At a glance
- Corporate tax
- 7.49% (2026), falling yearly
- Tax on wages
- 3.07% flat
- Sales tax
- 6% (+1% Allegheny, +2% Philadelphia)
- Economic nexus
- $100,000 in sales
- Minimum wage
- $7.25/hr
- UI wage base
- $10,000
- New-employer UI rate
- 3.822%
- Paid leave program
- None
- Annual report
- Jun 30 — $7
2026 figures, each explained with its source on the area’s page. On top of the federal baseline.
Setup, in order
Register the corporation in Pennsylvania
Before doing business in PennsylvaniaFile a Foreign Registration Statement with the Department of State ($250).
Register with the Department of Revenue
Before the first payroll or saleRegister in myPATH for corporate tax, employer withholding and, if needed, sales tax and 1099 withholding accounts.
Register for unemployment compensation
Before the first Pennsylvania payrollOpen an unemployment compensation account with the Department of Labor & Industry.
Report new hires
Within 20 days of hireReport each new or rehired employee through PA CareerLink.
Register for local earned income tax and LST
Before the first payroll at each worksiteLook up each worksite’s PSD code and tax collector with DCED, register with the collector, and collect a Residency Certification Form from each employee.
Register with Philadelphia
With business or employees in PhiladelphiaGet a Commercial Activity License and register for Wage Tax and BIRT with the City of Philadelphia.
Buy workers’ compensation insurance
Before the first Pennsylvania employee startsWorkers’ compensation insurance is required for Pennsylvania employees.
Register to collect sales tax
On physical presence or over $100,000 of salesCollect 6% (7% Allegheny, 8% Philadelphia) on SaaS and other taxable sales.
The six areas
- AccountingAccounting and state tax in PennsylvaniaPennsylvania’s corporate net income tax is 7.49% for 2026 and falling, on separate-company returns with market-sourced services. Losses are capped as a share of income, and federal R&D expensing and bonus depreciation don’t carry through.Corporate net income tax rate, 20267.49%
- ReceivablesReceivables and sales tax in PennsylvaniaPennsylvania taxes SaaS at 6%, with 7% in Allegheny County and 8% in Philadelphia, and requires remote sellers to register once sales pass $100,000.Sales tax rate6%
- PayablesPayables and contractors in PennsylvaniaPennsylvania wants 1099s by January 31 and 3.07% withheld from Pennsylvania-source payments of $5,000 or more to nonresident contractors. Because SaaS is taxable, use tax on software is a real payables item.1099s to PennsylvaniaDue January 31
- PayrollPayroll taxes and employer rules in PennsylvaniaPennsylvania’s state payroll is light: 3.07% flat withholding and UC on the first $10,000. The work is local: earned income tax under Act 32, the Local Services Tax, and Philadelphia’s 3.735% Wage Tax.State income tax withholding3.07% flat
- ComplianceCompliance and filings in PennsylvaniaPennsylvania compliance is the RCT-101 by May 15, a new $7 annual report by June 30, and unclaimed property by April 15. Philadelphia adds its own business tax and license.Foreign registration$250
- AdvisoryAdvisory: credits and decisions in PennsylvaniaPennsylvania’s R&D credit can be sold, which makes it worth applying for before profit. Pennsylvania doesn’t follow federal QSBS, and its corporate rate keeps falling to 4.99% in 2031.R&D credit10%
Who you register with
- PA Department of RevenueCorporate net income tax, sales tax, employer and nonresident withholding (myPATH)
- PA Department of Labor & IndustryUnemployment compensation account, wage law, new-hire reporting
- PA Department of State — Bureau of CorporationsForeign registration and the annual report
- PA Department of Community & Economic Development (DCED)Act 32 local tax lookup (PSD codes, EIT rates, tax collectors) and R&D credit sales
- Pennsylvania Treasury — Bureau of Unclaimed PropertyAnnual holder report
- City of Philadelphia Department of RevenueWage Tax, BIRT, Commercial Activity License
Hiring across the border
An employee who lives in one state and works in another is the most common way a startup ends up registered in two. These are Pennsylvania’s neighbors.
