In November 2020, the Pennsylvania Department of Revenue (DOR) issued guidance related to teleworkers and tax collection and imposition issues. The guidance was issued in reaction to the Governor’s Proclamation of Disaster Emergency for the COVID-19 pandemic. When the guidance was issued, the DOR said it would only be in effect until June 30, 2021, unless the disaster proclamation was lifted. The termination of the temporary rules will affect both employers and employees if the employees do not return to work in an out-of-state location.
Employers will be subject to the Corporate Net Income Tax (CNIT) unless the employee’s activities are limited to solicitation covered by P.L. 86-272. Sales tax collection responsibilities will also be imposed on a seller of goods who has an employee in the commonwealth.
On July 1, employees will now treat their compensation as Pennsylvania compensation, if they continue to work remotely in the commonwealth. While not required, the out-of-state employer may choose to withhold Pennsylvania income tax from the employee’s wages. The trap for the unwary is if the state in which the employer is located continues to impose a tax against the employee’s wages. Pennsylvania will not allow the employee to claim a credit for the other state’s taxes.
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Mark L. Nachbar
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