Comprehensive Pennsylvania Small Business Tax Guide [2025]

Before establishing a new business in Pennsylvania, consider the taxes that could apply to your operations. Pennsylvania small business taxes can be complex and confusing, but this comprehensive guide will help you start your business in Pennsylvania. 

We’ll explain how to determine how much tax you’ll pay, which forms you should file, and the deadlines for each tax type. We’ll also highlight tax credits to help you lower your Pennsylvania business tax bill.

Pennsylvania Small Business Taxes: Overview

Like most states, Pennsylvania imposes several business taxes. Depending on your business activities and entity type, your company could be subject to multiple taxes. 

Review the following table to determine which Pennsylvania taxes could apply to your small business.

Pennsylvania Business Taxes – Relevance to Each Entity Type

As the above table shows, sales and use taxes can apply to any type of business. Applicability depends on the specific goods or services the business sells. We recommend consulting Pennsylvania state tax professionals for specialized help with your company’s facts. 

Pennsylvania Small Business Taxes: Explained

After determining the taxes applicable to your business, use the following table as a reference for tax rates and forms. We’ll explain each section in further detail below.

Pennsylvania Small Business Tax Rates and Forms

Pennsylvania Corporate Net Income Tax

Who must pay: Companies doing business in Pennsylvania and organized as C corporations for federal income tax purposes. Limited liability companies (LLCs) and sole proprietorships taxed as C corporations must also pay corporate income tax.

Businesses outside Pennsylvania selling products or services in-state might also need to pay. Certain exceptions apply to companies in specific industries. We recommend consulting state income tax professionals for specific advice.

Tax rate: Pennsylvania enacted a corporate income tax rate decrease starting with tax year 2023. The Pennsylvania corporate income tax rate varies by tax year.

• Tax year 2023: 8.99%

• Tax year 2024: 8.49%

• Tax year 2025: 7.99%

• Tax year 2026: 7.49%

Double taxation: Similar to federal double taxation of corporate profits, the concept can apply to Pennsylvania-based corporations and PA resident shareholders. Pennsylvania C corps pay corporate income tax on corporate profits, and Pennsylvania shareholders pay personal income tax on corporate dividend distributions.

Form to file: Pennsylvania Form RCT-101, PA Corporate Income Tax Report (Instructions)

Informational Returns for Pennsylvania Partnerships and S Corporations

Who must file: Entities organized as partnerships or S corporations for federal income tax purposes. LLCs or sole proprietorships taxed as partnerships or S corps must also file informational returns.

Tax rate: Not applicable

Pennsylvania doesn’t impose income tax on passthrough entities. Partnerships and S corporations pass income and expenses to their owners, who must report PA-sourced income on their Pennsylvania personal income tax returns. 

If your partnership or S corporation has non-Pennsylvania members, check the nonresident withholding tax section below.

Forms to file: 

• All Pennsylvania passthrough entities: 

  • For each Pennsylvania resident owner: PA Schedule RK-1, Resident Schedule of Shareholder/ Partner/Beneficiary Pass-Through Income, Loss and Credits
  • For each nonresident owner: PA Schedule NRK-1, Nonresident Schedule of Shareholder/ Partner/Beneficiary Pass-Through Income, Loss and Credits

• Pennsylvania partnerships with corporate partners: PA-65 Corp, Directory of Corporate Partners

Pennsylvania Personal Income Tax 

Who must pay: Individuals who earn income from Pennsylvania sources must report and pay tax on PA-sourced income. 

The following individuals should file returns:

• Pennsylvania residents, including those working outside Pennsylvania

• Sole proprietors of Pennsylvania-based businesses

• Individuals living outside Pennsylvania and earning income in-state

Tax rate: The Pennsylvania personal income tax rate has been 3.07% since 2004.

Form to file: Form PA-40, Pennsylvania Income Tax Return (Instructions)

The 2024 PA personal income tax form is not yet available. Before filing your 2024 income tax return, obtain the latest form from your tax professional or the Department of Revenue.

Pennsylvania Nonresident Withholding Tax

Who must pay: Pennsylvania partnerships and S corporations with nonresident members. Passthrough entities must withhold income tax on nonresident individuals’ PA-sourced income. Businesses must remit withholding tax to Pennsylvania.

Nonresident withholding tax covers the members’ PA income tax obligations without requiring nonresidents to file Pennsylvania personal income tax returns.

Tax rate: 3.07%

Form to file: Form PA-20S/PA-65 Schedule NW, Nonresident Tax Withheld by PA S Corporations and Partnerships

Use Form PA-20S/PA-65 ES (P/S), Declaration of Estimated Withholding Tax for Partnerships and S Corporations, to remit nonresident income tax withholding payments.

Pennsylvania Sales and Use Taxes

Who must pay: Any company selling taxable products and services must withhold and remit sales tax. 

Taxable items include the following:

• Tangible personal property, such as electronics, furniture, cosmetics, and jewelry

• Digital products downloaded or streamed electronically

• Taxable services, such as building maintenance and landscaping

Pennsylvania exempts certain foods and products from sales tax. 

Businesses must pay use tax when purchasing taxable goods and services from retailers that did not pay Pennsylvania sales tax. For example, out-of-state or online purchases could generate a use tax liability.

Tax rate: Pennsylvania’s sales tax rate is 6%.

Allegheny County and the City of Philadelphia impose local sales taxes in addition to the state sales tax.

• Allegheny County: 1% 

• Philadelphia: 2%

Form to file: Pennsylvania Form PA-3, Pennsylvania Sales, Use, and Hotel Occupancy Tax Return

Pennsylvania Employer Withholding Tax 

Who must pay: Businesses with employees must withhold income tax on wages paid to each employee. Certain businesses filing 1099-R or 1099-MISC to nonemployees must also withhold income taxes.

