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STARTING AND OPERATING A BUSINESS IN PENNSYLVANIA Copyright © 2009, Michael D. Jenkins CHAPTER 18
CONTENTS OF THIS CHAPTER:
I. INTRODUCTION The Commonwealth of Pennsylvania has a fairly typical tax and legal structure under which businesses must operate. Like most states, Pennsylvania imposes an income tax, a franchise tax on corporations (which also applies to limited partnerships and limited liability companies), a sales and use tax, various excise taxes, with property taxes imposed at the local level. The state has also adopted a limited liability company (LLC) law, and a limited liability partnership (LLP) law, so that businesses operating in Pennsylvania in LLC or LLP form may obtain the advantages of limited liability, without incorporating or becoming subject to corporate taxation, generally. The state income tax rate on individuals is quite low, but local income taxes on wages, compensation, or on investment income, are often higher than the state tax rate. At present, in the spring of 2009, the state's economy is weakening rapidly, in terms of the level of unemployment and other economic measures. The Pennsylvania unemployment rate has risen significantly in the last year. In May, 2008, the Pennsylvania unemployment rate stood at only 5.1%, up from 4.3% a year earlier, but has since shot up to 8.2% in May, 2009, although the jobless rate in the state is considerably lower than the national unemployment rate, which was 9.4% in May, 2009. To view the latest federal Bureau of Labor Statistics unemployment rate data for Pennsylvania or any other state, visit the BLS website. II. LEGAL ENTITIES -- FILING FEES AND REPORTING REQUIREMENTS. (a) In General. A business that operates in Pennsylvania can operate as a sole proprietorship, a general or limited partnership, a corporation, or a limited liability company. In addition, like the federal tax law, the state income tax law also recognizes S corporations, for income tax purposes, and generally allows the income or losses of an S corporation to "flow through" and be taxed or deducted at the shareholder level, rather than taxing the corporation itself as an entity. Pennsylvania also provides for limited liability partnerships (LLP's), in which no partner is liable for debts of the partnership, in general, as in the case of a corporation or LLC, but with fewer legal formalities than are required for either a corporation or an LLC. Each of the above entities is discussed below, along with the basic requirements for forming such an entity and any general ongoing (non-tax) reporting requirements that are applicable to it. The tax treatment of each form of legal entity is discussed in Section IV below. (b) Sole Proprietorships. In general, sole proprietorships in Pennsylvania can be established with no formalities. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, as well. In addition, if you make any sales of tangible personal property at retail or provide certain types of services, you may be required to obtain a sales tax license and collect sales tax, as discussed in Section IV(d). No separate tax form filing is required, generally, for a sole proprietorship, under the Pennsylvania income tax law. Instead, as with the Schedule C on your federal Form 1040, you simply report the net income or loss from your sole proprietorship on your state personal income tax return. See Section IV(c) for information on the state's income tax and filing requirements for individuals. Doing business as a sole proprietor in Pennsylvania is generally much simpler than operating through any kind of business legal entity. As a sole proprietor, if you have no employees, you are not required to pay any unemployment taxes, withhold any federal or state income tax from wages, nor obtain workers' compensation coverage for yourself. However, if your sole proprietorship operates under an assumed or fictitious business name (trade name), it will generally need to register the name, as discussed in Section IV(g). (c) Partnerships. Pennsylvania's partnership laws allow creation of either a general partnership, in which all partners are liable for the debts of the business, or a limited partnership, in which only the general partners are liable for debts, while the liability of limited partners is limited to the amount they have invested, usually. State law also allows for the creation of a limited liability partnership, in which no partner has personal liability (subject to certain exceptions). As is discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, for any type of partnership, including general or limited partnerships, or limited liability partnerships. Partnerships, as entities, are not subject to state income tax in Pennsylvania, except for certain "electing" limited partnerships (usually publicly traded) that wish to be treated as corporations. Instead, the income or losses of the partnership, as allocated among the partners, must be reported on the personal income tax returns of the individual partners (or on the corporate tax returns of any corporate partners). Partnerships are required to file annual tax information returns with the state. For details on Pennsylvania partnership tax return filing requirements, see Section IV(c). A partnership agreement, for any type of partnership, should spell out in considerable detail such matters as the following:
As a rule, general partnerships in Pennsylvania can be formed with no formalities, although it is highly advisable to have a written partnership agreement. However, as discussed in Section IV(b), it will generally be necessary to obtain one or more local business licenses from cities or counties in which you operate and, in some cases, state licenses, as well. In addition, any partnership or other business that has employees will generally have to register for, and pay, state unemployment tax on wages paid, as discussed in Section V(b). A limited partnership, in which there is at least one general partner (who is liable for partnership debts) and at least one limited partner (who is not liable for partnership debts), may also be formed under Pennsylvania law. Unlike a general partnership, a limited partnership must generally have a written partnership agreement, and must file a certificate of limited partnership with the secretary of state, together with a filing fee of $125. Foreign limited partnerships must also register before being allowed to do business in Pennsylvania, and must pay a registration fee of $250. For more information on limited partnership filing requirements, see the contact information for the offices of the Pennsylvania Secretary of State, listed in Section VI(a). LIMITED LIABILITY PARTNERSHIPS Limited liability partnerships (LLP's) are a relatively new form of partnership permitted under the laws of Pennsylvania. Like an LLC, an LLP provides limited liability for its owners, while retaining the tax advantages of a partnership for federal and Pennsylvania state income tax purposes. However, unlike an LLC, an LLP typically operates like a regular partnership, and is not required to file articles of organization. The general partners of a general or limited partnership can obtain some measure of limited liability by simply registering the partnership with the state as an LLP. However, an LLP does not always offer the same degree of liability protection as a corporation or LLC. Under Pennsylvania law, an LLP mainly protects a partner from liabilities arising from the misconduct or negligence of another partner. Thus, LLP's are primarily utilized by professional partnerships, as Pennsylvania's LLP law provides considerably less liability protection than the LLP laws in most other states. The Pennsylvania law specifically does NOT shield a general partner in an LLP from liability for his or her own negligent or wrongful acts or from other debts or liabilities of the partnership -- such as ordinary trade debts. To become an LLP in Pennsylvania, your partnership must file a registration form and pay a filing fee to the Pennsylvania secretary of state, which is $125 in the case of a domestic (Pennsylvania) partnership or $250 in the case of a foreign LLP (one formed in another state or foreign country). LLP's were formerly required by state law to maintain liability insurance (above the deductible amount) of at least $100,000 times the number of general partners in excess of one, up to $1 million. However, this requirement was repealed by the Pennsylvania Legislature in 2001. Every LLP doing business in Pennsylvania, including both domestic and foreign LLP's, must file an annual registration with the secretary of state and pay an annual registration fee, by April 15th of each year, of $200 times the number of general partners who resided in the state on December 31. This fee is indexed and adjusted for inflation every third year, beginning after December 31, 1997 ($250 in 2009). The next adjustment will be after December 31, 2009. There is no fee if there are no resident general partners; however, the annual registration form must still be filed in that case, showing zero as the number of resident general partners. As several other states have done, Pennsylvania has enacted legislation that allows a limited partnership to also become a limited liability partnership -- a limited liability limited partnership, or LLLP. An LLLP is a regular limited partnership that has elected LLP status, so that the general partners in the LLLP are given the same liability protection as partners in an LLP. For more information on LLP registration and reporting requirements, see the contact information for the offices of the secretary of state, listed in Section VI(a). Note that one potential drawback of LLP's, if you will do business in other states besides Pennsylvania, is that some states, namely California and New York, will only recognize certain types of professional partnerships as LLP's. If yours is not a professional partnership, those states may simply treat your LLP like an ordinary general partnership, with no limitation of liability. (d) Corporations. To form a corporation in Pennsylvania, you must file articles of incorporation with the secretary of state and pay a fee of $125. Publication of either the intent to file or the actual filing of articles of