief.
February 18, 2022
Philadelphia Issues Guidance on the Expiration of COVID Tax Relief
On February 10, 2022, the city of Philadelphia provided answers to FAQs regarding the state’s nexus waiver for the Business Income and Receipts Tax (“BIRT”) and Net Profits Tax (“NPT”). This temporary waiver was granted specifically for the COVID-19 pandemic and expired on June 30, 2021. Since the expiration of the nexus waiver, the Department has fielded numerous questions related to how remote employees now affect a business’ nexus for BIRT and NPT. The city advises out-of-state entities have nexus in 2021, if they had employees working remotely in Philadelphia after June 30, 2021. Of course, the Department will make nexus determinations for BIRT and NPT on a case-by-case basis. Considerations include company policies, as well as frequency and type of the business activities conducted by remote employees.
Furthermore, if a remote worker’s business activities in Philadelphia is protected P.L. 86-272, the city clarifies that this provides protection for the NPT. Since the BIRT is not a tax based on net income, businesses claiming P.L. 86-272 protection in the city are still subject to the BIRT.
For entities that started having remote work arrangements since the pandemic, it is important to re-evaluate tax compliance and company policies as states may be tightening or reversing pandemic reliefs. If you have questions about whether your business is subject to Philadelphia BIRT or NPT, please call a Withum SALT practitioner.
October 8, 2021
Pennsylvania Department of Revenue Grants Hurricane Ida Relief Return Filing Extensions
The Pennsylvania Department of Revenue has extended the due dates to file individual and business tax returns for Taxpayers affected by Hurricane Ida. This extension is applicable to Taxpayer’s in Bucks, Chester, Delaware, Montgomery, Philadelphia, and York counties, as well as other areas in Pennsylvania designated by the Federal Emergency Management Agency as qualifying for public assistance. The tax relief applies to various return filings with deadlines starting August 31, 2021, however, does not apply to tax payments. Various return filings for Individuals, Partnerships, S-Corporations, and Trust & Estates have Ida Relief extension until January 3rd, 2022. However, return filings for Corporations have Ida Relief extension until February 2nd, 2022.
June 18, 2021
Pennsylvania Advises Taxpayers to be Aware of Scam Involving Letters from State Tax Processing Unit
The Pennsylvania Department of Revenue has posted a warning to taxpayers about a scam involving letters from the “Tax Processing Center,” the “Tax Processing Unit,” the “Benefits Suspension Unit,” or other similar entities with deceiving names. The letters make dubious claims, include suspicious details, or make threats, including the seizure of taxpayers’ property unless they immediately pay back taxes. The Department is encouraging taxpayers to keep the following tips in mind to safeguard against this scam: look closely for imposters; examine the notice for identifying information that can be verified; avoid scenarios asking for unusual payment methods; and conduct research online for a potentially fraudulent notice. Taxpayers should not call the toll-free number provided in a suspicious notice, but rather directly contact the appropriate tax agency through a published phone number or website. For specific information, please visit the posting on the Pennsylvania Department of Revenue website.
May 26, 2021
Pennsylvania Announces Voluntary Compliance Program for Retailers with Inventory in Pennsylvania
The Pennsylvania Department of Revenue has announced that it is offering a Voluntary Compliance Program for any business that has inventory or stores property in Pennsylvania but is not registered to collect and pay Pennsylvania taxes. The program announcement does not specify which taxes are affected; however, the program is listed under the Department of Revenue’s website section for Tax Obligations for Online Retailers, which specifically refers to sales and use tax, personal income tax, corporate net income tax, and other taxes such as cigarette taxes and fuels taxes. This program runs through June 8, 2021 and offers a limited lookback period and penalty relief when the business becomes compliant. Taxpayers who choose to participate in this program will not be liable for taxes owed prior to January 1, 2019. Taxpayers who participate in the program will also be given penalty relief for any noncompliance for past due tax returns that were not filed and taxes that were not paid. For additional information, please visit the Pennsylvania Department of Revenue website, which provides a Business Activity Questionnaire (“BAQ”) that must be completed.
May 13, 2021
Pennsylvania Issues Sales Tax Guidance on Energy Drinks and Energy Shots
Effective June 15, 2019, energy drinks or shots that are four (4) ounces or greater will be subject to sales tax in Pennsylvania, but energy drinks or shots less than four (4) ounces will be exempt. For purposes of determining the 4-ounce threshold, taxpayers should not aggregate the ounces in a given package when the drinks are sold in a multi-pack. For instance, if each bottle in a 6-pack of energy drinks or energy shots contains 1.98 ounces, but the total fluid ounces for the 6-pack amounts to 11.88 ounces, the 6-pack is not subject to tax because the individual products making up the 6-pack are all below the 4-ounce threshold. For specific information, please see Pennsylvania Sales Tax Bulletin No. 2021-02, 05/04/2021.
