Pennsylvania Small Business Taxes: The Employer’s 2023 Guide

Feli Oliveros

One of your biggest responsibilities as an entrepreneur or small business owner is filing and paying taxes. Paying your taxes doesn’t just ensure your startup remains operational—understanding your tax obligations also helps you manage your finances and make better business decisions. 

So, if you plan on starting a new business in Pennsylvania (or if you own one already), here’s what you should know about business taxes in the Keystone State: 

What business taxes do you pay in Pennsylvania?

Compared to their counterparts in some other states, Pennsylvania businesses are not subject to state franchise taxes. 

The taxes that small business owners do pay in Pennsylvania depend on factors like your business structure, employer status, industry, and business activities. However, businesses are typically responsible for income taxes, sales tax, and employer taxes, plus any industry-specific or local taxes that might apply. Keep reading to learn more about each of these state taxes. 

Pennsylvania personal income tax

Pass-through entities like sole proprietorships, partnerships, and limited liability companies (LLCs) typically don’t pay state income taxes themselves. Instead, this obligation is passed on to their business owners, who pay taxes on their personal tax returns at the state’s standard rates.

In Pennsylvania, the individual income tax rate in 2023 is 3.07%.

How to file and pay

Personal tax returns (Form PA-40) are due by April 15 each year. File your returns and make any tax payments through myPATH, the online portal used to file most of the state’s tax returns. 

Taxpayers expecting to receive $8,000 or more of state taxable income that isn’t subject to employer withholding must make estimated tax payments to the Pennsylvania Department of Revenue (DOR). These payments should be made by April 15, June 15, September 15, and January 15. 

If your estimated tax payment for the quarter is $15,000 or more, you must make the tax payment online via myPATH. Those who don’t meet this threshold and prefer to submit payment by mail can send their check or money order along with Form PA-40 ES to the address below: 

PA Department of Revenue
PO Box 2804036
Harrisburg, PA 17128-0403

Find more information on the Pennsylvania personal income tax on the DOR website.

Pennsylvania S corporation/partnership information return

In addition to the individual returns their business owners file, S corporations, partnerships, and LLCs treated as S corporations or partnerships for tax purposes must file a separate information return if they meet one of the following conditions:

  • Received any income from Pennsylvania sources during the tax year
  • Have at least one shareholder or partner that resides in Pennsylvania

Because these types of businesses are considered pass-through entities, they usually aren’t subject to additional income taxes from the state. Companies with nonresident shareholders or partners may be required to withhold income taxes from these taxpayers, however. 

How to file and pay

S corporation and partnership returns (Form PA-20S/PA-65) are due on the 15th day of the fourth month following the end of the fiscal year. For companies following the calendar year, this deadline is April 15. 

File returns and make any applicable tax payments through the IRS Modernized e-File (MeF) system. Alternatively, if you prefer to file paper returns, mail your return along with any tax payments to the appropriate address listed on the tax return form instructions. Any tax payments can also be made through myPATH. 

More information on the Pennsylvania state tax filing guidelines for S corporations and partnerships can be found on the Department of Revenue website

Pennsylvania corporate net income tax

Corporations (and LLCs taxed as such) that do business in Pennsylvania pay corporate income taxes to the state.

The Pennsylvania corporate income tax rate is 8.99% in 2023. S corporations only pay corporate income tax on their built-in gains. 

How to file and pay

Corporate income tax reports (Form RCT-101) are due 30 days after the deadline for the federal tax return. Corporations required to make estimated tax payments must send payment by the 15th day of the third, sixth, ninth, and 12th months of the fiscal year.

Corporate tax reports and all tax payments can be submitted through the myPATH online portal. 

Learn more about the Pennsylvania corporate income tax on the DOR website

Sales and use tax

Companies that sell physical products, certain digital products, or certain taxable services may be required to collect sales tax at the point of purchase and pay it to the Department of Revenue. If your business purchases taxable goods or services from outside Pennsylvania for us within the state, you may be subject to use tax as well. 

In 2023, Pennsylvania’s sales tax rate is 6%. 

Check whether you need to collect and pay Pennsylvania sales tax with your tax professional or the Department of Revenue, as the state makes exemptions for some products and services. A list of tax-exempt goods and services is also available in the DOR retailer’s information guide

How to file and pay

Companies that collect sales tax must register for a seller’s permit through myPATH. Registered businesses are then assigned a quarterly tax filing frequency, although you may be assigned a monthly or semi-annual filing frequency in the future based on your tax liability.

Quarterly tax filers submit sales tax returns and payments by April 20, July 20, October 20, and January 20. Returns and tax payments can be sent online via myPATH as well. 

Get more information on the Pennsylvania sales and use tax by visiting the DOR website

Withholding tax

If your business has employees who reside or perform work in Pennsylvania, you must withhold income from these employees’ wages and pay it to the Department of Revenue. These taxes are known as withholding taxes or employer taxes. 

The Pennsylvania income tax withholding rate is 3.07%, unless you receive a notice from the Department of Revenue assigning you a different tax rate. 