incorporation must be made in two newspapers of general circulation, including a legal journal, if that is possible. Proof of advertising must be retained in your records, but need not be filed with the secretary of state. A foreign corporation (one formed under the laws of another state or a foreign country), must obtain a certificate of authority before it may legally conduct business in Pennsylvania, by filing an application for a certificate of authority and paying a filing fee of $250. As with filing articles of incorporation, a foreign corporation that obtains a certificate of authority must also satisfy the publication requirements. For more information on filing articles of incorporation or applying for a certificate of authority to do business in Pennsylvania, see the contact information for the offices of the secretary of state, listed in Section VI(a). In addition, once your corporation is formed, it will be required to file annual reports along with the corporate income tax returns each year. In addition to paying federal income taxes on its income, a corporation that does business in Pennsylvania must also file corporate income tax returns with the state, plus paying a capital stock tax or franchise tax along with the Pennsylvania corporate income tax. See Section IV(c) for a discussion of state corporate income tax rates and tax return filing requirements, as well as a description of the capital stock/franchise tax that applies to corporations and limited liability companies. For tax forms and more information on corporate income and franchise taxes in Pennsylvania, see the contact information for the offices of the Pennsylvania Department of Revenue, listed in Section VI(a). (e) S Corporations. An S corporation is simply a regular corporation that has elected, for federal or state income tax purposes, or for both, to be taxed somewhat like a partnership, with its income, losses and tax credits flowing through to its owners, who report such income, losses, or credits on their individual tax returns. Pennsylvania recognizes S corporations for income tax purposes, and treats them in a manner similar to the federal tax treatment. (However, an S corporation will still be subject to franchise or capital stock tax.) Until 2006, a separate state S corporation election was required, which had to be made within 75 days of the start of the taxable year, on Form REV-1640. To qualify for S corporation status under Pennsylvania income tax laws, a federal S corporation election must be in effect, and a copy of the IRS approval notice must be furnished to the Pennsylvania Department of Revenue when it is received. For tax years beginning after December 31, 2005, a "small corporation," one that has elected federal S corporation status, is automatically treated as an S corporation for Pennsylvania tax purposes, unless 100% of the shareholders consent to its NOT being treated as an S corporation for Pennsylvania tax purposes. Once the "opt-out" election is made, it cannot be reversed for 5 years. LLC's which are treated as corporations for state income tax purposes may also elect S status. See Section IV(c) for more details on the Pennsylvania corporation income tax and the franchise and capital stock taxes. (f) Limited Liability Companies. Pennsylvania, like every other state in the U.S., has adopted a limited liability company (LLC) law. Thus, in addition to the traditional choices of a sole proprietorship, partnership, or corporation, businesses that operate in Pennsylvania may also choose to operate in the form of an LLC. In most states, LLC's are very attractive entities for small businesses in that they offer the same protection as a corporation from creditors for debts of the business, while offering much of the flexibility plus the flow-through tax treatment of a partnership for federal tax purposes. See Section IV(c) for a discussion of the income tax and franchise tax/capital stock tax treatment of LLC's under Pennsylvania tax laws. To form an LLC under the laws of Pennsylvania, one or more persons, not necessarily owners, must file a certificate of organization with the secretary of state, which must be accompanied by a filing fee of $125. Foreign LLC's, those formed under the laws of another state, must obtain a certificate of authority to do business in Pennsylvania, by filing an application for a certificate of authority with the secretary of state and paying a filing fee of $250. Note that, like corporations, LLC's, other than certain professional service firms, were previously fully subject to the Pennsylvania corporate net income tax and franchise or capital stock taxes. However, beginning in 1998, LLC's that are treated as partnerships for federal tax purposes are also treated like partnerships for Pennsylvania income tax purposes (but are still subject to franchise tax). Single-member LLC's that are disregarded entities for federal tax purposes are treated the same (as sole proprietorships if owned by an individual) for Pennsylvania income tax purposes -- that is, the net income or loss is reported on the owner's individual Pennsylvania income tax return. However, the franchise tax applies to a single-member LLC and to any other LLC except certain professional LLC's that are treated as limited partnerships for state income tax purposes. Domestic and foreign LLC's engaged in rendering professional services must file an annual registration statement with the secretary of state, and pay an annual registration fee of $300, indexed for inflation every three years after 1997 ($380 in 2009), times the number of resident members who were licensed to provide professional services (minimum of $380 in 2009). The next adjustment will be after December 31, 2009. For more information on filing articles of organization for an LLC, see the contact information for the offices of the secretary of state, listed in Section VI(a). (a) In General. When acquiring an existing business, there are a number of state legal and tax issues you or, preferably, your business attorney, should attend to before closing the purchase. These include matters such as doing a title search for any real property that is being acquired, checking for any recorded security interests on personal property items, and thoroughly researching county, state, and federal records for any judgment liens, tax liens, or other liens, before property is acquired. You will also benefit from consulting a tax advisor before the agreement of sale is negotiated, in order to seek a structuring of the agreement so that the purchase price is allocated among the assets in a way that favors you. You may be able to obtain considerable tax savings if the purchase price is allocated in a way that gives you the best possible tax results under federal and state income tax laws, and other state tax laws, such as sales/use tax or property tax laws. Depending upon the state (or states) in which the seller's assets are located, you may also have to comply with state bulk sale or bulk transfer laws. You should also obtain tax releases from various state taxing agencies, as discussed below. (b) Bulk Sale Laws. Typically, bulk sale laws require either publication of legal notices to all creditors in advance of the sale and recording of such notices in some cases, or maintenance of detailed lists of the property to be transferred, for inspection by the public. Pennsylvania is one of the many states that has repealed its bulk sale laws, so you no longer have to be concerned with this requirement when buying a business in Pennsylvania. However, there continues to be a bulk sale requirement for various state taxes, as described in the following section on tax releases. (c) Tax Releases. When you acquire an existing business, you will want to make sure that you do not unwittingly become liable for any unpaid taxes owed by the seller. Typically, to protect yourself, you will need to receive a tax release or releases from various state taxing agencies, for sales and use tax, income taxes, and state unemployment taxes. If you fail to obtain such a release or written statement from the tax agency that the seller is not delinquent on any tax payments, you will be held responsible for such tax if it is not withheld from the purchase price proceeds and paid to the state at the time the sale of the business transpires. In Pennsylvania, you need to obtain tax clearances from the seller for sales and use tax, income tax, withholding tax, and state unemployment tax owed by the seller. Any time a business is engaged in a bulk sale of 51% or more of its assets, or 51% or more of any class of assets, such as real estate or machinery and equipment, state law requires the seller to give notices of the bulk sale to the Department of Revenue at least 10 days prior to the transaction, and to request a tax clearance certificate, for purposes of:
A similar rule applies with regard to state unemployment tax, except that notice must be given to the Department of Labor and Industry, rather than the Department of Revenue. You must receive a copy of such tax clearance certificates from the seller, or you, as purchaser, will be liable for any such unpaid taxes of the seller. (d) Unemployment Tax Rating of Seller. Besides obtaining tax releases, you may find it advantageous to succeed to the seller's unemployment tax experience rating, if the seller has a tax rate lower than you would otherwise obtain as a new business. To obtain the seller's favorable experience rating as a successor employer, you will need to apply on a timely basis to the Bureau of Employer Tax Operations, Pennsylvania Department of Labor and Industry, requesting that you be treated as a successor employer. The Form PA-100, Enterprise Registration Form, a lengthy booklet of forms and instructions available from the Department of Revenue, contains an application form for requesting such a reserve account and experience rating transfer from a predecessor employer. Both the buyer and seller must sign the form, if requesting a reserve account and experience rating transfer. Where there is significant common ownership of the buying and selling businesses, the state may require that the experience rating of the seller be transferred to the buyer. PLANNING POINT: EXAMPLE: IV. PENNSYLVANIA TAXES AND OTHER GENERAL REQUIREMENTS. (a) In General.