Tax rate: 3.07%

Forms to file: Each employer must submit withholding returns via the myPATH portal tax account and include the following:

• Form W-3, Quarterly Withholding Return

• W-2 withholding statements

• REV-1667, Annual Withholding Reconciliation Statement

• Form PA-501, Employer Deposit Statement

Pennsylvania Unemployment Compensation Tax 

Who must pay: All employers (any entity type) must file and pay unemployment compensation tax. Some exceptions apply to household employers.

Tax rate: Each employer’s tax rate varies. The 2025 tax rates range from 1.42% to 10.37%.

The PA Department of Labor and Industry sends each employer a Contribution Rate Notice at the end of each calendar year. Unemployment compensation tax applies to the first $10,000 paid to each employee annually. 

Additionally, employees pay 0.07% on all PA wages earned during calendar years 2024 & 2025. Employers must withhold employee wages and remit withholding taxes to the department.

Forms to file:

• Form UC-2, Employer’s Report for Unemployment Compensation

• Form UC-2A, Employer’s Quarterly Report of Wages Paid to Each Employee

Other Business Taxes in Pennsylvania

Your company might need to pay other Pennsylvania business taxes, depending on your industry and location. Consider the following list of taxes that could apply.

• Hotel occupancy tax

• City of Philadelphia income tax

• County or municipality real property taxes

• Gross receipts tax

• Loans tax

• Gross premiums tax

How to File Your Small Business Taxes in Pennsylvania

Filing requirements vary by tax type and company size. Review the following section to determine how to file your Pennsylvania business tax return forms.

Electronic or Paper Filing

The Department of Revenue allows electronic or paper filing for the following forms:

• Corporate net income tax

• Passthrough entity information returns

• Personal income tax

Mailing addresses depend on your payment method (if any) – check the form instructions. Electronic filing methods include Department-accepted e-filing programs, excluding myPATH.

Electronic Filing or Telefile

Pennsylvania requires taxpayers to submit the following forms and payments through the Department of Revenue’s myPATH portal, using a third-party preparer, or via telefile:

• Nonresident withholding tax

• Sales and use taxes

• Employer withholding tax

Passthrough entities can mail nonresident withholding tax payments and Form PA-20S/PA-61 ES to the following address: 

PA Department of Revenue

P.O. Box 280403

Harrisburg, PA 17128-0403

Unemployment Compensation Management System

The Department of Labor and Industry requires employers to file unemployment compensation reports electronically through the Unemployment Compensation Management System (UCMS).

Pennsylvania Small Business Tax Deadlines

When should you file your tax return? 

Review the following small business tax due dates for Pennsylvania companies. If the due date falls on a Saturday, Sunday, or holiday, the report is due the next business day. 

Pennsylvania Income Tax Forms

Due by April 15th: 

The following forms are due by the 15th day of the fourth month after the company’s year-end. Most businesses must file by April 15th, but fiscal-year taxpayers should check with a tax professional. 

• Passthrough entity information returns (taxpayers can obtain a five-month extension of time to file)

• Personal income tax (taxpayers can obtain a six-month extension of time to file)

• Nonresident withholding tax

Due by May 15th:

The corporate net income tax form is due one month after the federal tax return, IRS Form 1120. Most businesses must file by May 15th, but fiscal-year taxpayers should check with a tax professional. 

C corps can obtain a six-month extension of time to file.

Sales, Use, and Employment Tax Forms

• Sales tax returns are due monthly, quarterly, or semiannually, depending on the annual sales tax liability. The due date is generally the 20th of the month following the close of the filing period. 

• Employer withholding tax is due quarterly, monthly, semi-monthly, or semi-weekly. Your filing frequency depends on the amount of withholding per period.

• Unemployment compensation tax reports and payments are due quarterly at the end of the month following the calendar quarter.

Tax Credits for Small Businesses in Pennsylvania

Pennsylvania offers numerous business tax credits to incentivize charitable activities, educational improvement, and job creation.

Consider the following list of common tax credits for Pennsylvania businesses. Review the Department of Revenue’s qualification information to determine your company’s eligibility.

• Research & Development (R&D) Credit

• Keystone Innovation Zone (KIZ) Tax Credit

• Educational Improvement Tax Credit (EITC)

• Opportunity Scholarship Tax Credit (OSTC)

• Neighborhood Assistance Program (NAP) Tax Credit

• Resource Enhancement and Protection (REAP) Tax Credit

Pennsylvania Small Business Tax Resources

The Commonwealth of Pennsylvania Department of Revenue publishes numerous resources to help business owners comply with state tax laws. 

The following websites provide additional information on PA business taxes: 

• Guide to Doing Business in Pennsylvania

• Resources located on the Commonwealth of Pennsylvania Department of Revenue website

Pennsylvania small business tax professionals can support your business through entity formation, tax planning, return preparation, and filing. 

Partner with 1-800Accountant for Accurate and Timely Pennsylvania Business Tax Compliance

Don’t get overwhelmed by complicated state tax laws and dynamic rules. You can rely on state tax experts at 1-800Accountant for hands-on, specialized advice and budget-friendly tax preparation. 

This guide offers a starting point for your compliance. When you have fact-specific questions about your business taxes, we recommend consulting tax and accounting professionals.

We’ll streamline your tax return preparation and filing, help you lower your tax bill, and strategize tax planning opportunities. Schedule a free consultation with 1-800Accountant for on-demand, year-round tax advice.