Pennsylvania Issues Reminder of Low-Income Tax Forgiveness Program
The Pennsylvania Department of Revenue has issued a reminder to low-income taxpayers that they may be eligible for a refund or reduction of their personal income taxes through Pennsylvania’s Tax Forgiveness Program. Many eligible taxpayers do not take advantage of the program because they fail to file a Pennsylvania personal income tax return (Form PA-40) to claim the reduction or refund on their taxes. For taxpayers who earn a wage, the employee can give his or her employer Form REV-419 (Employee’s Non-withholding Application Certificate) to ask that withholding not be done in cases of 100% tax forgiveness. In cases where withholding does occur, the taxpayer must file Form PA-40 and complete Schedule SP (Special Tax Forgiveness) to claim the tax forgiveness. The Department noted that people who are claimed as a dependent of another taxpayer are not eligible to receive tax forgiveness. For specific information, please see information on Pennsylvania’s Low-Income Tax Forgiveness Program, Pa. Dept. of Rev., 05/05/2021.
Philadelphia Revises its Income Tax FAQ Pertaining to COVID-19 policies
The Philadelphia Department of Revenue has revised its answers to a list of frequently asked questions (FAQs) regarding the Department’s wage tax policies throughout the coronavirus (COVID-19) pandemic. The FAQs address different circumstances for determining the extent to which a nonresident employee’s compensation is treated as compensation for services performed in Philadelphia and, thus, subject to the Philadelphia wage tax. For example, for employers who have a policy consistent with Philadelphia’s current guidance that all employees who are able to work from home are required to do so, but allow access only if employees prearrange to come to the Philadelphia workplace and pass a health assessment, the wages of the nonresident employees are subject to the wage tax only with respect to the days that they passed the health assessment and spent the day working at the Philadelphia workplace. For answers to additional questions, and other specific examples, please see Philadelphia Wage Tax Q&A applicable to COVID-19 policies, Philadelphia Dept. of Rev., 05/01/2021.
May 5, 2021
Pennsylvania Releases Bulletin on Taxation of Medical Marijuana
Under Pennsylvania’s Medical Marijuana Act (the “Act”), Pennsylvania imposes a tax on the gross receipts a grower/processor receives from the sale of medical marijuana at the point a grower/processor sells or transfers product to a dispensary. The tax is paid by the grower/processor at the rate of 5%. Grower/processors and clinical registrant grower/processors must submit quarterly medical marijuana gross receipts tax returns, even for periods where no taxable sales occurred. Returns and payments must be submitted electronically through the Pennsylvania Department of Revenue’s online filing system (mypath.pa.gov.). For further information, please see Pennsylvania’s recently released Medical Marijuana Tax Bulletin 2021-01.
April 28, 2021
Pennsylvania Changes Due Date of Corporate Net Income Tax Return
Effective for tax years beginning after December 31, 2020,Pennsylvania has changed the corporate net income tax (“CNIT”) return filing deadline to the 15thday of the month following the due date of the federal corporate income tax return. Previously the filing deadline was 30 days after the due date of the federal corporate income tax return.
Pennsylvania Implements Coronavirus-Related Penalty/Interest/Deadline Waivers
Via House Bill 766 (signed into law on April 22, 2021), the Pennsylvania Department of Revenue is authorized to disregard the period after April 14 and before May 17 in the calculation of interest, a penalty, or an addition to tax for failure to meet an extended deadline as a result of the Coronavirus Pandemic. Further, the Pennsylvania Department of Community and Economic Development is permitted to coordinate with local governing bodies and agencies of political subdivisions to extend filing and payment deadlines for local income taxes.
April 23, 2021
Paper Philadelphia School Income Tax Returns Will Not Be Mailed to Taxpayers
The Philadelphia Department of Revenue announced taxpayers will not receive a paper Philadelphia School Income Tax (“SIT”) tax return and coupon in the mail for the 2020 tax year. Taxpayers must instead pay the tax online, or by printing their own copy of the return and paying via check. Taxpayers have until May 17, 2021 to pay their SIT without added interest or penalty.
April 17, 2021
Pennsylvania Provides Guidance on Deductibility of Federal Employee Retention Credit
The Employee Retention Credit (ERC) under the CARES Act encourages businesses to keep employees on their payroll. According to the IRS, the refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19. Any reduction to the wage expense for federal tax purposes that is a result of a credit against taxes withheld from the employee would be deductible for Pennsylvania Personal Income Tax purposes. Any reduction to the wage expense for federal tax purposes that is a result of a credit against the employer’s (taxpayer’s) own FICA liability would not be deductible for Pennsylvania Personal Income Tax purposes.