Like most large industrial states, the Commonwealth of Pennsylvania
has a bewildering variety of taxes on businesses. However, for
a major industrial state, it has an unusually low personal income
tax rate of only 3.07%. This low rate is somewhat misleading,
however, since you will have almost no deductions, other than
business deductions, and losses in any of the eight categories
of income specified under the Pennsylvania tax law cannot be used
to offset income in any of the other categories. Thus, for example,
business losses will not offset any of your income from other
sources.
In addition, there are substantial local income taxes, often
higher than the state income tax, in the Pittsburgh and Philadelphia
areas, on wages and other compensation income, and a Philadelphia
tax on investment income, all of which considerably increase the
total income tax burden. (See Section IV(c)
regarding local income taxes.)
One very favorable feature of the Pennsylvania tax laws
is the absence of any state or local property taxes on
any kinds of tangible personal property, such as business
equipment or inventories. However, local governments can
impose property taxes on intangible personal property, and
the state imposes a similar tax on corporate loans, a tax
which corporations must withhold from interest payments.
Overall, anyone doing business in Pennsylvania will find
that taxes, especially corporate taxes, are relatively high,
and that there is a very complex tax and regulatory structure
to navigate. Many local taxes are imposed on almost every
phase of business activity, from parking taxes (extended
in 2005 to valet parking) to occupancy taxes on owners or
renters of business premises, including home-based offices,
so be sure to do your research at your local city and county
government offices before you get started in business.
For state tax forms and tax information, see the contact
information for the Pennsylvania Department of Revenue
in Section VI(a).
(b) State and Local Licensing.
Nearly any business, operated anywhere in the United States,
will have to have at least one government license of some
kind. In most cases, this will be a local license, issued by
your city or county. Before you open your business, contact
your local city or county hall and find out if your particular
business needs one or more local licenses. Most kinds of
local business licenses are granted upon payment of a fee,
with no further requirements, except possibly for annual
or other periodic renewal fees.
However, if you are engaging in any kind of food business,
you will usually need to also obtain a health department
permit and show that you are in compliance with health
department food-handling requirements. In addition, be
sure to check with an attorney or local government zoning
or planning department officials to determine if your
business will be in compliance with all local zoning and
planning restrictions. If you own or rent any type of
facility, you will generally need fire department permits,
showing that you meet fire safety codes and, of course,
any construction or improvements to an existing structure
will almost always require a building permit. Even if you
intend to simply operate your business from your home, you
may be in violation of local zoning requirements, but this
is less likely to be a concern if you don't have clients,
customers, suppliers, or employees coming to your house on
business, on a regular basis.
State governments have traditionally required special
licenses for many kinds of professionals, such as physicians,
dentists, lawyers, and accountants. To further protect
consumers, Pennsylvania has expanded the list of occupations
that must be licensed by the state to include many other
occupations. Most state licenses not only require payment
of fees, but are only issued for a given profession or
occupation upon showing that you have completed certain
educational or experience requirements, or passed certain
tests, or some combination of the foregoing.
The $10 a year Pittsburgh occupation tax that was formerly
imposed on all businesses has been repealed, effective since
2005.
You can register your business with the state for
Pennsylvania income tax, sales and use tax, employer
withholding, state unemployment tax, and other state taxes
on a single state application form, Form PA-100,
Enterprise Registration, which you can obtain
from the Pennsylvania Department of Revenue. The form
can also be completed online at the Department of Revenue
website.
For help with state licensing and business registration
requirements in Pennsylvania, see the contact information
for the offices of the Professional and Occupational Affairs
Bureau, part of the Pennsylvania Department of State, listed in
Section VI(a), or PA Open for Business,
Pennsylvania Department of Community and Economic Development,
also listed in Section VI(a). PA
Open for Business provides a helpful free booklet (online), entitled
A Guide to Business Registration in Pennsylvania.
(Be advised, however, that some parts of the Guide,
such as the information regarding S corporation tax requirements
in Pennsylvania, are not up to date.)
(c) Income and Franchise Taxes.
Pennsylvania has both an individual income tax and a
corporate net income tax, as well as franchise taxes
on corporations and most limited liability companies.
In addition to state income taxes, Allegheny County
(which includes Pittsburgh) and Philadelphia, as well as
school districts in both of those localities and elsewhere
in the state, impose income taxes on wages and other earned
income and investment income, which are higher than the
state tax rate in some cases, although the Philadelphia
wage and net profits taxes were both reduced as of July 1,
2003, for both residents and nonresidents of Philadelphia.
Additional cuts in the wage and net profits tax are scheduled,
for both the resident and nonresident taxes, as well as for
Philadelphia School District tax on investment income, as
follows:
The Philadelphia tax on wages is imposed on the employee
and must be withheld by the employer. The tax on net profits
applies to self-employed persons, who may offset the tax with
a tax credit equal to 60% of their Philadelphia Business
Privilege Tax, discussed in the following paragraph.
The net profits tax does not apply to corporations.
The Philadelphia Business Privilege Tax is a tax on all
businesses in the city, imposed at a rate of 6.5% on net
income and 1.75 mills per dollar of gross receipts, beginning
July 1, 2006 (1.625 mills in 2007, 1.5 mills thereafter).
Wholesalers, retailers, and manufacturers may qualify for
lower tax rates under alternative calculations of the Business
Privilege Tax that are allowed for each of those three types
of businesses.
