Pennsylvania Business Taxes – Property and Employment Taxes

October 8, 2018

If you’re thinking about starting a business in Pennsylvania, an important part of the financial side of your business plan is to evaluate the impact of taxes on your new business. Your lawyer and your accountant are key members of your business team that can help you evaluate what type of entity to form, how that entity should be taxed, and the taxes applicable to your business.

Part three of this series discusses taxes associated with ownership of real estate and employment taxes. Part one discussed sales and use taxes and others that may apply based on the nature of the goods you sell or the services you provide. Part two discussed taxes that may apply depending on the way your business is organized.

This post is not intended to be a substitute for legal or tax advice from your lawyer or accountant – you should talk to them in order to obtain advice to address your specific situation. Need a lawyer or an accountant? We might be able to help you with that!

Property Tax

In Pennsylvania, counties, municipalities and school districts bear the responsibility to levy and collect taxes on real estate and personal property. Unless you qualify for a specific tax exemption, real estate is subject to tax in Pennsylvania. Real estate tax rates vary from county to county, and real estate values are reassessed on a periodic basis. For more information on property tax appeals, check out our coverage on the topic in 2018 Property Tax Assessment Appeals.

Employment Taxes

Employers that have one or more employees (either residents or non-residents) in Pennsylvania are required to withhold an amount of personal income taxes from each payroll period reasonably estimated to be due with respect to the employee’s compensation. This, of course, is in addition to federal income tax and Social Security/Medicare withholding. For more information on Pennsylvania’s requirements and associated forms, please see the Department of Revenue’s Employer Withholding website.

In addition, Pennsylvania employers must register for unemployment compensation coverage with the Department of Labor and Industry. Employers are assessed a contribution tax rate each calendar year pursuant to a rate notice, which can be appealed if you disagree with the information provided on the notice.

If an S Corporation or LLC has either income from Pennsylvania or a Pennsylvania shareholder or member, the entity must file an information return and withhold quarterly personal income tax from nonresident individual owners based on the owner’s expected share of distributable Pennsylvania-source taxable income.

Matt Landis is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Widener University Commonwealth School of Law and works regularly with business owners and entrepreneurs.