Pennsylvania Tax Update
The Commonwealth Imposes New Withholding Requirements
on Businesses
Focused on You. Dedicated to Your Success.
December 4, 2017

Pennsylvania Governor Wolf signed House Bill 542 (H.B. 542) into law on October 30, 2017. This legislation is designed to increase tax revenue by $600 million. 

Two provisions of H.B. 542 will require operational changes for Pennsylvania business to be in compliance. Beginning in January 2018:
  1. Entities paying nonresidents rent and royalty payments on Pennsylvania property in excess of $5,000 must withhold personal income tax on the payments. 
  2. Companies with out-of-state independent contractors who make more than $5,000 working in Pennsylvania must withhold personal income tax and file Form 1099-Misc. electronically. 

Other provisions of the law include:
  • Beginning on March 1, 2018, remote sellers (Amazon, ebay, etc.) with over $10,000 in sales in the preceding 12 calendar months in Pennsylvania have to either collect or remit sales tax or comply with additional reporting requirements.
  • The sales and use tax exemption for wrapping supplies and packaging is extended to include kegs that contain malt or brewed beverages.
  • The definition of tangible personal property has been expanded to exclude help desk support from sales tax if these services are invoiced separately. 
  • Effective December 29, 2017, the period for appealing a Notice of Assessment to either the Board of Appeals or the Board of Finance has been reduced from 90 days to 60 days. 
  • The $5 million cap on net operating loss deductions has been removed. However, the percentage cap on taxable income increases from 30% in 2017 to 35% in 2018 and 40% thereafter. This is in response to the Pennsylvania Supreme Court’s ruling in the Nextel Communications case.
  • A manufacturing and reinvestment deduction is available in the amount of 5% of private capital investment made to create or renovate a manufacturing facility per tax year for five years. To qualify, manufactures must be preapproved and agree to invest a minimum of $100 million in the first three years.
  • A 2% sales and use tax will be imposed on consumer fireworks. Professional pyro technicians are exempt.
  • License fees on permanent structures will be $7,500, $10,000 or $20,000 depending on the square footage. Facilities and temporary structures will be assessed $2,500 and $1,000, respectively. 

As always, we are here to answer your questions. Feel free to call us at 610-828-1900 or contact me at Marty.McCarthy@MCC-CPAs.com . We are always happy to help.
Martin C. McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company, PC

Disclaimer This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).