Under legislation enacted in July 2026, Pennsylvania is moving Philadelphia’s local sales tax from an origin-based approach to a destination-based sourcing model. The change can affect how businesses determine when to collect Philadelphia’s additional 2% sales tax, particularly businesses that sell or ship taxable products to customers throughout Pennsylvania.

What Is Changing?

Philadelphia’s combined sales tax rate remains 8%, made up of the 6% Pennsylvania state sales tax and a 2% Philadelphia local sales tax.

The important change is how the 2% local tax is sourced.

Previously, local sales tax was generally tied to the location where the sale originated. Under the new rules, local sales tax is based on the destination of the sale, where the taxable product or service is delivered.

The change was enacted through Act 21 of 2026, which became law on July 12, 2026. Although the law has a retroactive effective date for tax years after December 31, 2025, the Pennsylvania Department of Revenue has announced that it will not begin enforcing the new sourcing requirements until October 1, 2026.

Why Does This Matter for Businesses?

The change may be particularly important for businesses that sell taxable goods or services across Pennsylvania.

For example, consider a business located outside Philadelphia that sells taxable products to customers in Philadelphia. Under the new rules, the business may need to collect the additional 2% Philadelphia local sales tax when the taxable sale is delivered to a Philadelphia customer.

Likewise, a Philadelphia business that ships taxable products to customers outside Philadelphia may need to reconsider how the local portion of sales tax applies to those transactions.

In other words, where your customer receives the taxable product or service may become just as important as where your business is located.

What Should Businesses Do Now?

With the October 1 enforcement date approaching, businesses should use this time to review their sales tax processes and make necessary updates.

1. Review Your Sales Tax System

Check your accounting, point-of-sale, invoicing, and e-commerce systems to make sure they can properly determine sales tax based on the customer’s delivery destination.

2. Review Your Customer Locations

Businesses that sell throughout Pennsylvania should identify whether they have customers in Philadelphia or Allegheny County, which are the two Pennsylvania jurisdictions with local sales taxes covered by the new legislation. Philadelphia’s local rate is 2%, while Allegheny County’s is 1%.

3. Check Your Tax Collection Procedures

If your business currently collects Pennsylvania sales tax, determine whether your existing procedures will properly account for the applicable local tax based on the destination of each taxable sale.

4. Update Your E-Commerce and Invoicing Processes

Online sellers should pay particular attention to this change. Customer shipping addresses and delivery locations may affect the amount of local sales tax that must be collected.

5. Don’t Wait Until October

The Department of Revenue has provided a transition period before enforcement begins. Use that time to review your systems, train employees, and work with your tax professional or software provider to address any issues.

The Bottom Line

The Philadelphia sales tax rate itself is not increasing. The key change is where the local 2% tax applies based on the destination of a taxable sale.

For businesses selling to customers throughout Pennsylvania, this could mean changes to sales tax collection, accounting, invoicing, and e-commerce processes.

If your business sells taxable products or services in Philadelphia or ships taxable products to customers in Philadelphia, now is a good time to review your sales tax procedures and make sure you’re prepared for the October 1, 2026 enforcement date.

Need help determining how these changes may affect your business? Contact an Alloy Silverstein advisors to discuss your sales tax compliance needs.

The post Philadelphia Sales Tax Update: What Businesses Need to Know About the 2026 Changes appeared first on Alloy Silverstein.

After many years without an annual filing obligation, Pennsylvania required annual reports for most business entities beginning in 2025. While businesses have already gone through one filing cycle, the requirement is still relatively new, and many owners may not realize it is now an ongoing responsibility.

Missing an annual report filing can lead to the loss of good standing with the state and, eventually, administrative dissolution of the business.

Who Must File a Pennsylvania Annual Report?

Most entities registered with the Pennsylvania Department of State are required to file an annual report, including:

• Business Corporations
• Nonprofit Corporations
• Limited Liability Companies (LLCs)
• Limited Partnerships (LPs)
• Limited Liability General Partnerships (LLGPs)
• Professional Associations
• Business Trusts

The requirement applies to both Pennsylvania-based entities and foreign entities registered to do business in the state.

What Information Is Included?

