The Treasury Department previously issued temporary guidance on teleworking and its tax implications during the COVID-19 Pandemic: Teleworking During the COVID-19 Pandemic
This prior manual linked above is valid until June 30th, 2021 ("End Date"). From the "End Date", the provisional guidelines no longer apply and the applicable tax law applies.
Corporate Income Tax (CNIT)
According to current tax law, domestic and foreign corporations are subject to the CNIT for business privilege; Exercise of activities; in any capital or property employed or employed in Pennsylvania; or owning real estate in Pennsylvania. A company is considered Pennsylvania resident for CNIT purposes if it has one or more employees who conduct business in Pennsylvania on its behalf. Therefore, a non-filing by a government entity with a Pennsylvania resident continuing to work at home in 2021 after the "End Date" has an association for 2021 and future years based solely on that employee's activities, unless the teleworking activity is protected by PL 86-272., d. H. Solicitation of tangible personal property with orders approved and shipped from inventory outside of Pennsylvania.
value added tax
A corporation has sufficient Pennsylvania affiliation to require sales tax if it has a place of business in the Commonwealth. This includes, in part, the conduct of business within this Commonwealth by a person, either directly or through a subsidiary, agent, or agent. A company that continues to have a Pennsylvania resident working from home in 2021 after the "End Date" may have a nexus for 2021 and future years based solely on that employee's activities.
Income tax and employer withholding
After the "End Date", employees must assess their current work situation and apply existing Pennsylvania tax laws.
A Pennsylvania resident who is teleworking full-time from home in Pennsylvania rather than at the employer's location outside of the state should treat their compensation as Pennsylvania income. Pennsylvania does not allow a taxpayer to claim a residence credit on Pennsylvania source income. As a result, a Pennsylvania resident who works for an employer outside of the state but is required to telework from his or her Pennsylvania residence will not be able to claim Pennsylvania resident credit on his Pennsylvania tax return, even if the state in which his employer is resident and his remuneration is taxed. An employer located outside of Pennsylvania and whose only Pennsylvania connection is an employee who works full-time from home in Pennsylvania is not required, but may withhold the employee's compensation.
A non-resident worker who is teleworking full-time from home in another state should treat their compensation as income from non-Pennsylvania sources, even if their employer is based in Pennsylvania. In these cases, the employer is not obliged to withhold the employee's compensation.
Certain business development programs and tax credits require that certain costs (e.g., employee wages, research and development costs) go to the Commonwealth or a specific location within the Commonwealth. You can access the list of affected programs by visiting the Incentives, Credits, and Programs page. From the "End Date", the provisional guidelines no longer apply and the applicable tax law applies.