Key figures
Pennsylvania payables
2026, with sources
- 1099s to Pennsylvania
- Due January 31Payors file federal 1099-MISC/NEC with the Department and give copies to payees.
- Nonresident contractor withholding
- 3.07%On Pennsylvania-source non-employee compensation reported on a 1099.
- Use tax
- 6%On taxable purchases where no sales tax was paid; local add-ons apply in Allegheny County and Philadelphia.
1099s and nonresident withholding
Pennsylvania wants a copy of federal Forms 1099-MISC and 1099-NEC, filed electronically through myPATH with the annual withholding statement, REV-1667, by January 31. The deadline applies regardless of the federal date.
Pennsylvania also requires withholding of 3.07% on Pennsylvania-source non-employee compensation paid to a nonresident individual, or to a disregarded entity with a nonresident member, when the payment is reportable on a 1099. Withholding is optional for a payee paid less than $5,000 in the year. An example: a Philadelphia startup pays a New Jersey-resident designer $12,000 for work done in Pennsylvania. It withholds $368.40, remits it through a 1099 withholding account, and reports it on the 1099-NEC and REV-1667.
Use tax on software and services
Because Pennsylvania taxes canned software in any form, including SaaS and digital subscriptions, use tax is a real accounts payable item. When an out-of-state vendor doesn’t charge Pennsylvania tax, the company self-assesses 6%, plus 1% for use in Allegheny County or 2% in Philadelphia, and reports it on its sales and use tax return.
For remotely accessed software, a Pennsylvania billing address creates a presumption that every user is in Pennsylvania. An employer can allocate licenses to its own employees who use the software only outside Pennsylvania on the exemption certificate, REV-1220, and pay tax only on the Pennsylvania share. Licenses used by contractors or customers can’t be allocated that way.
Unclaimed property
Uncashed vendor checks and unapplied vendor credits are reported to the Pennsylvania Treasury by April 15. Treasury expects electronic reports.
Deadlines
- Jan 311099s and annual withholding statement to the Department of RevenueREV-1667 with 1099-NEC/MISC
The federal baseline
This page covers what Pennsylvania adds. The federal rules underneath it apply here too.
Common questions
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.
Do we owe use tax on SaaS tools we buy?
Very likely. Pennsylvania taxes canned software however it is delivered, including SaaS. If a vendor doesn’t charge Pennsylvania sales tax, the company owes 6% use tax (7% in Allegheny County, 8% in Philadelphia) on the licenses used in Pennsylvania. Licenses used only by employees outside Pennsylvania can be allocated out on the exemption certificate, REV-1220.
Payables next door
- DEDelaware payablesDelaware has no sales or use tax, so there is nothing to accrue on purchases. 1099s for Delaware contractors go directly to the Division of Revenue, and uncashed vendor checks are unclaimed property.
- MDMaryland payablesMaryland wants 1099s only when Maryland tax was withheld, classifies workers for unemployment with the ABC test, and since July 2025 taxes the software and IT services a company buys.
- NJNew Jersey payablesNew Jersey classifies workers with the ABC test, wants contractors reported like new hires, and wants 1099s of $1,000 or more filed electronically by February 15.
- NYNew York payablesNew York wants a written contract for freelancers and a new-hire report for contractors over $2,500. Untaxed software purchases owe use tax, and stale vendor checks escheat after three years.
- OHOhio payablesOhio taxes the business software you buy, so untaxed SaaS invoices carry use tax; 1099s go to Ohio only when they report Ohio withholding.
- WVWest Virginia payablesWest Virginia treats contractors paid $2,500 or more as reportable new hires, due within 14 days. Its sales tax reaches many services and prewritten software, so use tax on purchases needs a process.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- ComplianceFirst-year compliance calendar for a Delaware C-corpDelaware franchise tax, 1099s, the federal return, payroll filings, state annual reports and sales tax: the deadlines a young C-corp misses most, by month.
More of the Pennsylvania guide
- AccountingAccounting and state tax in PennsylvaniaCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in PennsylvaniaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayrollPayroll taxes and employer rules in PennsylvaniaWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in PennsylvaniaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in PennsylvaniaCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
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.