The annual report confirms that the state’s records are accurate and up to date. Businesses will typically need to provide:

• Business name
• Jurisdiction of formation
• Registered office address
• Principal office address
• Name of at least one governor (director, member, partner, etc.)
• Names of officers, if applicable
• Pennsylvania Department of State file number

Filing Deadlines by Entity Type

Pennsylvania assigns annual report deadlines based on entity type.

Corporations

January 1 – June 30

Limited Liability Companies (LLCs)

January 1 – September 30

All Other Covered Entities

January 1 – December 31

Be sure to add the appropriate deadline to your compliance calendar each year.

Filing Fees

Most entities pay a filing fee of $7 annually.

Nonprofit corporations are not required to pay a filing fee.

What Happens If You Miss the Deadline?

Failure to file an annual report can result in administrative dissolution, termination, or cancellation of your business registration.

The Pennsylvania Department of State typically sends reminder notices by email, when an email address is on file, and by postcard before the filing deadline. Even so, business owners should not depend solely on those reminders.

Keeping a business in compliance ultimately falls on the business owner.

How to File

Annual reports are filed online through the Pennsylvania Department of State’s business filing portal.

The filing process generally involves:

1. Finding your entity in the Pennsylvania business filing system.
2. Selecting the annual report filing option.
3. Reviewing and updating business information, if necessary.
4. Submitting the report and paying any required fee.
5. Saving a copy of the completed filing for your records.

Most online filings are processed immediately.

Need Assistance?

Although the filing itself is relatively simple, overlooking an annual report can create unnecessary problems for your business. If you have questions about Pennsylvania annual reports, business compliance requirements, or other state filing obligations, the professionals at Alloy Silverstein can help.

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The most significant update for 2025 is the elimination of the $100,000 BIRT gross receipts exemption, meaning more businesses will now be required to file and pay. Combined with modest rate reductions across several taxes, these changes highlight the need for proactive tax planning. Read on for a full breakdown of Philadelphia’s 2025 tax updates and what they mean for your business or personal finances.

Philadelphia BIRT and Elimination of the $100,000 Exclusion

The Business Income and Receipts Tax (BIRT) is a tax applied to both the net income and gross receipts generated by business activities conducted within the City of Philadelphia. The biggest change for tax year 2025 is the elimination of the exemption for the first $100,000 of gross receipts. The gross receipts tax rate has been decreased from 1.415 mills to 1.410 mills. The net income portion of the BIRT has been reduced from 5.81% to 5.71%.

BIRT filings and payments are due by April 15 each year, covering business activity from the previous calendar year. If you were not previously required to file due to the $100,000 exemption, you will need to set up a Philadelphia tax account to file for the 2025 tax year.

Reduction of Philadelphia Net Profits Tax

The Net Profits Tax is imposed on the net profits of a business conducted by a Philadelphia resident, and on non-residents who conduct business in the City.  The tax rates for 2025 are reduced from 3.75% to 3.74% for residents and from 3.44% to 3.43% for nonresidents.

Philadelphia City Wage Tax Rate 2025-2026

Starting July 1, 2025, Philadelphia’s Wage and Earnings Tax rate will be reduced from 3.75% to 3.74% for residents, and from 3.44% to 3.43% for non-residents. Any paycheck issued with a pay date after June 30, 2025, must have Philadelphia’s wage tax withheld at the updated rates for both residents and non-residents.

School Income Tax for Philadelphia Residents

School Income Tax applies to many types of unearned income received by Philadelphia residents.  The tax rate for 2025 is reduced from 3.75% to 3.74%.

Connect with a Leading Philadelphia Region CPA Firm

Philadelphia’s tax landscape continues to evolve, and with changes to BIRT filing requirements and wage tax rates, now is the time to review your tax strategy.

Whether you’re a new business now required to file due to the removed BIRT exemption or a seasoned taxpayer navigating updated rates, it’s critical to stay compliant and informed. Don’t leave your tax planning to chance—partner with Alloy Silverstein’s experienced accountants and advisors to ensure you’re maximizing deductions, minimizing liabilities, and staying ahead of local compliance requirements.

Schedule your personalized tax consultation today and gain peace of mind for the year ahead.

