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Partial funding for this site
was provided by PPL.
business incentives
& taxes
labor demographics
& employers
location
& transportation
was provided by PPL.
STATE TAXES
Capital Stock and Foreign Franchise Tax - 6.99 Mils
The Capital Stock and Foreign Franchise Tax (CS/F) rate currently stands at 6.99 mills and is applied to the corporations capital stock value.The valuation of the stock is calculated using the formula:
- [0.5 x{(Average Net Income/0.095) + (0.75 x Net Worth)}] - $125,000
Certain assets are exempt from the tax, and these exemptions are reflected in the apportionment fractions used to compute the percentage of the capital stock value actually subject to tax. A statutory exemption is provided for assets engaged in producing a manufactured article within Pennsylvania, specified processing operations, including computer software development, research or development activities, and air or water pollution control efforts. A corporation receives an exemption for intangible assets to the extent that they are directly used in an exempt activity. Holding companies, as defined by law, may elect a special 100% apportionment formula in lieu of a standard apportionment formula. Regulated investment companies apportion their special valuation based on the share of income distributed to resident shareholders.
Corporate Net Income Tax - 9.99%
If a company is organized as a corporation, it will be subject to Pennsylvania's corporate net income (CNI) tax. The rate currently stands at 9.99% and is applied to the company's federal taxable income, excluding any net operating loss deductions. Provisions under the CNI tax include: 100% dividend exclusion, separate-company reporting, Accelerated Cost Recovery System (ACRS), and PA Selection. For corporations whose entire business is not transacted within Pennsylvania, the income base will be allocated and apportioned to determine income subject to taxation according to an apportionment formula of property, payroll and sales allocated to the entity's Pennsylvania facility when calculating its CNI tax. Apportionment is calculated using a double-weighted sales factor.The state further modifies this taxable income figure to add back all taxes imposed on or measured by net income which are expensed on the federal corporate income tax return and subtracts the foreign dividend gross-up and net interest income and gains on U.S. government securities.
A Net Operating Loss (NOL) deduction provision allows Pennsylvania C Corporations that pay the CNI tax to offset up to $2 million in taxable income annually. NOLs can be carried forward for a period of not more than ten tax periods.
Exemptions: Corporations defined as S Corporations for federal tax purposes may elect to be treated like a partnership for Pennsylvania tax purposes and pay the 3.07% Personal Income Tax rather than the 9.99% Corporate Net Income Tax.
Limited Liability Companies which qualify as partnerships for federal tax purposes are treated as partnerships for Pennsylvania tax purposes and pay the state 3.07% Personal Income Tax rather than the 9.99% Corporate Net Income Tax.
Inventory/Unitary Tax
There are no inventory or unitary taxes in Pennsylvania.Personal Income Tax - 3.07% Flat Rate
Pennsylvania has a 3.07% flat rate personal income tax that applies to eight classes of income including compensation, interest, dividends, capital gains, proprietorship, partnership, and Pennsylvania S business income. Credit against the tax is allowed for income paid to other states.Exemptions: There are exemptions on retirement income and there are special provisions for low-income persons.
Personal Property Tax - No Tax
The Commonwealth of Pennsylvania does not levy a personal property tax.Sales Tax - 6%
The state's sales tax rate is 6% - there are no local sales taxes. Pennsylvania offers personal sales tax exemptions for clothing, grocery food, pharmaceuticals, and other necessities.Exemptions: Business exemptions are available for products purchased for resale, manufacturing, processing, farming, printing, research and development, mining and public utilities.
Unemployment Compensation
Pennsylvania unemployment compensation taxes are paid by the employer on the first $8,000 of wages for each employee.An experience rating is a rate applied toward determining the unemployment compensation tax liability for a company. After approximately two years of operation, a company obtains this rating. According to the Director of the Pennsylvania Bureau of Employer Tax Operations, new employers with insufficient employment history to qualify for an experience rating will be subject to a rate of 3.5% (newly liable).
For more information contact Pennsylvania's Field Accounting Service Office in Scranton at 570-963-4686.
Worker’s Compensation
All Pennsylvania employers are required to insure payment of workers' compensation in accordance with the Workers' Compensation Act. A company can purchase this insurance through the State Workmen's Insurance Fund or through a private insurance carrier.The Pennsylvania Workers' Compensation Rating Bureau will establish a modification rate, which will be used to determine a company’s workers compensation liability. This rate is measured in dollars owed per $100 of payroll.
If a company chooses to establish itself as a new entity in Pennsylvania, no prior history of claims will be used to determine a modification rate. The Pennsylvania Workers' Compensation Rating Bureau will take into account the type of operation and classification of work to be conducted at the facility in establishing a modification rate.
Local Taxes
Business Privilege Tax - 6.13 Mils
Any for-profit, Scranton-based business that provides a service or receives payment for an exchange of talent must pay a business privilege tax at a rate of 6.13 mils (5.13 mils to school district + 1.00 mil to the City), which amounts to $6.13 for every $1,000 of gross receipts. This is based on the previous year’s gross sales.In general, taxable activity includes any trade, business, profession, vocation, service, construction, communication, commercial activity, or financial business of interstate or intrastate character that is carried on in Scranton or controlled from a Scranton location.
A person who engages in a taxable activity in Scranton is subject to the tax whether or not he/she is a resident and whether or not he/she has a permanent place of business within the City. A foreign corporation is subject to this tax if it carries on a taxable activity in Scranton, whether or not it is licensed to do business in Pennsylvania.
Dickson City imposes a similar tax at 1.5 mils, or $1.50 per $1,000 of gross receipts.
Earned Income Tax
The amount an individual pays in local wage taxes is determined by his/her place of residence. This tax is imposed upon salaries, wages, commissions, and other compensation earned by individuals and upon net profits earned from all business and other activities relating to earned income. Wage taxes are limited to 1% of total compensation (0.5% to the municipality and 0.5% to the school district) in all Lackawanna County communities except the City of Scranton and the City of Carbondale. Scrantonians pay a 3.4% wage tax (2.4% to the city and 1% to the school district) and residents of Carbondale pay 1.75%.Mercantile Tax
A few Lackawanna County communities impose mercantile taxes on persons, firms and entities engaged in business as dealers of wholesale and retail goods, wares and merchandise. The tax is based on annual gross receipts for the previous year and is levied on retail and wholesale businesses in Scranton and Dickson City with rates as follows:Scranton
Retailers = $1.68 per $1,000 of gross receipts
Wholesalers = $1.45 per $1,000 of gross receipts
Dickson City
Retailers = $1.50 per $1,000 of gross receipts
Wholesalers = $1.00 per $1,000 of gross receipts