What is Pennsylvania’s franchise tax?

Pennsylvania no longer has a franchise tax. The state’s Capital Stock and Foreign Franchise Tax, which functioned as a franchise tax on both domestic and foreign corporations, was fully repealed for tax years beginning after December 31, 2015. 

These taxes applied to corporations, LLCs taxed as corporations, business trusts, and similar entities. Businesses now only need to consider corporate net income tax (CNIT) and other applicable state taxes. You must file a CNIT return if your entity is treated as a C corporation for federal purposes, whether the charter was issued in Pennsylvania or elsewhere. 

Pennsylvania's Corporate Net Income Tax

The Corporate Net Income Tax (CNIT) is now Pennsylvania's primary state-level business income tax. The tax uses a single-sales-factor apportionment formula, meaning only Pennsylvania-sourced receipts are included in the calculation. Payroll and property located outside of Pennsylvania are not factored into apportionment.

Pennsylvania has an economic nexus threshold: businesses with $500,000 or more in Pennsylvania-sourced sales are presumed to have nexus and must file CNIT returns.

Industry-specific exception

While Pennsylvania eliminated its general franchise tax, the state retains the industry-specific Oil Company Franchise Tax that applies to fuel distributors, not to ordinary corporations.

Additional state taxes

Even after budgeting for the Corporate Net Income Tax, Pennsylvania expects you to manage several other state-level taxes that can quietly undo your cash-flow projections if ignored.

Sales and registration obligations:

• Sales and use tax registration through the PA-100 Business Tax Registration form (now via myPATH's online business tax registration)
• Early registration helps ensure your account is active before conducting taxable business

Employee-related tax requirements:

• Employer withholding - Added to PA-100 profile with separate deposit calendar from CNIT due dates
• Unemployment insurance - Independent schedule that rarely matches other tax deadlines
• Federal coordination risk - State deposit mismatches can trigger federal penalty notices due to payroll data connections

Local government tax layers:

• Philadelphia-specific - Business Income and Receipts Tax plus Net Profits Tax, each with separate penalty calculations
• Borough and township taxes - Mercantile or gross-receipts taxes outside Philadelphia
• Independent tracking - Local liabilities don't flow automatically to Harrisburg, requiring separate management from CNIT and sales tax

Discern automates your Pennsylvania compliance obligations

Pennsylvania's Corporate Net Income Tax requires professional tax expertise, especially when managing single-sales-factor apportionment and determining nexus for multi-state businesses.

While Discern does not file Pennsylvania corporate income taxes, Discern can file your Pennsylvania annual reports, provide registered agent services, and help you track compliance across all your entities.

Ready to simplify your multi-state compliance? Book a demo to see how Discern streamlines entity management across all 50 states and DC.