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Do you live in one state, but work in another? Many neighboring states have special rules to deal with this situation. The agreement between New Jersey and Pennsylvania is one example.

People who live in New Jersey but drive over the bridge to work in Pennsylvania are often unsure about their state income tax obligations.  Unfortunately, many Pennsylvania employers are also unsure about this.

New Jersey and Pennsylvania have a Reciprocal Income Tax Agreement.  This means the two states have agreed that their residents can cross the state line to go to work without needing to pay tax in the work state.  A New Jersey resident may work in Pennsylvania, but he will only need to pay income tax to New Jersey.  Likewise, a Pennsylvania resident who comes into New Jersey to work would only need to pay income tax in Pennsylvania.

It is important to note that the reciprocity only applies to compensation as an employee, and not self-employment income, rental income, business income, etc.

What should happen is that the New Jersey resident goes to work in Pennsylvania, and New Jersey state income taxes are withheld from the paycheck.  If the employer is also within Philadelphia, city wage tax will also be withheld.  Since New Jersey gives resident taxpayers a credit for taxes paid to other taxing jurisdictions, it is possible that the credit for the city wage tax is high enough to satisfy the entire New Jersey income tax liability.  In this case, the employee may not need any state income tax withheld because the city wage tax would be enough.

What should not happen is for Pennsylvania income tax to be withheld from the pay of a New Jersey resident.  If this is the case, the only way to get the Pennsylvania tax back is to file a Pennsylvania tax return showing zero wages and ask for a refund.  Since a New Jersey resident shows all his income, no matter in which state it was earned, on his home state tax return, he would also be paying in New Jersey income tax on those same wages.  And, because of the reciprocal agreement, you can’t simply take a credit on your New Jersey tax return for income taxes erroneously paid to Pennsylvania.  Once the Pennsylvania refund is received, the taxpayer ends up the same, but filing the extra return and waiting for the refund is a hassle, and sometimes you have to provide extra documentation and it takes a long time to get the refund. 

Any New Jersey or Pennsylvania residents who get a new job across the state line should look carefully at their first pay stub to make sure the correct taxes are being withheld.  Don’t wait until the year is over to find out there is a problem when the W-2 is issued.

In conclusion, understanding the nuances of the Reciprocal Income Tax Agreement between New Jersey and Pennsylvania is crucial for residents who work across state lines. Ensuring that the correct state taxes are withheld from your paycheck can save you from the hassle of filing additional tax returns and waiting for refunds. It’s always a good idea to review your first pay stub from a new job to confirm that the appropriate taxes are being withheld according to your residency. By staying informed and proactive, you can navigate the complexities of interstate tax obligations with confidence and focus on your career without unnecessary financial stress. It’s always a smart move to consult with a tax professional. They can help you navigate your specific situation and ensure you’re making the best decisions for your financial future.

Related Resources:

• Do You Work Remotely in a State You Don’t Live In? [Video] →
• Working Remotely in a Different State from Your Employer? Here’s What You Need to Know →
• Where Do You Think You’re Going?! Establishing Residency in a New State →
• You Need Tax Planning If… →
• Tax Season Resources from Alloy Silverstein →
• Common Sense Tips For Preparing Your Tax Returns →
• What Taxpayers Should Know at the Start of Tax Season [Video] →
• It’s Tax Preparation Time! →
• Skip the Stress: 6 Tips for a Smooth Tax Season →
• Alloy Jeopardy – Common Excuses During Tax Season [Video] →
• What Documents Do I Need to File My Tax Return? →
• How Should I Organize My Tax Documents? [Video] →
• Review Your Tax Return Before Filing →

The post Living in One State, Working in Another? Navigating Taxes and State Benefits [VIDEO] appeared first on Alloy Silverstein.

Eligibility:

• Business firms authorized in the Commonwealth, subject to taxes such as personal income, capital stock, or corporate net income tax.
• Pass-through entities are eligible, but sole proprietors are not.
• To receive tax credits, businesses must be approved to make contributions to Scholarship Organizations (SO), Educational Improvement Organizations (EIO), or Pre-Kindergarten Scholarship Organizations (PKSO) listed by the Department.

