Starting a Business in Pennsylvania
Pennsylvania has a long history of notoriety, with everything from the liberty bell to the steel mills of Pittsburg. There are many upsides to forming a company in the Keystone State. The largest cities, Philadelphia and Pittsburg, both have ever expanding tech communities. Even though Philadelphia is one of the largest markets in and of itself, it is also in close proximity to some of the largest markets in the nation, including Washington DC, Boston and New York City. Pennsylvania also has a highly skilled labor market overall and a reasonable tax system. Pennsylvania businesses can benefit from a variety of programs and incentives, with the most notable of these being tax credits and companies who physically situate themselves inside a State designated Enterprise Zone or Opportunity Zone. The Pennsylvania Department of Revenue oversees sales tax collection and the Pennsylvania Secretary of State verifies if a business in good standing. To remain in good standing you must remember to file an annual report. Once you have performed a Pennsylvania corporation search and have formed a company with the Pennsylvania Secretary of State, you can move forward with catering to other administrative related tasks that are needed for your business to remain compliant. Registering online for a Pennsylvania Sales Tax License is required for you to collect and turn in sales tax. Finding competent support services is important whether you are researching getting Business licenses in Pennsylvania, checking the status of a PA-100 Enterprise Registration Form, seeing if you need to collect Pennsylvania sales tax, finding good office space to lease, and searching a Pennsylvania sales tax rate. Here are the benefit programs given to Pennsylvania businesses who qualify. Tax credit categories are broken down into job act credits, industry credit or hybrid credit:
- Pennsylvania has a workforce development program called the Job Creation Tax Credit that focuses on helping expand jobs in the state. A tax credit of $1000 per new job created can be taken or $2500 if the individual is unemployed. To be eligible, a business must create at least 25 new jobs or expand its workforce by 20%. Any unused credits that exceed total state income tax can be carried forward and applied to future income tax obligations with certain statutory limitations. Funds can be used towards corporate income tax obligations, gross receipts tax, personal income tax and foreign franchise tax. Pass through entities such as LLC’s or S corporations can apply the credit towards tax obligations.
- The industry Credit Program known as the Film Tax Credit is available to a qualified production company engaged in the production of a state certified production project located in Pennsylvania. It was spawned to help facilitate the expansion of the film industry inside the state. Qualified projects include television shows, feature films, made for television series and advertising commercials. To qualify, a minimum of 55% of the estimated budget must be used on total expenses. The maximum credit available for a total project is 25% of the total project expenditures in Pennsylvania.
- Opportunity Zones are an integral part of the Pennsylvania incentive package landscape. Stimulus is taken in the form of private capital investment. These capital infusions are offered to stimulate economic growth and expansion to economically depressed areas in Pennsylvania. To qualify, a business must make a capital investment of 10% of the prior year’s wages or expand their workforce by 20% within one year.
- Innovation Zones work along many of the same premises as the opportunity zone programs. The zones are meant to bring businesses within qualified Industries together with educational facilities. To qualify, the businesses must be part of specific industries and sectors and be within the borders of the innovation zones. Credits are eligible to be taken against personal income tax, corporate income tax, capital tax and foreign franchise tax. There is a cap on the total benefit of $100,000 per company/per year and any unused credit is lost.
- A Pennsylvania Sales and Use Tax Exemption is offered to companies that have qualified computer equipment used in data center operations. A qualified data center is any newly built facility or existing facility that is approved by the Pennsylvania Department of Revenue. There is a cap of $5 million annually.
- Pennsylvania has a Research and Development Tax Credit given to a business for any R & D expenses that it incurs. A business must first meet its corporate tax obligations after which the reimbursement can be taken. Credits can be used towards Pennsylvania state taxes including corporate income tax obligations, gross receipts tax, personal income tax and foreign franchise tax. Pass through entities like LLC’s or S corporations can also benefit from the credit.