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August 12, 2021

Pennsylvania ends COVID-19 temporary business tax nexus and income tax withholding guidance for teleworkers

The Pennsylvania Department of Revenue announced that its temporary provisions governing the determination of nexus for Corporate Next Income Tax (CNIT), sales and use tax (SUT), and state income tax withholding for teleworkers during the COVID-19 emergency expires effective July 1, 2021. (See EY Tax Alert 2020-0996; Pennsylvania Department of Revenue website)

Guidance through June 30, 2021

  • Wage sourcing and withholding. If nonresident employees were working in Pennsylvania before the pandemic, their compensation remained Pennsylvania-sourced income for all tax purposes, including PA-40 reporting, employer withholding and three-factor business income apportionment purposes for S corporations, partnerships and individuals. Conversely, for Pennsylvania residents who were working out-of-state before the pandemic, their compensation remained sourced to the other state and they were still be able to claim a resident credit for tax paid to the other state on the compensation.

Further, if a nonresident employee was temporarily working from home due to COVID-19 in a state that doesn't have a reciprocity agreement with Pennsylvania, the Department advised that the employee's compensation remained Pennsylvania sourced, and the employer was required to withhold Pennsylvania state income tax on the compensation.

  • CNIT/SUT. The Department stated it would not seek to impose CNIT or SUT nexus solely on the basis of temporary telework within the state due to COVID-19.


Contact Information
For additional information concerning this Alert, please contact:
Workforce Tax Services - Employment Tax Advisory Services
   • Kristie Lowery (
   • Kenneth Hausser (
   • Debera Salam (


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