Tax Credit Details:

• 75% credit of yearly contributions, up to $750,000.
• Increased to 90% if committed for 2 consecutive years.
• Pass-through entities may make an irrevocable election to pass the credit to the owners.
• Credits not used in the taxable year cannot be sold, assigned, carried forward, or carried back, except with an approved pass-through election.

Application Deadlines:

• May 15: For businesses renewing their 2-year commitment or in the middle of one.
• July 1: For all other businesses, including new applicants.
• Next Deadline: July 1, 2025, for years ending July 1, 2025 through June 30, 2026.

Additional Information:

• Lists of qualifying charitable organizations are available on the Department’s website.
• Public information includes the amounts donated and the recipient organizations.

For more details, visit dced.pa.gov.

The post Pennsylvania Educational Improvement Tax Credit Program appeared first on Alloy Silverstein.

Business Income and Receipts Tax (BIRT)

With the new annual budget taking effect on July 1st, Philadelphia officials have cut the net income portion of the BIRT to its lowest level in more than five decades. Every individual, partnership, association, limited liability company (LLC), and corporation engaged in a business, profession, or other activity for profit within the City of Philadelphia must file a BIRT return. Including:

• Commercial or residential real estate rental activity
• Estates, trusts, or non-profits engaged in any for-profit business or activity in Philadelphia
• Those who main a Commercial Activity License (CAL) but do not actively engage in business

In all of these situations, you MUST file a BIRT return, whether or not you made a profit. However, businesses with less than $100,000 in Philadelphia taxable gross receipts are not required to file a BIRT return. Instead, they may choose to file a No Tax Liability (NTL) form. The BIRT must be filed and paid by April 15 (Tax Day) of each year, based on business activity from the previous calendar year.

Net Profits Tax Update

The Philadelphia net profits tax for residents is reduced from 3.79% to 3.75% for 2023.  The nonresident rate remains at 3.44%.

City Wage Tax Update

Another update in the city’s budget that may impact your business is a decrease in the Philadelphia City Wage tax as of July 1, 2023.

The rate is reduced to 3.75% from 3.79% for residents and remains the same at 3.44% for non-residents. 

For more information on payroll tax wage rates, see our Abacus Payroll Tax Alert and sign up of our end-of-year alerts. 

• 2023 Federal Payroll Tax Rates
• 2023 Pennsylvania Payroll Tax Rates
• 2023 New Jersey Payroll Tax Rates

If you have further questions about how these tax updates affect your Philadelphia based business, touch base with an Alloy Silverstein Accountant and Advisor today.

The post 2023 Philadelphia Budget Update: Decrease in the Business Income and Receipts Tax (BIRT) appeared first on Alloy Silverstein.

Business Income and Receipts Tax (BIRT)

With the new annual budget taking effect on July 1st, Philadelphia officials have cut the net income portion of the BIRT to its lowest level in more than five decades. Every individual, partnership, association, limited liability company (LLC), and corporation engaged in a business, profession, or other activity for profit within the City of Philadelphia must file a BIRT return. Including:

• Commercial or residential real estate rental activity
• Estates, trusts, or non-profits engaged in any for-profit business or activity in Philadelphia
• Those who main a Commercial Activity License (CAL) but do not actively engage in business

In all of these situations, you MUST file a BIRT return, whether or not you made a profit. However, businesses with less than $100,000 in Philadelphia taxable gross receipts are not required to file a BIRT return. Instead, they may choose to file a No Tax Liability (NTL) form. The BIRT must be filed and paid by April 15 (Tax Day) of each year, based on business activity from the previous calendar year.

City Wage Tax Update

Another update in the city’s budget that may impact your business is a decrease in the Philadelphia City Wage tax as of July 1, 2022.

The rate is reduced to 3.79% from 3.87% for residents and slightly down to 3.44% from 3.45% for non-residents. 

For more information on payroll tax wage rates, see our Abacus Payroll Tax Alert and sign up of our end-of-year alerts. 

• 2022 Federal Payroll Tax Rates
• 2022 Pennsylvania Payroll Tax Rates
• 2022 New Jersey Payroll Tax Rates

If you have further questions about how these tax updates affect your Philadelphia based business, touch base with an Alloy Silverstein Accountant and Advisor today.