The residents of Philadelphia are also subject to the
Intergovernmental Cooperation Authority tax, at the rate
of 1.5%, which is in addition to the wage and net profits
tax rates for residents listed above.
Under the Local Tax Enabling Act of 2008, consolidated collection
procedures will be implemented for local income taxes for local
taxes levied and collected after December 31, 2011. (This will not
include school district income taxes.) The state Department of
Community and Economic Development will provide standard forms,
schedules, reports and returns to be used by local taxing
authorities once the new law goes into effect.
The city of Pittsburgh imposes a 1% tax on earned income and
net profits, and an identical school district tax (which does
not apply to nonresidents, generally) is also imposed, but at
a tax rate of 2%. Like the Philadelphia Wage and Net Profits
Tax, the two Pittsburgh taxes on wages are imposed on the employee,
not the employer, but must be withheld as a payroll deduction
by the employer. Effective since January 1, 2005, Pittsburgh
imposes a $52 per year Emergency and Municipal Services Tax on
employees and self-employed persons. Employers are required to
withhold this tax on behalf of employees.
Pittsburgh also imposes a 0.55% payroll tax on the payrolls
of employers who operate in Pittsburgh, effective in 2005.
Revenues from this new tax are being used to phase out the
Pittsburgh Business Privilege Tax, which was imposed at a rate
of 2 mills per dollar on gross receipts in 2006, and one mill
in the years 2007-2009. It was to be phased out by 2010.
TAXATION OF SOLE PROPRIETORS AND PARTNERSHIPS
The Pennsylvania individual income tax is imposed at a
flat tax rate of 3.07%.
Individual taxpayers generally pay state income tax on their
business earnings from a sole proprietorship, or on their share
of the earnings of a pass-through entity, such as a partnership,
LLC, or S corporation. Pass-through entities are not subject
to state income tax, generally. However, LLC's and S
corporations are both subject to the state franchise tax or
capital stock tax, like C corporations.
The Pennsylvania personal income tax return is Form PA-40,
which must be filed with the state Department of Revenue.
While the personal income tax rate is low, no standard
deduction or personal exemption is allowed. Also, all income
is broken down into eight categories and the net amount in
each category cannot be offset against losses in others,
and no itemized deductions are allowed. No single income or
expense item can be included on more than one of the eight
categories.
The eight categories of taxable income are:
Certain deductions are allowed against the income in
some of the categories, such as expenses offsetting business
income or rental/royalty income, plus certain unreimbursed
employee expenses that may offset compensation income. Three
special deduction are also allowed, for Archer Medical Savings
Accounts, Health Savings Accounts, and Tuition Account Programs,
as under federal tax law.
New Jersey and Pennsylvania have a reciprocal tax agreement
under which the two states have agreed that compensation
income earned in one state by residents of the other will
only be subject to state income tax in the state of residence.
This agreement applies to wages, salaries, tips, commissions,
and bonuses, but does not apply to self-employed income earned
from businesses or rendering of professional services. Thus,
for example, a commuter who lives in New Jersey but works in
Philadelphia is not subject to Pennsylvania income tax on his
or her salary or wages, but would be taxable on self-employed
income earned in Philadelphia.
Partnerships, or entities taxable as partnerships, such
as most limited liability companies, are not subject to
state income taxation in Pennsylvania,
but must file an information return with the Department of Revenue
each year, by April 15th for a calendar year partnership, showing
each partner's share of taxable income, losses, and credits, on
Form PA-20S/PA-65, along with a copy of the federal
Form 1065.
Also, certain limited partnerships may choose under state law to
be "electing partnerships," in which case they will be treated as
business corporations for most purposes under state law, including
the tax laws.
For tax years beginning in 2004 or later, Pennsylvania
requires partnerships that have nonfiling corporate partners
(i.e., corporations that do not file Pennsylvania
income tax returns) to withhold tax on behalf of any such
corporations. Returns and payments of withheld tax must be
made by the 15th day of the fourth month after the end of
the taxable year of the partnership.
In addition, if a pass-through entity (a partnership, LLC,
or S corporation) has any Pennsylvania-source income that is
allocable to a nonresident owner (partner, member or shareholder),
it is required to pay a state withholding tax on such income.
This requirement does not apply to any publicly traded partnership,
as that term is defined under the federal Internal Revenue Code.
Note that to the extent any such tax is withheld on behalf of a
nonresident taxpayer, the nonresident may claim the withheld tax
as a payment credit when filing his or her Pennsylvania personal
income tax return.
Individual taxpayers doing business as sole proprietors
(or who are partners in partnerships, members of LLC's, or
shareholders in S corporations), who have taxable income
from the business, will generally be required to make advance
payments of estimated Pennsylvania individual income taxes,
on Form PA-40ES, if their net taxable income
from sources other than compensation from which Pennsylvania
income tax is withheld is $8,000 or more. This equates to tax
liability of $246 or more that is not covered by withholding.
Estimated tax payments are due in four installments, on
the 15th day of the 4th, 6th, and 9th months of the taxable
year, and the 15th day of the first month of the following year.
To avoid penalties for underpayment of estimated tax, you
must either pay in 90% of the current year's tax, or 100%
of the tax computed on the amount of the previous year's
income at the current year's tax rates.
The Pennsylvania corporate income tax rate, on corporations
other than S corporations, is imposed at the flat rate of 9.99%.
While this rate was reduced from over 12% a few years ago, it
remains one of the highest corporate tax rates of any state,
with only one state (Iowa) and the District of Columbia imposing
higher corporate income taxes in 2009.
In addition to the corporate income tax, corporations
formed in Pennsylvania, except for certain family farm
corporations,
are subject to a tax on their capital stock, and foreign
corporations that do business in Pennsylvania are subject
to a corporate franchise tax, which also applies to LLC's.
The capital stock tax and franchise tax are essentially
the same, and are imposed at a rate of 1.89 mills per dollar
(0.189%) of the value of a corporation's capital stock for
the year 2009. The value of capital stock is computed by
adding 75% of the company's net worth to an amount equal to
the average net income for several years, capitalized at
9.5%. That amount is then multiplied by 50%, then the balance
is reduced by an exemption of $150,000, before the tax is
computed. The minimum annual tax of $200 has been eliminated.
This tax calculation can be expressed algebraically as
follows:
The franchise and capital stock tax is being phased out
over a number of years, and is to be phased out totally after
the year 2010. The 1997 tax rate of 12.75 mills dropped
steadily to 4.89 mills in 2006, 3.89 mills in 2007, 2.89 mills
in 2008, 1.89 mills in 2009, and 0.89 mills in 2010, until the
tax rate reaches zero in 2011.
Corporations or LLC's that are engaged in manufacturing,
processing or research or development activities within the
Commonwealth of Pennsylvania may exclude their investments
in such facilities from the capital stock/franchise tax base.
Franchise tax must be paid in during the year in four equal
installments, each equal to 25% of the estimated franchise
tax. Quarterly tax payments are due on the 15th day of the
third, sixth, ninth, and twelfth months of the taxable year.
