Area Development Pennsylvania Resource Page
Basic Business Taxes
Pennsylvania levies a CNI tax for the privilege of doing business or carrying on activities in Pennsylvania, having capital or property employed or used in Pennsylvania, or owning property in Pennsylvania. The tax is levied on federal taxable income modified by certain additions and subtractions. The CNI tax is 9.99 percent of taxable income based on federal returns, with certain additions and deductions allocated to Pennsylvania. Note: The commonwealth has decoupled from the federal Job Creation and Worker Assistance Act of 2002. The following types of corporations are not subject to the CNI tax but pay other special taxes in its place: building and loan associations, banks, bank and trust companies, national banks, savings institutions, trust companies, and insurance and surety companies.
Capital stock and foreign franchise tax:
The capital stock and foreign franchise tax is imposed on corporations that solicit sales of tangible personal property in Pennsylvania. Domestic corporations are subject to the capital stock tax, while other corporations are subject to the foreign franchise tax. A statutory exemption is provided for assets engaged in producing a manufactured article within Pennsylvania — computer software developments, specified processing operations, research and development activities, and pollution-control equipment. The current tax rate is 4.99 mills for 2006, and there is one mill reduction per year thereafter through 2010, after which the tax is eliminated.
Sales and use taxes:
6 percent of purchase price of tangible personal property and certain services, with exemptions. A local sales tax of 1 percent is collected on the sale of taxable goods and services initiated from a location in Philadelphia and Allegheny counties.
Property tax:
Based on fair market value of property; rates vary among local jurisdictions; no state tax.
Net operating loss carry forward:
The net operating loss carry forward allows corporate taxpayers to apply losses from one year against profits in subsequent years for the corporate net income tax. Losses can be carried forward and deducted from profits for as many as 20 years beginning with 1998 losses. Taxpayers are allowed to offset up to $2 million in taxable income annually by applying the losses from the oldest available period first.
Manufacturer's exemption:
Pennsylvania encourages manufacturers to locate and expand in the state by offering a manufacturing exemption. The exemption is part of the formula for calculating the capital stock and foreign franchise taxes. Pennsylvania also exempts from sales and use tax the cost of equipment used directly in the manufacturing process.
Governor's Action Team
Commonwealth of Pennsylvania
400 North Street
Commonwealth Keystone Building
Harrisburg, PA 17120
(717) 787-8199
Fax: (717) 772-5419