The post Philadelphia Budget Update: Decrease in the Business Income and Receipts Tax (BIRT) appeared first on Alloy Silverstein.

Last week, the IRS and U.S. Treasury extended the federal income tax filing and 2020 payment deadline for individuals from April 15 to May 17.

As of today, both Pennsylvania and New Jersey have followed suit in postponing their state filing date for individuals to May 17, 2021.

Like the federal extension, this is automatic and only applies to income tax returns for individuals and 2020 tax payments (including tax on self-employment income) otherwise due April 15, 2021. Penalties and interest are waived through the extension period. However, both states advise that 2021 first quarter estimated payments are still due as of April 15, 2021.

It is up to each state to determine their filing and payment deadlines. Check with your respective state tax agency for updates to their filing and payment due dates at https://www.taxadmin.org/state-tax-agencies .

Contact Us

The IRS will release more guidance in the coming days. If you have not yet filed your 2020 return, touch base with your Alloy Silverstein CPA to schedule a virtual meeting.

Contact an Alloy Silverstein accountant and advisor for further tax or business assistance.

The post New Jersey and Pennsylvania Extend Tax Filing Deadline to May 17 appeared first on Alloy Silverstein.

New Jersey Businesses

NJ Economic Development Authority (EDA) Grants & Loans

The New Jersey EDA approved a suite of new initiatives designed to support businesses and workers facing economic hardship due to the outbreak of the novel coronavirus COVID-19.

• Small Business Emergency Assistance Grant Program: A $5 million program that will provide grants up to $5,000 to small businesses in retail, arts, entertainment, recreation, accommodation, food service and other services — such as repair, maintenance, personal and laundry services — to stabilize their operations and reduce the need for layoffs or furloughs.
  • Note: The New Jersey Economic Development Authority (NJEDA) will launch the application for its Small Business Emergency Assistance Grant Program on Friday, April 3, 2020 at 9:00 am. A link to the grant program application will be posted on the State’s COVID-19 Business Information Hub.
• Small Business Emergency Assistance Loan Program: A $10 million program that will provide working capital loans of up to $100,000 to businesses with less than $5 million in revenues. Loans made through the program will have 10-year terms with zero percent for the first five years, then resetting to the EDA’s prevailing floor rate (capped at 3%) for the remaining five years.
• Community Development Finance Institution Emergency Loan Loss Reserve Fund: A $10 million capital reserve fund to take a first loss position on CDFI loans that provide low-interest working capital to microbusinesses. This will allow CDFIs to withstand loan defaults due to the outbreak, which will allow them to provide more loans at lower interest rates to microbusinesses affected by the outbreak.
• CDFI Emergency Assistance Grant Program: A $1.25 million program that will provide grants of up to $250,000 to CDFIs to scale operations or reduce interest rates for the duration of the outbreak.
• NJ Entrepreneur Support Program: A $5 million program that will encourage continued capital flows to new companies, often in the innovation economy, and temporarily support a shaky market by providing 80% loan guarantees for working capital loans to entrepreneurs.
• Small Business Emergency Assistance Guarantee Program: A $10 million program that will provide 50% guarantees on working capital loans and waive fees on loans made through institutions participating in the NJEDA’s existing Premier Lender or Premier CDFI programs.
• Emergency Technical Assistance Program: A $150,000 program that will support technical assistance to New Jersey-based companies applying for assistance through the U.S. Small Business Administration. The organizations contracted will be paid based on SBA application submissions supported by the technical assistance they provide.

