The Philadelphia Department of Revenue has issued temporary guidance concerning the imposition of legal nexus and apportionment for its Business Income & Receipts Tax (BIRT) and Net Profits Tax (NPT) as it pertains to telework during the COVID-19 emergency.

This temporary guidance will apply until the earlier of June 30, 2021, or 90 days after the Proclamation of Disaster Emergency in Pennsylvania is lifted.

For information concerning the imposition of the Philadelphia wage tax for teleworkers during the COVID-19 emergency, see Tax Alert 2020-1227.

Temporary guidance

• Employee was performing services for a business location within Philadelphia but is now temporarily working from home outside of Philadelphia due to the COVID-19 emergency (nonresident):

The Department considers that such services are performed within Philadelphia for purposes of sourcing receipts for BIRT and NPT.

The Department considers that receipts from services performed by these Philadelphia resident employees at their Philadelphia homes solely as a result of the COVID-19 emergency will not be sourced to Philadelphia for BIRT and NPT.

This temporary guidance applies only for the duration of the state and Philadelphia emergency stay-at-home orders issued in response to the COVID-19 health emergency and is issued under the Department's authority to provide for alternative apportionment when the ordinary rules would not accurately reflect the taxpayer's income attributable to Philadelphia.

The Department of Revenue will temporarily waive the legal nexus threshold established under Section 19-2603 of the Philadelphia Code and under Section 103 of the BIRT Regulations, which considers the presence of employees working temporarily from home within Philadelphia as establishing sufficient nexus for out-of-Philadelphia businesses. This waiver applies if, and when, an employee works from home solely as a result of the COVID-19 pandemic.

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