The state corporation income tax return is Form
RCT-101, which must be filed with the Department of
Revenue by the 15th day of the fourth month (or one month
after the due date for the federal corporate return) following
the end of the taxable year, or by April 15th in the case of
a corporation whose taxable year is the calendar year. Both
the corporate income tax and the franchise or capital stock
tax, which applies to corporations and most limited liability
companies, can be reported on the same Form RCT-101.
Corporations are also required to make estimated tax payments
of their state corporate income tax in advance. Estimated tax
payments are due, in four equal installments, on the 15th day
of the 3rd, 6th, 9th, and 12th months of the taxable year.
The total estimated tax that must be paid in is usually equal
to 90% of the actual tax liability for the year, with certain
exceptions.
Penalties will be imposed for failure to make the required
estimated tax payments on a timely basis.
S corporations are exempt from Pennsylvania's corporation
income tax, but not from the franchise or capital stock
tax. In order to qualify as an S corporation for Pennsylvania
income tax purposes, a corporation must meet the following
requirements:
While, after December 31, 2005, a federal S corporation
election will also apply for Pennsylvania purposes, a
federal S corporation may elect NOT to be treated as an
S corporation by Pennsylvania, if 100% of its shareholders
file such a consent with the Pennsylvania Department of
Revenue, on Form REV-976. If the election
is made to "opt-out" of S corporation status for Pennsylvania
purposes, it may not be rescinded for 5 years.
A corporation that is an S corporation for Pennsylvania tax
purposes must file annual returns, by April 15th for a calendar
year corporation, on the same form on which partnerships and
LLC's taxable as partnerships must file, Form PA-20S/PA-65.
TAXATION OF LIMITED LIABILITY COMPANIES
In Pennsylvania, unlike most other states, a limited
liability company (LLC) was previously taxed like a
corporation for state income tax purposes, but an LLC could
avoid corporate taxation by electing S corporation status.
LLC's still remain liable for franchise or capital stock taxes,
even if electing to be taxed as S corporations, but an LLC
is now subject to the Pennsylvania corporate income tax only
if it has elected to be taxable as a corporation for federal
income tax purposes.
Under legislation that became effective in 1998, LLC's
that are treated as partnerships for federal tax purposes
are also treated like partnerships for Pennsylvania income
tax purposes.
A single-member LLC that is a "disregarded entity" for
federal tax purposes will be treated the same by Pennsylvania.
Thus, if an individual is the sole owner of an LLC, he or she
will report its income or losses on federal Schedule C
(Form 1040) and on his or her Pennsylvania individual
income tax return, Form PA-40, Schedule C or
Schedule F. However, a single-member LLC that
has elected corporate tax status for federal tax purposes would
not be disregarded, and would have to pay Pennsylvania corporate
income tax.
Note that it is not always entirely clear whether an LLC
is a "single-member LLC" or not, where the "single owner" is
a married couple who hold the entire ownership of the LLC in
some form of co-tenancy, such as joint tenants with right of
survivorship, tenants by the entirety, or as tenants in common.
The federal Internal Revenue Service (IRS) has taken a very
lenient position in Rev. Proc. 2002-69, where a couple
hold the LLC interest as community property, ruling that the IRS
will accept whatever choice the couple make, either to disregard
the LLC as an entity (treating it as a "single-member LLC") or
to treat it as a partnership between the husband and wife.
However, Pennsylvania is not a community property state, so
where the LLC is owned by a husband and wife in some form of
co-tenancy, it is unclear whether the IRS treatment would be as
lenient as for community property owners, since the IRS has not
issued any published rulings on whether an LLC can be a disregarded
entity if held in one of the various forms of co-tenancy by a
married couple, rather than being held as community property.
Thus, it is also unclear, where an LLC is owned by a husband and
wife as co-tenants, whether Pennsylvania would treat the LLC as
a single-member LLC or as a partnership.
LLC's that are treated as partnerships for federal tax purposes
file an annual Pennsylvania information return on Form
PA-20S/PA-65.
As noted above, certain professional LLC's with more than one
member are taxed like limited partnerships for state tax purposes
and are exempt from the franchise or capital stock tax.
Such professional LLC's must file an annual registration, and
pay an annual fee of $300 (indexed) to the secretary of state
for each member who is a licensed person in a "restricted
professional services" firm and was also a Pennsylvania resident
on December 31 of the year. The $300 amount is indexed and
adjusted for inflation every third year, after December 31, 1997
($380 in 2009).
"Restricted professional services" include the following
professions:
(d) Sales and Use Tax. Pennsylvania imposes a general sales tax at the statewide rate of 6%. The Pennsylvania sales and use tax, administered by the state's Department of Revenue, generally applies not only to sales of tangible personal property, but also to intrastate communications, restaurant meals, hotel occupancy, food that is sold through vending machines, and certain kinds of specified services relating to tangible personal property. Taxable services which are subject to tax include (among others):
There are generally no local sales or use taxes in the Commonwealth of Pennsylvania. However, Philadelphia and Allegheny County (Pittsburgh) each have a 1% local tax. Persons who maintain a place of business in the state and who sell or lease items subject to tax are required to obtain a sales tax license from the Pennsylvania Department of Revenue before beginning business. A license is issued for the principal place of business, if a seller has more than one place of business in Pennsylvania. There are numerous exemptions from the sales tax, the most important of which is the resale exemption. If you are a wholesaler or retailer who purchases goods that you will resell, your purchase of such goods may qualify as an exempt sale for resale. Similarly, if you sell goods to wholesalers or retailers for resale by them, your sale may also qualify as an exempt sale for resale. In any such transaction, the exemption is ordinarily available only if the purchaser gives the seller a valid resale certificate, certifying that the items are being purchased for resale, and not for use or consumption by the buyer. All "canned" software is now taxable, for invoices dated on or after November 1, 2005, regardless of whether it is delivered in physical form or is downloaded or otherwise delivered electronically. This ruling by the Pennsylvania Department of Revenue is based on a Pennsylvania Commonwealth Court decision in the case of Graham Packaging Co., Inc. v. Commonwealth, 652 FR 2002 (2005). A shadow tax, the use tax, is also imposed at the same rate as the sales tax. It is primarily intended to tax property that is acquired from sources outside of the state, in transactions not subject to sales tax, when such property is used or consumed within Pennsylvania. Use tax may also apply to items purchased on an exempt basis, such as for resale, if such items end up being used or consumed, instead of being resold. Before making any taxable sales, you will need to register your business with the Department of Revenue on Form PA-100, Enterprise Registration. This form can also serve as your registration for employer withholding and various other state taxes. Sales tax returns are due monthly, by the 20th day of the following month, for sellers whose tax was $600 or more for the third quarter of the preceding year. Smaller firms may file quarterly, semi-annual, or annual returns. If a vendor pays all sales and use taxes that are due on a timely basis, the tax is discounted (reduced) by one percent, in order to compensate the vendor for the time and expense of collecting and paying the tax. For more information on Pennsylvania sales and use tax registration and compliance, see contact information for the offices of the Department of Revenue, in Section VI(a). (e) Real and Personal Property Taxes. In Pennsylvania, as in every other state, any business real estate you own will be subject to real property taxes. In general, there is little that you must do, unless you wish to challenge your assessed valuation, since the assessor will bill you for each year's property taxes as they come due. The state of Pennsylvania does not impose any property taxes on personal property of any kind, either tangible or intangible. ("Personal property" is any kind of property that is not real estate.) However, the counties are allowed to impose a personal property tax on certain types of intangible personal property, at the rate of $4 per $1,000 of valuation. Generally, loans that are subject to the corporate loans tax, or stock in corporations subject to Pennsylvania franchise capital stock taxes, have not been subject to local intangibles taxes. However, the Pennsylvania Supreme Court has ruled, in Annenberg v. Commonwealth (June 1, 2000), that this exemption was unconstitutional and discriminated against interstate commerce. Tax collectors were instructed to provide a retrospective remedy, which may include collecting tax on previously exempt stock. Such intangible property taxes are also imposed by the city of Pittsburgh and the Pittsburgh school district. (f) Other Business Taxes. Pennsylvania imposes a number of excise and other taxes on businesses, including:
(g) Trade Names. A trade name, also known as a fictitious or assumed name, is any name used in the course of business that does not include the actual legal names of all the owners of the business. Thus, if your business goes by any name other than your own real name, it is operating under a trade name. The same is true of a corporation, if it operates under a name other than its legal name. A trade name might also be one that suggests the existence of additional owners, by using such words as "company," "associates," or "group." In most states where you do business, it will be necessary to register a trade, fictitious, or assumed name, so that people who do business with you can find out who the actual owners of your business are. You may also want to register any such trade name, as a means of protecting against other companies usurping that particular trade name. However, in Pennsylvania, filing under the Fictitious Name Act does not create any exclusive or other right in the fictitious name. The Pennsylvania Fictitious Name Act typically requires registration of any business operating under a fictitious name. The surname of a person, standing alone or coupled with words that describe the business, is not a fictitious business name. However, for partnerships, the last names of all partners must be listed or the fictitious name rule applies. The registration requirements do not apply to professional activities. Any entity may also voluntarily register a fictitious business name, if it wishes to do so. Registration requirements vary, and advertisement of the fictitious name registration may be required where an entity includes an individual party. To register an assumed or fictitious business name, you must file Form DSCB:54-311 with the Corporation Bureau in the Department of State. There can be significant consequences for failing to register a fictitious business name. No person or entity that is required to register a fictitious name but fails to do so will be allowed to bring a suit in any Pennsylvania court, unless it first pays a civil penalty of $500 to the Commonwealth of Pennsylvania. You can register a fictitious name for a filing fee of $70 or pay $50 to register a trademark, by registering with the Pennsylvania Secretary of State's office, Corporations Bureau. V. EMPLOYER REQUIREMENTS IF YOU HAVE EMPLOYEES (a) Employer Registration and Withholding. Once you hire the first employee in your business, you must comply with numerous Federal and state laws. One of the first things you will need to be concerned about as a new employer is the requirement that you withhold personal income taxes from the wages of your employees. As an employer, you are responsible for withholding the taxes and paying them over to the government on behalf of the employee. If you have any employees, you will already be withholding federal income tax and FICA taxes from their wages. Since Pennsylvania imposes a state income tax on the income of individuals, you will need to also withhold Pennsylvania income tax from the wages of your employees. Before you begin to pay wages, you must register as an employer with the Department of Revenue, using Form PA-100, Enterprise Registration, which can be used to register for other state taxes as well. For more information on Pennsylvania income tax withholding and registration requirements for employers, see the contact information for the Registration Division, Bureau of Business Trust Fund Taxes, of the Department of Revenue, listed in Section VI(a). In addition, employers will be required to withhold various occupational and wage taxes from employees' wages in the cities of Pittsburgh and Philadelphia, so you need to contact the revenue departments of those cities, if you operate in either, for their withholding and tax payment requirements. Also see Section IV(c). The city of Pittsburgh adopted a number of tax changes, effective in 2005, including a new 0.55% payroll tax that is imposed on the employer, rather than the employee, and is in addition to the city taxes that must be withheld from wages. Its business privilege tax, at a rate of 2 mills per dollar on gross receipts in 2006, and one mill in the years 2007-2009, is being phased out over several years, by 2010. Pittsburgh also imposes a $52 a year Emergency and Municipal Services Tax on each person who engages in an occupation in the city, effective as of the 2005 tax year. Employers must withhold the tax as a payroll deduction, while self-employed individuals must file a return and pay the tax directly to the city treasurer. (b) Unemployment and Other State Payroll Taxes. If your business has one or more employees, you, as an employer will generally be required to pay state unemployment tax based on the amount of such wages paid. Employers subject to the Pennsylvania unemployment tax are required to register with the Pennsylvania Department of Labor and Industry, on Form PA-100, on the date wages are first paid. New employers are generally required to pay tax at a rate of 3.5% plus a 5.8% surcharge, or a total rate of 3.7030%, in 2009 on the first $8,000 of wages paid to each employee (a higher rate of 10.2626% applies for construction employers). After you have had employees for a while, you will develop an unemployment tax experience rating. This rating is based on the number of employees you terminate who then claim unemployment benefits and the amount of such benefits paid to those former employees, under complex formulas. The state will inform you when they have assigned you an individual tax rate based on your firm's experience rating. That rate may be higher or, if you have had relatively few benefit claims charged to your account, lower than the standard new employer tax rate you initially were paying. The above unemployment taxes must be paid by you, as the employer. However, your employees must usually also pay in a small portion of their wages, which is 0.06% of their TOTAL wages (not limited to the wage base amount) in 2009. You must withhold this tax from their paychecks and pay it over to the state along with your employer contributions. In recent years, the employee contribution rate had been reduced to zero, because the state unemployment fund exceeded certain specified solvency levels, but the zero rate no longer applies at this time, and the withholding tax will remain in effect for so long as the state fund falls below the specified solvency level. For more information on your Pennsylvania unemployment tax obligations as an employer, see the contact information for the offices of the Department of Labor and Industry, listed in Section VI(a). (c) Workers' Compensation. Workers' compensation insurance is a state-mandated insurance requirement for most employers, in almost every state. States that require workers' compensation coverage also generally allow some companies that can demonstrate sufficient financial resources to self-insure, in lieu of purchasing such insurance from state-operated or private insurers. However, as a practical matter, most small businesses with employees will have to obtain workers' compensation insurance coverage, as few, if any, small firms will have the financial wherewithal to obtain state permission to self-insure. In Pennsylvania, virtually all businesses with one or more employees are required by law to have workers' compensation insurance, except those able to self-insure. Note, however, that a sole proprietor or a partner in a partnership is self-employed and thus is generally not considered an employee. State law also exempts from coverage licensed real estate salespersons or associate real estate brokers affiliated with a licensed real estate broker or licensed insurance agents affiliated with a licensed insurance agency, under a written agreement, if remunerated on a commission-only basis and qualifying as independent contractors for tax purposes. Insurance coverage can be obtained from the State Workers' Insurance Fund (see contact information in