Learn more here→  and at cv.business.nj.gov →

You can also check out the NJ Emergency Assistance Eligibility Wizard at https://assistance.business.nj.gov/ →

Burlington County, NJ

The Burlington County Bridge Commission and Burlington County Freeholders are offering small businesses located in Burlington County, NJ with working capital loans for up to $10,000 for each job the employer retains, up to a maximum of $50,000. In addition to covering wages and salaries of employees, the loans can be used to pay for inventories, accounts payable and operational activities. Interest rates are 2.4375%, which is 75% of the prime rate currently set at 3.25%, and have a maximum payback period of 10 years. During the COVID-19 pandemic, the Freeholders will: (1) Expedite the review of loan applications, (2) expedite settlement of loans for eligible applicants, and (3) waive all application fees.
Learn more→

Pennsylvania Businesses

Philadelphia Small Business Relief Fund: Loans & Grants

Administered by the Department of Commerce and Philadelphia Industrial Development Corporation (PIDC), the Philadelphia COVID-19 Small Business Relief Fund offers one-time grants or zero-interest loans to Philadelphia small businesses impacted by the COVID-19 pandemic. The Relief Fund includes three programs (and you can apply for all three in one application). A committee reviews all applications on a weekly basis and, after approval and completed paperwork, funds can be available in 1-2 business days.

• Microenterprise Grant: A $5,000 grant for Philadelphia micro-businesses with an annual revenue under $500,000. To apply, provide a signed tax return and a description of the impact of COVID-19 on your business, along with your recovery plan.
• Small Biz Grant: Up to $25,000 grant (determined by review of application) for small businesses with annual revenue between $500,000 and $3 million. To apply, provide a signed tax return, 2019 financial statements, proof of insurance, verification of cash flow, and a description of the impact of COVID-19 on your business, along with your recovery plan.
• Small Biz Zero-Interest Loan: A loan for $25,000—$100,000 (determined by review of application) for businesses with annual revenue between $3 million—$5 million. To apply, provide a signed tax return, 2019 financial statements, proof of insurance, verification of cash flow, and a description of the impact of COVID-19 on your business, along with your recovery plan. There are no collateral requirements.

Learn more→

Pennsylvania Working Capital Access

The Pennsylvania Industrial Development Authority (PIDA) launched a COVID-19 Working Capital Access (CWCA) Program for Pennsylvania for-profit businesses with fewer than 100 employees. Businesses can apply for up to $100,000 to put towards critical working capital financing (which for purposes of this program is considered capital used by a small business for operations, excluding fixed assets and production machinery and equipment).

Learn more→

Not-for-Profit Organizations

Southern New Jersey

Community Foundation of South Jersey’s South Jersey COVID-19 Response Fund: The CFSJ’s Response Fund will support local 501(c)3 non-profit agencies as they adapt internally and programmatically to assist neighbors and continue to deliver on their missions during this turbulent time. To do so, CFSJ will award a limited number of one-time program support grants to organizations operating in the Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Ocean or Salem counties. The grant amounts are a minimum of $3,000 to 501(c)3 non-profit organizations providing critical services tied directly to the economic security of South Jersey residents.
Learn more→

South Jersey & Philadelphia Counties

United Way of Greater Philadelphia and Southern New Jersey’s PHL COVID-19 Fund: Eligible 501(c)(3) nonprofits in Bucks, Chester, Delaware, Montgomery and Philadelphia counties in Pennsylvania and Atlantic, Burlington, Camden, Cape May, Cumberland counties in New Jersey can apply for grants, with amounts calculated based on the organization’s operating budget. Grants will be made on a rolling basis to address the most immediate needs first, keeping in mind that some needs likely will emerge over time.
Learn more→

Business Advice You Can Trust

We’re here for you. Contact an Alloy Silverstein Accountant and Advisor for tax and business guidance during these trying times. Contact us today.

The post Additional Resources For South Jersey Employers Impacted By COVID-19 appeared first on Alloy Silverstein.

In New Jersey, the rule applies to remote sellers if their gross revenue from sales into the state exceed $100,000 or the sales happened in 200 or more separate transactions during the current or prior calendar year. The ruling took effect October 1, 2018. Sales must be of tangible personal property, specified digital products or services delivered into New Jersey. A similar rule will apply in Pennsylvania for remote sellers who in the previous 12 months, made more than $100,000 of gross sales in the Commonwealth.

If the taxpayer is a remote marketplace facilitator they will use their facilitated and direct sales to determine their gross sales. A remote marketplace seller, however, will calculate their gross sales using its direct sales and sales made through a facilitator if no sales tax was collected on their behalf. The new ruling in Pennsylvania is effective July 1, 2019.

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