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Pennsylvania Business And Tax Climate



Monika Miles - Pennsylvania

Pennsylvania, a northeastern state and one of the 13 original colonies, has a diverse terrain, which includes wide stretches of farmland, national forests and mountains. Philadelphia, the Keystone State’s largest city, displays its rich history in Independence Hall (where the Declaration of Independence and Constitution were signed) and the Liberty Bell, an enduring symbol of American Freedom. It was the second state to ratify U.S. Constitution, on December 12, 1787.

Business Climate

The first nationally chartered bank in the United States, the Bank of North America, was founded in 1781 in Philadelphia. After a series of Mergers, the Bank of North America is now part of Wells Fargo.

Agriculture is a major industry in the commonwealth of Pennsylvania. As of the most recent U.S. Census of Agriculture conducted in 2012, there were 59,309 farms in PA. PA ranks first in the U.S. in Agaricus mushroom production, fourth in apple production, fourth in Christmas tree production, fifth in dairy sales, fifth in grape production, and seventh in winemaking.

Historically, different geographic regions in PA were centers for different forms of agricultural production, with fruit production occurring in the Adams County Region, fruit and vegetables in the Lake Erie region and potatoes in the Lehigh County region. Modern agricultural production in PA includes corn, wheat, oats, barley, sorghum, soybeans, tobacco, sunflowers, potatoes, and sweet potatoes.

Casino gambling was legalized in Pennsylvania in 2004. Currently, there are nine casinos across the state with three under construction or in the planning phase.

Tax Climate  

The top individual income tax rate is 3.07% and the top corporate income tax rate is 9.99%.

Apportionment: Pennsylvania moved to a single-sales factor for corporate net income taxes from the traditional three-factor apportionment formula (property, payroll, and sales) several years ago.

Pennsylvania uses the market based method for sourcing of services and intangible property.

Sales Tax Structure  

Sales tax provides 39% of the commonwealth’s revenue, personal income tax 34%, motor vehicle taxes about 12% and taxes on cigarettes and alcohol beverages 5%.

Pennsylvania has enacted economic legislation. Remote sellers are required to pay PA sales tax if the company’s gross sales total more than $100,000 in the previous 12 months. This legislation will go into effect on July 1, 2019.

The state sales tax rate is 6%, which ranks 16th in the nation.

Pennsylvania is moderate in its approach to the taxation of technology products for sales tax purposes. All digital content, except for digital newspapers, are taxable. Prewritten computer software that is electronically downloaded is taxable while custom computer software that is electronically downloaded is exempt. Lastly, Software as a Service (SaaS) is taxable. How products are produced, sold and delivered is critical to determining their tax status.

Many states have annual sales tax holidays, during which certain items the state wants to promote the purchase of (like school supplies, emergency preparedness supplies, or energy efficient appliances) can be purchased sales tax free. Pennsylvania, however, does not currently have any scheduled sales tax holidays.

Random Facts

  • Of the original 13 colonies, Pennsylvania is the only state that does not border the Atlantic Ocean.
  • Hershey, PA is considered to be the Chocolate Capital of the United States.
  • In 1909, the first baseball stadium was built in Pittsburgh.
  • Pennsylvania is the first state to list their web site URL on a license plate.
  • Betsy Ross made the first American Flag in Philadelphia.
  • The Rockville Bridge in Harrisburg is the longest stone arch bridge in the world.
  • Actor Jimmy Stewart was born and raised in the town of Indiana. Each year at Christmas, the downtown area is decorated in the theme of the film, “It’s a Wonderful Life.”
  • Punxsutawney citizens are proud to be over shadowed by their town’s most famous resident, the world-renowned weather forecasting groundhog, Punxsutawney Phil. Punxsutawney is billed as the weather capital of the world.
  • Located in the Grape Coast region of Pennsylvania the city of North East has four thriving wineries and is home to the largest Welch’s grape processing plant in the country.
  • Pennsylvania is coined the snack food capital of the world. It leads all other states in the manufacture of pretzels and potato chips. The U.S. Chocolate industry is centered in Hersey, Pennsylvania, with Mars, Godiva, and Wilbur Chocolate Company nearby, and smaller manufacturers such as Asher’s in Souderton, and Gertrude Hawk Chocolates of Dunmore.

Have a tax question? Contact Monika Miles.

 

Monika Miles

Monika founded Miles Consulting Group which focuses on multi-state tax consulting, helping clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for 12 years combined in Big 4 Public Accounting and private industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.