Pennsylvania Issues Bulletin on Realty Transfer Tax Application for Refund Procedure
In recently released Realty Transfer Tax Bulletin No. 2010-01 (04/07/202), Pennsylvania outlines that the application for refund is an informal, administrative process for requesting a refund of overpayments of Realty Transfer Tax to correct simple or noncomplex issues, such as duplicate payments, mathematical errors, clerical errors, or exemptions clear on the face of the deed transferring the property. The application for refund is filed with the department’s Bureau of Individual Taxes (“BIT”) on the “Application for Refund Pennsylvania Realty Transfer Tax” form REV-1651 available on the department’s website. Mailing instructions are found on the application form. An application must be filed within the same period as required for the filing of a petition for refund. Please see bulletin 2010-01 for additional details, or reach out to Withum’s SALT team with questions.
April 1, 2021
Philadelphia Updates Guidance on Employee Business Expense Deduction
The Philadelphia Department of Revenue has updated its guidance regarding the employee business expense deduction for purposes of the Philadelphia wage tax. Philadelphia will not conform to the changes to the deductibility of employee business expenses under the federal Tax Cuts and Jobs Act of 2017 (TCJA). The TCJA eliminated most miscellaneous itemized deductions for individuals, including deductions for employee business expenses for tax years 2018 through 2025; and suspended the moving expense deduction for most individual taxpayers for tax years 2018 through 2025. However, Philadelphia will continue to allow a deduction for expenses directly connected with employment that are ordinary, necessary, and reasonable; and Philadelphia will allow a deduction for unreimbursed expenses of moving to a new home that are incurred to retain employment. Taxpayers should use Pennsylvania Schedule UE to report deductions for the applicable employee business expense; also include a letter from your employer indicating that the expenditures were necessary and not reimbursed (or if not available, a signed affidavit or a copy of the employer’s employee expenses reimbursement policy).
March 23, 2021
Pennsylvania Update on Extension of Filing Deadline
The Pennsylvania Department of Revenue alerts taxpayers that the filing and payment due dates for 2020 Pennsylvania personal income tax returns have been extended to May 17, 2021. The IRS recently announced the extension of federal returns due to the coronavirus (COVID-19) pandemic. Pennsylvania law requires the deadline for filing state income tax returns to be tied to the deadline set at the federal level. The Department will waive penalties and interest on returns and payments filed by the extended due date. If additional time is needed to file, taxpayers may request a 6-month extension to November 15, 2021, but such an extension does not extend the time for payment. Regarding estimated income tax payments, these should continue to follow the normal filing schedule, including payments due April 15, 2021. ( Pennsylvania Extends Personal Income Tax Filing Deadline To May 17, 2021, Pa. Dept. of Rev., 03/18/2021 .)
February 18, 2021
Continued Existence in Pennsylvania and Received “Decennial Report”
The Decennial Report is used by the Pennsylvania Department of State, not the Department of Revenue. The state department requires most all entities registered to do business in Pennsylvania (in 2021) to identify business names and marks that are no longer in use. That way, the state may reissue the name and place it back into the stream of commerce. The decennial report must be filed every ten years. The form “Decennial Report of Association Continued Existence” must be completed and mailed with the payment.
If the report is not timely filed, the entity is deemed to be no longer registered with the Department of State and registration may be restored only by filing an original application of registration. The business may also lose exclusive rights to use of its name on or after January 1, 2022.
Further information can be found on the state website. Please let us know if you have any questions or would like to discuss.
February 11, 2021
90-Day Pennsylvania Voluntary Compliance Program for Qualified Retailers
The Pennsylvania Department of Revenue is currently offering a 90-day voluntary compliance program available to unregistered retailers that have inventory or store property in Pennsylvania. For participating in the program, qualified retailers are offered penalty relief and a limited lookback period beginning from January 1, 2019.
To participate in the program, a retailer must submit a Business Activities Questionnaire, which requires disclosure of the retailer’s identity, Pennsylvania activities and Pennsylvania sales. After receiving contact from the Department regarding participation, the retailer is required to register, file any returns due, and remit the tax due. Penalty relief is contingent on the retailer maintaining compliance with its Pennsylvania tax obligations.
Businesses are advised to refer to the voluntary compliance program guidance as issued by the state for more information regarding the specifics of the program, or reach out to Withum’s State and Local Tax Group for a deeper discussion.
May 2, 2020
Pennsylvania Provides Property Tax Relief
Governor Wolf signed into law S841, effective April 20, 2020, which provides property tax relief due to Covid-19. The law temporarily authorizes the governing body of a taxing district to apply the taxing district’s discount rate to taxes collected by August 31, 2020, and to waive any fee or penalty for late payment of property taxes paid in full by December 31, 2020.
