Pennsylvania Small Business Tax Guide for 2026

Before establishing a new business in Pennsylvania, small business owners, limited liability company (LLC) owners, and freelancers should consider which taxes will apply. Business taxes in the state can be complex and confusing, but this comprehensive guide will help ensure you start your business in Pennsylvania with clarity and confidence.

Use this article to determine how much tax you’ll pay, which forms you should file, and associated deadlines for each. It also highlights valuable tax credits that lower your Pennsylvania business tax bill.

Pennsylvania Small Business Taxes: Overview

Pennsylvania imposes several business taxes, and depending on your business activities and entity type, your company could be subject to several.

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

Pennsylvania Business Taxes – Relevance to Each Entity Type

As the 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 this table as a reference for tax rates and forms. We’ll explain each section in further detail below.

PennsylvaniaSmall 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. 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.

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

Corporate Net Income Tax Phase-Down Schedule

Pennsylvania enacted a corporate income tax rate phase-down decrease at the start of the 2023 tax year. The Pennsylvania corporate income tax rate varies by tax year.

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 pass-through 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 pass-through 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.

Pennsylvania Nonresident Withholding Tax

Who must pay: Pennsylvania partnerships and S corporations with nonresident members. Pass-through 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

Economic Nexus for Remote Sellers

As a result of the 2018 Supreme Court ruling in South Dakota v. Wayfair, tax rules changed by allowing states to require online stores to collect sales tax based on economic nexus. This overturned an old rule requiring a physical presence. In Pennsylvania, a small business can create economic nexus when gross sales into the state exceed $100,000 in the previous calendar year or a rolling 12-month period.

Marketplace facilitators like Amazon and Etsy usually collect and remit tax on a seller's behalf.

Are Digital Products and SaaS Taxable in Pennsylvania?

Pennsylvania taxes many digital products and some software transactions. They are subject to the state's 6% sales tax, with local taxes in Philadelphia pushing the tax on digital products and SaaS up to 8%.

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 2026 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 (by December 31st). 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 year 2026. 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

Depending on industry and location, your company might need to pay other Pennsylvania business taxes.

Philadelphia Business Income and Receipts Tax (BIRT)

BIRT is a two-part tax imposed by Philadelphia on business profits and sales. The current Net Income rate is 5.71%, and the Gross Receipts rate is 1.410 mills, which translates to $1.40 per $1,000 of revenue.

Determine your obligations by reviewing BIRT regulations.

Philadelphia Wage Tax

Employers must withhold and remit the Philadelphia Wage Tax for Philadelphia-based employees. The current rate is 3.735% for residents and 3.425% for non-residents, and applies to all salaries and wages.

For residents, employers must withhold this tax on every paycheck, regardless of where the employee works. For non-residents, employers must withhold this tax only for work or services performed physically inside the city.

Other Local Taxes

In addition to BIRT and the Philadelphia Wage Tax, you may also be responsible for other local taxes, depending on the nature of your business.

• Hotel occupancy 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

• Pass-through entity information returns

• Personal income tax

Mailing addresses depend on your payment method (if any), so 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

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

PA Department of RevenueP. O. Box 280403Harrisburg, 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

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.

• Pass-through 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

The net operating loss (NOL) deduction cap expanded to 50% of taxable income for losses incurred in tax years beginning in 2026. This is an additional planning consideration for growing PA-based corporations.

FAQs about Pennsylvania Small Business Taxes

Does Pennsylvania recognize federal S corporation elections?

Yes, Pennsylvania automatically recognizes federal S corp elections. You do not need to file a separate state S election form unless you want to opt out and be taxed as a regular corporation. To opt out, you must file a REV-976 Election Not to be Taxed as a Pennsylvania S Corporation.

What is Pennsylvania's economic nexus threshold for sales tax?

Out-of-state businesses must collect and remit Pennsylvania sales tax if they exceed $100,000 in gross sales to Pennsylvania customers in the previous calendar year. This threshold relies only on total gross sales and does not count individual transactions, as in some other states. Once you cross this amount, you must register through the myPATH Portal.

Do single-member LLCs pay Pennsylvania corporate income tax?

No, single-member LLCs are disregarded entities and do not pay the state's Corporate Net Income Tax. Instead, business profits pass through to your personal tax return. These profits are taxed at the flat state personal income tax rate of 3.07%.

What is the Philadelphia BIRT, and who has to pay it?

BIRT is a local city tax applied to both net income and gross receipts. You must pay it if you are physically located in the city, employ workers in the city, or do business with customers in Philadelphia. There is no longer a $100,000 exemption, meaning every business must file regardless of how small its revenue is.

How do I register a new business for Pennsylvania taxes?

You can register your new business for state taxes online using the PA Business One-Stop Shop. This platform will guide you through registering for an Employer Identification Number (EIN), sales tax licenses, and employer withholding accounts. Corporate income tax registration happens automatically when you officially form your business with the Department of State.

What happens if I miss a Pennsylvania business tax deadline?

Missing a state tax deadline or failing to file will result in late filing penalties and interest charges. For corporate taxes, a $500 late penalty is typically applied, plus an additional percentage of the tax amount due. Interest also accrues on any unpaid tax balance, and willful evasion can lead to more serious consequences.

Are there Pennsylvania-specific tax credits for small businesses?

Yes, Pennsylvania offers targeted credits, such as the PA EDGE Tax Credit for manufacturers and the EITC for businesses that donate to scholarship organizations. Startups may also qualify for the R&D Tax Credit if they spend on qualified research within the state.

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 with entity formation, tax planning, return preparation, and filing.

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

This guide is a great starting point for PA-based business owners who address their own tax work. But when managing your business taxes becomes too complex and time-consuming, that's a signal to embrace professional tax support.

If you're ready for a dedicated partner who understands Pennsylvania taxes and the regional nuances of your industry, explore our small business tax and bookkeeping services to see how year-round solutions can streamline your processes and free up your time to focus on growth.