- DEDelawareWhere startups incorporate: franchise tax every March 1, no sales tax, 8.7% if you operate
- MDMarylandSaaS taxed at 3% since 2025, county income tax on payroll, and FAMLI from 2027
- NJNew JerseyDisability and family leave through payroll, the ABC test, and NOLs you can sell
- NYNew YorkState, MTA district and New York City: three tax layers, plus insured disability and PFL
- OHOhioNo corporate income tax, but city and school district taxes on every paycheck
- WVWest VirginiaFalling income tax, a 14-day new-hire rule that covers contractors, and taxed services
Common questions
Can we use our NOLs to wipe out Pennsylvania tax?
Not all at once. Pennsylvania caps the NOL deduction as a share of taxable income: 40% for losses from tax years before 2025, and for later losses 50% in 2026, rising ten points a year to 80% from 2029. A startup that turns profitable after years of losses will pay Pennsylvania tax in its first profitable year even with a large carryforward.
Is SaaS taxable in Pennsylvania?
Yes. Pennsylvania treats canned software as tangible personal property however it is delivered, including software accessed as a service and sold by subscription, so SaaS sold to Pennsylvania users is taxable at 6%, or 7% in Allegheny County and 8% in Philadelphia. Configuration and support bundled with it are generally taxable too; separately invoiced help desk support is not.
Do we withhold Pennsylvania tax from contractors?
If the contractor lives outside Pennsylvania and the work is Pennsylvania-source, and the company pays $5,000 or more in the year, yes: 3.07% of each payment. The company registers a 1099-MISC/NEC withholding account in myPATH, remits on a schedule set by how much it withholds, and files the 1099s with Form REV-1667 by January 31.
Our only Pennsylvania employee works from home. Is there local tax?
Yes. Under Act 32, an employer with a worksite in Pennsylvania, and the home of a remote employee counts as one, withholds local earned income tax at the higher of the employee’s resident rate and the work location’s nonresident rate, plus the Local Services Tax of up to $52 a year, and remits them to the collector for the work location within 30 days after each quarter. DCED’s lookup gives the PSD codes and rates.
Does Pennsylvania have an annual report now?
Yes, every year from 2025. Corporations, domestic and foreign, file a $7 annual report with the Department of State between January 1 and June 30, starting the year after they register. From 2027, failing to file leads to administrative dissolution or, for a foreign corporation, cancellation of its registration.
Can a pre-profit startup get anything from the Pennsylvania R&D credit?
Yes, and that is what makes it useful to a startup. A company that is awarded a Pennsylvania R&D credit and can’t use it can apply to DCED for approval to sell or assign it to another taxpayer. The credit is 10% of the increase in Pennsylvania research spending over a base, or 20% for a small business with less than $5 million of net book assets, and the application is due by December 1.
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- PA Department of Revenue — 2025 Corporate Net Income Tax Instructions (REV-1200)
- PA Department of Revenue — Act 45 of 2025
- PA Department of Revenue — Corporate Net Income Tax Audit Manual
- PA Department of Revenue — Corporation Tax Bulletin 2019-04
- PA Department of Revenue — Information Notice 2014-01, Sourcing the Sales of Services
- PA Department of Revenue — Sales, Use and Hotel Occupancy Tax
- PA Department of Revenue — Taxability of Canned Computer Software, Digital Goods, and Related Services
- PA Department of Revenue — Online Retailers
- PA Department of Revenue — Nonresident Withholding
- PA Department of Revenue — REV-419, Employee’s Nonwithholding Application Certificate
- PA Department of Revenue — 2026 Research & Development Tax Credit Report
- PA Department of Revenue — R&D Tax Credit Program
- PA Department of Labor & Industry — UC Tax Yearly Highlights
- PA Department of Labor & Industry — Wage FAQs
- PA Department of Labor & Industry — Summary of the Wage Payment and Collection Law
- Pennsylvania — Report Newly Hired Employees
- PA DCED — Act 32 and local income tax information
- PA DCED — Local Services Tax (LST)
- PA Department of State — Annual Reports
- PA Department of State — Fees and Payments
- Pennsylvania Treasury — Unclaimed Property for Holders
- City of Philadelphia — Wage Tax (employers)
- City of Philadelphia — Business Income & Receipts Tax (BIRT)
- City of Philadelphia — Changes to the Use and Occupancy Tax (2026 rate notice)
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.