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.
TECHNICAL INFORMATION CONTACTS:
Mark L. Nachbar
Principal
Ryan
630.515.0477
mark.nachbar@ryan.com
Mary Bernard
Manager
Ryan
401.272.3363
mary.bernard@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.