Pennsylvania State Tax Updates

Our Dash of SALT Blog provides the most recent developments and changes in state and local tax regulations. Here are the latest updates for Pennsylvania.

February 24, 2026

Pennsylvania Introduces Fast File for Streamlined Individual Returns

Authored by: Brian Meier, MSA and Katie Nguyen, CPA

Pennsylvania has launched a new free pilot program, Fast File, to help certain residents quickly complete their personal income tax returns online. The program is limited to individuals with very simple filing profiles, such as:

Single taxpayers who were full-year residents of Pennsylvania for 2025,
Those who received income from only one W-2 (from the same employer),
And those who are not claiming any credits, itemized deductions, or making estimated tax payments.

Eligible taxpayers will be invited to use the system through direct communications from the state. The initiative reflects the state’s effort to modernize tax administration and reduce filing burdens.

If you have questions about state income tax filings, please reach out to Withum’s SALT Team for assistance.

February 11, 2026

Philadelphia Reinstates Business Income and Receipts Tax for Small Businesses

Authored by: Bonnie Susmano, JD, MBA and Emilia Jarrin

Philadelphia has reinstated broader application of its Business Income and Receipts Tax (“BIRT”), bringing thousands of small businesses, self-employed individuals, and gig workers back into the city’s tax base. For tax year 2025, the city now requires all businesses to file and pay BIRT, resulting in an estimated tens of millions of dollars in additional revenue for the city. This requirement extends to gig and self-employed workers as well. The BIRT includes both a gross receipts and a net income tax base, meaning businesses may owe tax even if they operate at a loss.

This change has created new compliance challenges, particularly for smaller and minority owned businesses that were unprepared for the renewed filing obligation. With the exemption eliminated following a legal challenge, affected taxpayers must now navigate filing requirements and payment deadlines, increasing both administrative burden and financial pressure. The expansion of the tax represents a significant shift in Philadelphia’s local business tax landscape.

If you have questions about local taxes, please reach out to a member of the Withum SALT Team.

January 28, 2026

Philadelphia Updates BIRT Filing Rules

Authored by: Brandon Spinella and Penny Sweeting, CPA

The Philadelphia Department of Revenue has issued new guidance on filing requirements for the Business Income and Receipts Tax (BIRT), effective for the 2025 tax year. Under the updated rules, every business operating within the city must submit a BIRT return, regardless of activity level or total gross receipts. This change follows the discontinuation of Philadelphia’s $100,000 statutory exemption after a legal challenge prompted the city to remove it for 2025 and future years. Additionally, businesses filing a BIRT return for the first time will not be required to make estimated tax payments until 2027.

If you have any questions about local taxes (the often overlooked “L” in SALT), please reach out to a member of the If you have questions about state tax appeals, please reach out to a member of the Withum SALT Team.

October 27, 2025

Pennsylvania Issues Partial Sales and Use Refund

Authored by: Katerine Velasquez and Penny Sweeting, CPA

The Pennsylvania Board of Finance and Revenue, an independent administrative tax tribunal responsible for the second and final level of administrative appeal before pursuing legal remedies, recently issued a decision partially granting a taxpayer’s sales and use tax refund petition. The taxpayer claimed they had mistakenly paid tax on exempt transactions, including construction services, nontaxable services, out-of-state purchases, manufacturing equipment, research and development materials, and wrapping supplies. The BF&R agreed to provide partial relief, determining that certain transactions qualified for specific exemptions: construction repairs, manufacturing equipment, and wrapping supplies. However, they denied relief for other transactions due to insufficient documentation or because those transactions did not meet the exemption criteria.

If you have questions about state tax appeals, please reach out to a member of the Withum SALT Team.

September 16, 2025

Pennsylvania New Bill to Expand Film Tax Credit

Authored by: Brandon Spinella and Penny Sweeting, CPA

House Bill 1775 (H.B. 1775) was introduced in the Pennsylvania House of Representatives to expand the film tax credit, increasing its annual cap from $100 million to $400 million. The Bill proposed increasing the base credit to 30% for productions with qualified expenses under $50 million and to 35% for those with qualified expenses over $50 million.

The Bill proposed three new options to increase the credit that are stackable with the base credit:

5% increase if at least 60% of the cast and crew are PA residents;
5% increase if the official PA tourism logo is displayed in the credits or promotional material;
5% if the production is shot in one of 32 selected counties.

However, the current Bill does not explain why the 32 counties were selected or how many days must be shot in one of those counties to be eligible for the credit bump.

If you have questions on state tax credits, please reach out to a member of the Withum SALT Team.

September 3, 2025

Philadelphia Issues Clarification on Business Income and Receipts Tax

Authored by: Brian Meier, MSA and Penny Sweeting, CPA

The City of Philadelphia clarified its tax policy to assist small businesses subject to the Business Income & Receipts Tax (BIRT) starting in Tax Year 2025 due to the elimination of the $100,000 exemption. Any entity that previously didn’t meet the filing threshold will now be treated as “new businesses.” This designation allows them to defer estimated tax payments in their first year of filing, reducing the immediate financial burden.

This policy stems from a 2018 city law that redefined how new businesses are taxed, allowing them to skip estimated payments in their first year and pay in quarterly installments in the second. Additionally, the FY26 budget includes nearly $40 million for grants and support services designed to help small businesses grow and manage new tax obligations. More details are available on the city’s official websites.

If you have questions about the Philadelphia BIRT, please contact a member of the Withum SALT Team.

August 6, 2025

Pennsylvania Proposes Elimination of State Income Tax

Authored by: Courtney Easterday, MSA and Jessie Racioppi, MSA

The Pennsylvania legislature has two proposed bills, Senate Bill (SB) 206 and House Bill (HB) 1742. The bills propose a repeal of state income tax for tax years beginning after January 1, 2026. The proposed legislation intends to eradicate income tax for individuals, trusts, and estates. The bills would also remove the employer withholding requirement and individual state tax filing obligations if passed.

If this legislation is enacted, Pennsylvania will join Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming as states that do not impose an individual income tax.

If you have questions about state taxation of individual income, please reach out to a member of the Withum SALT Team.

November 25, 2024

Pennsylvania Grants Tax Relief to Medical Marijuana Dispensaries

Authored by: Bonnie Susmano, JD, MBA and Kiana McGowan, CPA, MBA

On October 29, 2024, Governor Shapiro signed into law Senate Bill 1501, which amended the state’s tax code to include medical cannabis dispensaries with respect to receiving 280E tax relief. Medical cannabis businesses can now deduct ordinary and necessary expenses such as salaries, rent, and utilities from their taxable income at the state level, even if these deductions are federally disallowed under IRC Section 280E. By decoupling from IRC Section 280E, Pennsylvania medical cannabis dispensaries can take a subtraction modification on their PA returns.

If you have questions about state income tax modifications, please reach out to a member of the Withum SALT Team.

Disclaimer: Please note this is the information that is readily available at this time, it is subject to change so please consult your Withum tax advisor.