Section VI(a)) or from a number of private insurance companies that are licensed to sell workers' compensation insurance in Pennsylvania. Workers' compensation provides wage loss and medical benefits to employees injured on the job and it protects you, as an employer, from legal action for damages for injuries or job-related illnesses suffered by your employees. In effect, it is a "no-fault" insurance system for work-related injuries or illnesses. Thus, if you fail to obtain required workers' compensation insurance, and an employee is injured on the job, you will have opened yourself to unlimited liability and severe legal consequences, so it is very important to obtain workers' compensation insurance for your employees. Be aware that neither general liability nor health and accident insurance can properly substitute for workers' compensation insurance. As an employer, you must notify injured employees of their benefits and post a notice in the workplace, such as the Form LIBC-500, informing your employees of their workers' compensation coverage. The notice must include the following statement: "Remember, it is important to tell your employer about your injury." For more detailed information regarding your obligations as an employer under the Pennsylvania workers' compensation laws, contact your insurance carrier or see the contact information for the offices of the Pennsylvania Department of Labor and Industry, listed in Section VI(a). (d) State Wage and Hour Laws. Some employees of certain small firms not engaged in interstate commerce are not covered by the federal minimum wage and overtime laws. However, even if few or none of your employees are covered by the federal wage-hour laws, if, for example, because your firm does less than $500,000 a year in gross sales and the employees in question are not deemed to "...engage in (interstate) commerce...," they will still generally be subject to the Pennsylvania wage-hour laws, which provide for a state minimum hourly wage that is the same as the federal minimum, but which increased to $6.25 on January 1, 2007 and to $7.15 on July 1, 2007 for companies with more than 10 employees, increasing to $7.25 on July 24, 2009. For smaller employers, the minimum wage increased to $5.65 on January 1, 2007, $6.65 on July 1, 2007, $7.15 on July 1, 2008, and will increase to to $7.25 on July 24, 2009. Pennsylvania law requires, like federal wage-hour laws, that you pay covered workers time-and-one-half for hours they work in excess of 40 hours a week. Note that, as under federal wage-hour laws, certain classes of executive, administrative, and professional employees are exempted from the Pennsylvania wage-hour rules. However, the Pennsylvania overtime rules differ in a number of respects from the new federal overtime requirements. In some cases, the Pennsylvania laws require payment of overtime where federal law does not, and in some cases the opposite is true. Whichever requirement is more stringent, federal or state, is the standard that must be applied. An employer must pay overtime if either the new federal rules or Pennsylvania law requires overtime payment. EXAMPLE: EXAMPLE: In some cases, the federal rules are more stringent than the Pennsylvania overtime requirements. For example, the Federal rules increase the minimum threshold's required salary to $455 per week, or $23,660 annually. An executive, administrative, or professional employee must make this amount, at least, or overtime is required. Pennsylvania still maintains its test to determine whether the exemption applies to employees making a weekly salary over $155.00. However, an employer would violate federal rules if the employer did not pay overtime to an employee making below $455 per week or $23,660 annually, even if under Pennsylvania law the employee were considered to be exempt as an executive, administrative, or professional employee. Besides the federal wage-hour posters that you must display in the workplace, you must also display a state wage-hour poster, which you can obtain from the Bureau of Labor Standards of the Department of Labor and Industry. In addition to wage-hour laws, most businesses are subject to federal child labor laws, which put numerous restrictions on the working hours and kinds of work in which minors under the age of 18 may engage. Your business must also be aware of similar state child labor laws, in Pennsylvania. An employment certificate is required for any children under the age of 18, and children under age 14 generally may not work at all, with only a very few limited exceptions, such as for delivering newspapers (children 11 or older), working as golf caddies (12 or older), or working as entertainers (7 or older). Children of age 14 or older may usually be hired in non-hazardous occupations, but their hours are strictly limited, and employment rules are more restrictive for 14- and 15-year-olds than for 16- and 17-year-olds. Minors under age 18 may not work:
Minors under age 16 are not allowed to work before seven in the morning or after seven at night (or ten at night, from June to Labor Day). In addition, they may not work more than four hours a day on school days or 18 hours a week during school weeks. Minors 11 or older may deliver newspapers, but if under 16 years of age, may not work before 5 a.m. or after 8 p.m. on any given day. Also, minors under the age of 18 may not work for more than 5 hours continuously without a meal break of at least 30 minutes. For more detailed information on Pennsylvania wage-hour and child labor laws, contact the Bureau of Labor Law Compliance of the Pennsylvania Department of Labor and Industry, at the address listed for that agency in Section VI(a). (e) State Occupational Safety and Health Laws. Employers in Pennsylvania must comply with state and federal job safety laws designed to prevent injuries resulting from unsafe or unhealthy conditions in the workplace. The Bureau of PENNSAFE of the Pennsylvania Department of Labor and Industry enforces health and safety standards issued under the laws of Pennsylvania. However, since Pennsylvania has not adopted a federally-approved plan for enforcing health and safety laws in the state, the primary responsibility for enforcing health and safety standards in Pennsylvania, as in a majority of the other states, remains with the federal Occupational Safety and Health Administration (OSHA) agency. Note that while you may obtain a free safety consultation from federal OSHA experts, they must and will cite you for any violations they discover at your workplace. This is not the case with state safety inspections. If you request a safety consultation from the Bureau of PENNSAFE and they detect violations, they will not cite you if you promptly correct the unsafe conditions. For information on your job safety and health obligations as an employer, required posters, and possible on-site safety consultations, see the contact information for the offices of the Bureau of PENNSAFE, listed in Section VI(a). (f) Other Miscellaneous State Labor Laws. Other Pennsylvania labor laws you need to be aware of, as an employer, include the following: (1) Wage payments to employees. Pennsylvania law requires generally that employers pay wages not less frequently than semimonthly, unless stipulated otherwise in the contract of hiring. If an employee quits or is discharged from employment by the employer, final wages must be paid no later than the next regularly scheduled payday and, if requested by the employee, such payment must be made by certified mail. Where wages remain unpaid for 30 days beyond the regular payday, the employee is entitled to receive, in addition to the wages owed, 25% of the amount of wages owed or $500, whichever is greater. As an employer, you must designate in advance a payday on which wages other than fringe benefits and wage supplements will be paid. (Overtime wages may be considered as wages earned and payable in the next succeeding pay period.) You must notify each employee at the time of hiring of the time and place of payment of wages and the rate of pay and the amount of any fringe benefits or wage supplements to be paid to the employee. (2) Right-to-work laws. About half the states have enacted "right-to-work" laws, which guarantee that no person may be denied employment for refusing to join a union or for not paying union dues, thus banning either "union shop" or "agency shop" agreements, or both. In a union shop, an employee not belonging to a union may be hired but then must join the union, usually within 30 days. In an agency shop, an employee need not join the union but, to remain employed, must pay union dues. Pennsylvania does not have such a right-to-work law and allows union shop or agency shop contracts between an employer and a union. To the contrary, Pennsylvania is a very pro-union state and its labor law prohibits any kind of agreement with an employer in which an employee agrees not to become or remain a union member. (3) State anti-discrimination laws. In addition to compliance with federal anti-discrimination laws, employers must also be aware of and comply with state civil rights laws in Pennsylvania, and display a poster informing employees of their rights. You can obtain this poster from the nearest office of the Pennsylvania Human Relations Commission. The Pennsylvania law prohibits discrimination in employment on the basis of race, color, religious creed, ancestry, age (if over age 40), sex, national origin, or non-job related handicap or disability. The employment discrimination rules apply to any person who employs four or more persons within the commonwealth. (4) Reporting new hires. Under federal welfare reform laws, employers in all states are now required to report newly-hired (or rehired) employees to a designated state agency (the New Hire Reporting Program, for Pennsylvania employers) within 20 days after the date of hire. Reports may be filed online, or by mail or fax. See the contact information for new hire reporting listed in Section VI(a). (5) Summary of Posting Requirements. In addition to any required federal labor law posters, Pennsylvania employers are required to post the following state labor law posters in the workplace:
