![]() ![]() Under Pennsylvania’s Local Tax Enabling Act (LTEA), “earned income” is defined under Pennsylvania’s personal income tax (PIT) statute and regulations. Taxpayers are responsible for the higher of their resident location tax rate or their employment location rate. Nearly 3,000 local jurisdictions across Pennsylvania levy a local EIT, 4 which is imposed on the income of residents and nonresidents living or working within a locality. The nexus guidance expired on June 30, 2021, and the apportionment guidance expired June 10, 2021. 3 The city allowed employers to source receipts and apportion their income to Philadelphia as if the employee was not working remotely. 2 The EIT guidance expired on June 30, 2021.įor Philadelphia’s BIRT, the Philadelphia Department of Revenue waived its physical presence nexus threshold for teleworking employees. For local EIT, the Pennsylvania Department of Community and Economic Development issued informal guidance specifying that it was reasonable for local taxing jurisdictions to follow the state’s temporary teleworking guidance, but it did not mention the local BPT or other local taxes. 1 However, this guidance expired on June 30, 2021.Īt the local level, less-definitive guidance had been issued. An employer did not have nexus for Pennsylvania corporate net income tax or sales and use tax purposes solely based on the presence of remote employees. This article examines the most impactful Pennsylvania local tax issues associated with remote work.Įxpiration of Temporary Guidance In 2020, the Pennsylvania Department of Revenue issued temporary guidance that waived nexus for taxpayers with employees working remotely. The local earned income tax (EIT) and business privilege/mercantile tax (BPT) imposed throughout Pennsylvania, as well as Philadelphia’s city wage tax and business income and receipts tax (BIRT), tend to cause the most complications. There are myriad state and local tax issues to consider, and Pennsylvania’s local taxes can be particularly challenging. However, widespread remote work could expose businesses to additional tax risks and filing obligations. What began as a COVID-19 necessity has come to be seen as an employee benefit. Remote work arrangements are becoming increasingly commonplace. Pennsylvania Local Tax Implications of Remote Work Matthew Melinson, CPA, Narj Bhogal, CPA, Patrick Skeehan, JD, and Thomas Boyle, JD 13:43:29 ![]()
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