March 21, 2020
Income Tax Returns Deadline Extended
Pennsylvania’s Department of Revenue announced the deadline for taxpayers to file their 2019 Pennsylvania personal income tax returns is extended to July 15, 2020. Giving taxpayers an additional 90 days to file from the original deadline of April 15, no extension is necessary. This extension applies to both final 2019 tax returns and payments, and estimated payments for the first and second quarters of 2020.
PA Inherence Tax Returns Update
Due to the recent closing of commonwealth and county office buildings to help prevent the spread of COVID-19, the Department of Revenue is aware that taxpayers have been unable to meet their Inheritance Tax filing and payment obligations. To address these concerns, the Department is asking County Register of Wills offices to implement the following procedures when their operations resume:
If a taxpayer is filing a return or making a payment and indicates that either was due during the timeframe that offices were closed, please place a date received as of March 12, 2020, on the return and the receipt.
In addition, the Department is making system modifications to not apply penalties for payments received late, that otherwise would have been timely during office closures.
PA Waiver of Penalties on Accelerated Sales Tax Payment
The Department of Revenue is waiving penalties for businesses that are required to make Accelerated Sales Tax (AST) prepayments by the deadline of Friday, March 20, 2020. For April sales tax payments, the Department is waiving the AST prepayment requirement and asking businesses to remit the sales tax that they have collected in March.
May 2, 2020
The City of Philadelphia Provides Extensions and Installment Plans for Property Tax Relief
The City of Philadelphia has changed the extended due date for real estate taxes from April 30, 2020 to July 15, 2020. The Department has also extended the deadline to July 15th for senior citizens over the age of 65, and eligible low-income homeowners, to apply for an installment payment plan for their real estate taxes.
April 2, 2020
The City has Several Funds and Programs in Place to Assist Businesses During this Financial Crisis
- The Enterprise Center Capital Corporation COVID-19 Loan Fund is offering loans to small businesses that meet the following criteria: The business is located in Philadelphia, has been in operation for a minimum of six months prior to the COVID-19 pandemic, and has a documented hardship.
- The Philadelphia COVID-19 Small Business Program offers grants or zero-interest loans to Philadelphia small businesses impacted by COVID-19. The program, administered by the Department of Commerce and PIDC, aims to provide relief to selected small businesses in order to help them survive this crisis and retain as many employees as possible grants or zero-interest loans to Philadelphia small businesses impacted by COVID-19. Due to extraordinary demand and limited resources available, applications submitted after 5 p.m. on March 30, 2020, will only be accepted and reviewed from businesses applying for microenterprise grants of $5,000. Awards for applications received after that deadline will only be made as new funds become available.
- The West Philadelphia Financial Services Institution provides loans to small businesses in Philadelphia.
- The Neighborhood Progress Fund is a nonprofit group that offers small business loans and business development services to entrepreneurs and businesses in distressed communities.
- Apply for the Commonwealth of Pennsylvania’s new COVID-19 Working Capital Access Program, administered by the Pennsylvania Industrial Development Authority (PIDA). Applications must be submitted to Philadelphia Industrial Development Corporation (PIDC) – the city’s Certified Economic Development Organization (CEDO). The program will offer loans of $100,000 or less to for-profit businesses with 100 or fewer full-time employees.
- KIVA, which gives entrepreneurs access to zero-percent interest small business loans, has increased the size of no-interest loans available.
- The Finanta Emergency Loan is available for entrepreneurs affected by COVID-19 and other emergencies. Loans range from $5,000-$15,000 without closing fees. Please contact Finanta for more information and to apply: 267-236-7030 (for English) or 267-236-7019 (para Español)
- The Women’s Opportunities Resource Center has low–interest loans, professional services, and referrals to partner banks and community loan funds for small businesses.
March 30, 2020
Philadelphia Payroll Tax Guidance for Non-Resident Employees in Respect to COVID-19
The City of Philadelphia issued payroll tax guidance on March 26, 2020, pertaining to the Covid-19 pandemic. The City uses a “requirement of employment” standard for payroll taxes. Philadelphia asserts for nonresidents who work from their home for their own convenience, then the nonresident employee would be still be subject to tax. This is similar to the New York convenience of employer rules. However, in respect to the pandemic, the City states even if the employer’s base of operation is in Philadelphia, the employer is not required to withhold on wages on nonresident employees if they are required/ordered to work from outside of the City.
The State and Local Tax (SALT) laws vary from state to state and are constantly changing. Reach out to Withum’s SALT Team for guidance on how to navigate your state’s local tax laws.