(6) Lie Detector Tests Prohibited. Pennsylvania law prohibits all private sector employers from using any kind of lie detector test as a condition of employment, except with respect to individuals who would dispense or have access to narcotics or dangerous drugs. Violation of this law is a criminal offense -- a second degree misdemeanor. (7) Pennsylvania smoke-free workplace rules. Effective September 11, 2008, the state legislature enacted the Pennsylvania Clean Indoor Air Act, which generally prohibits indoor smoking in public places and workplaces throughout the state, with the exception of the City of Philadelphia. "Public places" include schools, restaurants and bars, healthcare facilities, vehicles used for mass transportation, sports and recreational facilities, and indoor areas serving as a place of employment. Businesses must prominently post "No Smoking" signage on their premises. VI. STATE SOURCES OF HELP AND INFORMATION (a) Key State Agencies Contact Information. Pennsylvania, as many states have done in recent years, has set up a "one-stop" center to help your new or existing businesses to obtain all necessary state licenses and permits from a single office, and can refer you to the appropriate agencies to meet all the applicable legal and regulatory licensing requirements. PA Open for Business is the center set up by the state Department of Community and Economic Development and other state agencies to aid businesses in getting started or relocating to Pennsylvania. Its website (see Section VI(c)) contains a wealth of information for new businesses in the state and also allows you to register online with several major state agencies. You can register your business with the state for Pennsylvania income tax, sales and use tax, employer withholding, state unemployment tax, and other state taxes on a single state application form, Form PA-100, Enterprise Registration, which you can obtain from the Pennsylvania Department of Revenue. To obtain information and assistance on starting or relocating your business in Pennsylvania, contact: Pennsylvania Department of Community and Economic Development Also, you may want to request a copy of the helpful free publication, Entrepreneur's Guide -- Starting and Growing a Business in Pennsylvania, from the above agency. It was last updated in June, 2003, but still contains considerable amounts of information on specific state license requirements and sources of financing in Pennsylvania. Addresses and other contact information for other key state and federal government agencies in Pennsylvania, mentioned in preceding sections of this book, are listed below for your convenience. SECRETARY OF STATE. Contact the office of the Pennsylvania Department of State for information on:
Pennsylvania Department of State TAXES. Obtain state income, sales and use tax, and other miscellaneous business tax forms, instructions and information from the Pennsylvania Department of Revenue, which is the main tax collection agency in Pennsylvania. Also register with this agency as an employer, for state income tax withholding purposes, and for sales and use, unemployment, and other taxes, on Form PA-100, Enterprise Registration. Commonwealth of Pennsylvania Call, or send a written request for forms or instructions to: Pennsylvania Department of Revenue All material will be mailed or faxed directly to you. STATE LABOR LAWS. Contact the following agency about your obligations as an employer under various state labor laws, including:
Pennsylvania Department of Labor and Industry NEW HIRE REPORTING. File new hire reports within 20 days after hiring any employee, or fax your report to: Commonwealth of Pennsylvania STATE LICENSES. The following agency is the main Pennsylvania licensing agency. Register with this state agency for various types of state professional and occupational licenses. Professional and Occupational Affairs Bureau STATE SALES TAX. Obtain your sales and use tax license or permit and information on the Pennsylvania sales and use tax law, from the Department of Revenue, at the address given above for that agency. STATE UNEMPLOYMENT TAX. Contact the Pennsylvania Department of Labor and Industry at the address listed above to determine whether you are an employer subject to payment of state unemployment taxes, and for registration as an employer if you are subject. WORKERS' COMPENSATION INSURANCE. If you employ workers for whom you must supply workers' compensation coverage, contact the following agency for further information: Bureau of Workers' Compensation Or, contact the State Workers' Insurance Fund to obtain workers compensation insurance coverage: State Workers' Insurance Fund STATE OSHA PROGRAM. For information on the Pennsylvania occupational safety and health laws that will affect you as an employer in Pennsylvania, contact: Bureau of PENNSAFE STATE ANTI-DISCRIMINATION LAWS. Contact the following state agency for more detailed information on Pennsylvania civil rights laws that may apply to your business, and to obtain the anti-discrimination notice you are required to post in the workplace. Order publications or posters from the following address: Pennsylvania Human Relations Commission (b) Small Business Development Centers. A number of Small Business Development Centers (SBDCs) are located throughout Pennsylvania to assist you. These centers, usually located on college campuses, provide a wealth of start-up information and sponsor frequent business-oriented seminars. Contact the lead office below for information, or for the location of other SBDCs nearer to you. SBDC: State Director's Office (c) Internet Sites. For anyone with access to the Internet, there is a wealth of state and even local business information provided by state and local governments. All states now have a state government Web page, and most major Pennsylvania state agencies also have sites on the Internet where you can obtain useful small business information on matters such as state taxes, financing sources, or the addresses and phone numbers (or e-mail addresses) of various state and federal agencies' offices in Pennsylvania. Since new sites are appearing frequently, you might also want to search for other Pennsylvania government Web sites by using one of the popular Internet search engines, such as Google, Excite! or Yahoo. To start your Internet search for Pennsylvania government information, you may want to begin with the following Internet sites: PA Open for Business (Online registration of your business, plus links to many helpful business resources): Pennsylvania Small Business Development Centers (Small business information and assistance): Commonwealth of Pennsylvania Government Home Page (Links to various state agencies): Pennsylvania Department of Revenue (State tax forms, tax information and assistance): Pennsylvania Department of State (Corporate, LLC and partnership filing information and forms): Pennsylvania Department of Labor and Industry (Minimum wage/hour, child labor, wage payment, unemployment tax, workers' compensation, occupational safety and health regulations): New Hire Reporting for Pennsylvania employers (Information on where and how to file new hire reports): (d) Financing Sources. For information and help on locating financing for your small business, contact the nearest U.S. Small Business Administration office in Pennsylvania, or contact the following state agency: Governor's Action Team The address of the Philadelphia District SBA Office (now located in King of Prussia) is: U.S. Small Business Administration |
Copyright © 2009 Michael D. Jenkins
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