How to file and pay

To pay withholding taxes, you’ll first need to register for an employer withholding account on myPATH. 

Then, you’ll be assigned a quarterly, monthly, semi-monthly, or semi-weekly payment frequency, depending on the average amount of tax withheld per quarter. Use the chart below to determine what your payment frequency and due dates might look like based on your estimated withholding tax liability. 

Payment frequencyQuarterly withholding tax thresholdPayment due dates
Quarterly Less than $300January 31, April 30, July 31, October 31
Monthly $300–$999.9915th of each month
Semi-monthly $1,000–$4,999.99Within three banking days of the end of the reporting period
Semi-weekly $5,000 or moreThe Wednesday or Friday following payday, depending on your payroll schedule

You’ll also need to file withholding returns (Form W-3) on a quarterly basis. File your returns and make any withholding tax payments via myPATH. Note that registered employers must file returns even if they have no wages or taxes to report for the quarter.

Every year, all employers are required to file Form REV-1667 to report the total amount of taxes withheld for the year. This tax form, along with the state copies of each employee’s Form W-2, is due by January 31. 

Visit the Department of Revenue employer withholding webpage for more information on the Pennsylvania income withholding tax. 

Unemployment compensation tax

Employers also pay state unemployment insurance taxes to cover unemployment benefits for eligible workers who leave the company through no fault of their own. In Pennsylvania, this tax is known as the unemployment compensation (UC) tax and is overseen by the Department of Labor and Industry. 

In 2023, new non-construction employers pay a 3.5% tax on the first $10,000 of each employee’s wages, while new construction employers pay 9.7%. After two years, employers are eligible for a new tax rate based on their employment history and unemployment rate. 

How to file and pay

Before you can pay unemployment taxes, you’ll need to register your business with the Pennsylvania Unemployment Compensation Management System (or UCMS for short). You’ll use this system to file and pay unemployment taxes as well.

Pennsylvania unemployment tax returns and payments must be submitted via UCMS by April 30, July 31, October 31, and January 31. 

Get more information on the Pennsylvania unemployment compensation tax by visiting the Office of Unemployment Compensation website

Other industry-related and local taxes

On top of the taxes discussed above, businesses may be subject to other taxes based on their industry, products or services sold, or business activities.

For instance, companies that provide banking, electricity, telecommunications, and transportation services might pay a gross receipts tax to the Department of Revenue. Other taxes charged by the DOR include: 

  • Hotel Occupancy Tax
  • Motor Fuels Tax
  • Alternative Fuels Tax
  • Malt Beverage Tax
  • Liquor Tax
  • Wine Excise Tax
  • Vehicle Rental Tax

Some municipalities in Pennsylvania levy their own taxes alongside the ones imposed by the state. In addition to the statewide sales tax, an extra 1% and 2% local sales tax is added to Allegheny County and Philadelphia purchases, respectively. If your business owns property within the state, you may be required to pay local property taxes as well. 

Companies with worksites within the state are also subject to a local Earned Income Tax and Local Services Tax. The tax rates for each depend on where your business is located. 

Because the taxes described in this section are dependent on the location and nature of your business, you should talk with your tax advisor or accountant to get a complete picture of your company’s tax obligations. 

Pennsylvania business tax breakdown by business type

To make the tax filing process easier, we’ve included a chart below that breaks down the taxes that different types of business entities pay in Pennsylvania. Keep in mind that pass-through entities don’t pay federal income taxes on the entity level—the tax liability passes through to their owners, partners, or members instead. 

Business typePersonal income taxS corporation/partnership returnCorporate net income taxSales and use taxWithholding taxUnemployment compensation taxFederal income taxes
C corporationNo No YesYes, if applicableYes, if you hire employeesYes, if you hire employeesYes
S corporationYesYesYes, on built-in gains onlyYes, if applicableYes, if you hire employeesYes, if you hire employeesYes (pass-through)
LLCDepends on how it’s structuredDepends on how it’s structuredDepends on how it’s structuredYes, if applicableYes, if you hire employeesYes, if you hire employeesYes (pass-through)
Partnership YesYesNoYes, if applicableYes, if you hire employeesYes, if you hire employeesYes (pass-through)
Sole proprietorshipYes (pass-through)No NoYes, if applicableYes, if you hire employeesYes, if you hire employeesYes, by way of individual income tax

File your Pennsylvania small business taxes with Gusto

Even though filing taxes is a crucial part of running a small business, it’s a task many business owners don’t want to do themselves. 

That’s where Gusto can help. Our easy-to-use software automatically files your payroll taxes every time you run payroll, so you’ll have one less responsibility to worry about. And because tax laws change unexpectedly and often, we’ll notify you of any updates that may affect your business. 

Discover how Gusto can streamline your business operations by creating an account today. 

Feli Oliveros Feli Oliveros is a freelance finance and business writer with experience covering personal and small business finance. In 2015 she graduated from UCLA, where she earned her bachelor’s degree in English and minored in Anthropology.
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