Pennsylvania lies in the eastern United States. It belongs to the Mid-Atlantic states and is one of the thirteen original colonies that founded the USA. The Keystone State covers almost 120,000 km². More than 12.5 million people live here, and the capital is Harrisburg.
Key industries with a long tradition
Pennsylvania's renowned agricultural industry is one of its leading economic drivers, turning out quality products such as food and hardwood. Rich soils, a wide variety of crops, close partnerships with universities and a deep farming tradition, combined with a strategic location and extensive infrastructure and logistics, make Pennsylvania an ideal home for agribusiness.
Manufacturing has a long tradition here too. Pennsylvania steel went into famous American landmarks such as the Golden Gate Bridge, the Empire State Building and the Hoover Dam. Today the industry focuses on advanced additives, high-tech and digital strategies to meet the needs of modern businesses and consumers. You will find companies specializing in medical devices and organic food alongside producers of nanomaterials and fabricated metal products.
Natural gas production, mainly from the Marcellus Shale, has topped five billion cubic feet in each of the past years, making the Keystone State the second-largest gas producer in the nation. Pennsylvania ranks among the three largest energy exporters in the United States and has cemented its role as a major net exporter of energy.
Economic development programs
The Keystone Innovation Zone (KIZ) program was created in 2004 as part of the Rendell administration's economic stimulus plan, to tackle a lack of entrepreneurial activity and knowledge-based economic growth. Since its launch, the KIZ program has helped create more than 11,600 jobs.
The KIZs were set up around colleges and universities and focus on using them as engines of economic growth. Each KIZ brings together regional partners, including economic development organizations, local governments, financial institutions and venture capital investors.
Keystone Opportunity Zones (KOZ) are such a groundbreaking idea that Business Facilities magazine named them the nation's number one economic development strategy. They reflect a real sense of partnership between state and local tax authorities, school districts, economic development agencies and community organizations. By waiving certain state and local taxes in less developed and underused areas, these Pennsylvania communities are seeing economic growth.
By the end of 2017, KOZ applicants had created more than 7,000 jobs and invested over $2.5 billion in private capital in KOZ properties. Thanks to the initiative's huge success, local communities have had several opportunities to designate additional subzones.
Business and education working together
Pennsylvania's workforce stands out for its blend of education, experience and curiosity, all driven by that legendary can-do spirit. The result: innovative solutions are discovered and developed every single day.
Partnerships between universities and businesses make sure talent is trained with purpose and fully prepared for the demands of the modern economy. Pennsylvania is home to many renowned educational institutions that help businesses work at the cutting edge.
Income tax in Pennsylvania
Pennsylvania levies a flat income tax of 3.07%. On top of that, you pay federal income tax.
Corporate tax in Pennsylvania
Pennsylvania levies a corporate income tax of 7.49% (tax year 2026); the rate keeps falling each year until it reaches 4.99% in 2031. On top of that, you pay federal corporate tax.
Sales tax in Pennsylvania
The US has no European-style VAT. Instead, states, counties and municipalities levy a local sales tax on sales of goods (but not services).
Pennsylvania sales tax rate
Pennsylvania's state sales tax is 6%. Cities and counties add an average of 0.34%, so the combined rate averages 6.34%.
Pennsylvania nexus laws & sales tax
Learn more about economic nexus laws and sales tax.
Effective date
July 1, 2019
Included transactions:
Gross sales of products and services in the Commonwealth, including sales through agents, representatives or subsidiaries
Treatment of exempt sales:
Exempt sales and exempt services count toward the threshold
Trigger:
Sales only
Sales/transaction threshold:
$100,000
Evaluation period:
The threshold applies to sales in the previous 12 calendar months
Additional information:
- Until June 30, 2019, the threshold excluded exempt sales or services under a separate sales tax obligation for remote sellers.
- Registration requirements: If its total Pennsylvania sales for 2019 exceed the threshold, a remote seller must collect and remit Pennsylvania sales tax starting April 1, 2020. The first quarter of each year is set aside for businesses to tally their total Pennsylvania sales from the previous calendar year and determine their sales tax exposure. For more information, see answers on economic nexus.
- Sales and use tax bulletin
Pennsylvania marketplace sellers & sales tax
Learn more about registration requirements for marketplace sellers
Effective date for marketplace facilitators:
April 1, 2018; updated effective July 1, 2019
Economic nexus threshold:
More than $100,000 in gross revenue in Pennsylvania in the previous 12 months. Remote sellers should include sales made through a non-collecting marketplace when calculating the threshold. Marketplace facilitators include all sales, leases and deliveries of tangible personal property and all sales of services made through the marketplace when calculating the threshold.
Note: Until June 30, 2019, remote marketplace facilitators with at least $10,000 in taxable sales into Pennsylvania had to choose either to register and collect and remit sales tax on all sales into Pennsylvania, or to comply with the notice and reporting requirements for non-collecting sellers. From July 1, 2019, the reporting option is no longer available to sellers exceeding the $100,000 economic nexus threshold.
Registration requirements:
- Remote multichannel sellers: Once you exceed the economic nexus threshold, you must register with the Pennsylvania Department of Revenue (DOR) and collect Pennsylvania sales tax on sales not taxed by a marketplace facilitator.
- Remote marketplace sellers: You do not need to register, even if you exceed the economic nexus threshold. Contact the Pennsylvania DOR for more information.
- In-state multichannel sellers: You must register with the Pennsylvania DOR and collect tax on sales not taxed by a marketplace facilitator.
- In-state marketplace sellers: You do not need to register. If you already hold a license, report your gross sales and "0" as taxable, unless you start selling outside the marketplace(s); contact the Pennsylvania DOR for more information.
- Learn more here.
For an overview of every state, see our directory US states at a glance. Our guide Which US state is best for your company? helps you pick the right state, and the guide to forming a US company walks you through the process. And if you want to run your US LLC tax-free without a US permanent establishment, our sister site zerotax.llc is the place to go.
Our services for Pennsylvania:
Want to do business in Pennsylvania? Our overview of US company formation helps you find the right entity type and home state, and in a consultation we go through your plans together.