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SALT Blawg – State and Local Tax Blog

State and Local Tax ("SALT") blog issues require state and local tax knowledge. Chamberlain Hrdlicka's SALT Blawg (SALT Blog) provides exactly that knowledge with news updates and commentary about state and local tax issues.

You can expect to find relevant information about topics such as income (corporate and personal) tax, franchise tax, sales and use tax, property (real and personal) tax, fuel tax, capital stock tax, bank tax, gross receipts tax and withholding tax. SALT Blawg, offers tax talk for tax pros … in your neighborhood.

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COVID Nexus Waivers End as Pennsylvania & Philadelphia Return to Status Quo

With the start of the new fiscal year comes another change: a reversion to standard nexus policies for Pennsylvania and Philadelphia.  During the pandemic, both Pennsylvania and Philadelphia implemented temporary nexus policies.  Pennsylvania implemented temporary nexus waivers for purposes of its Corporate Net Income Tax (“CNIT”), while Philadelphia implemented similar waivers for purposes of its Business Income and Receipts Tax (“BIRT”).  Those temporary waivers for both Philadelphia and Pennsylvania expired on June 30, 2021.  While nothing has changed with regard to the standard nexus policies that existed prior to the pandemic, the working environment has.  Many employers still maintain a remote workforce or are operating on a hybrid approach.  If businesses have continued to maintain a remote workforce after June 30, 2021, they should consider the nexus that they have likely established with Pennsylvania and/or Philadelphia.


For purposes of the CNIT, a company is considered to have nexus with Pennsylvania where it has one or more employees conducting business activities on its behalf in Pennsylvania.  Nexus was temporarily waived during the pandemic such that a remote employee working in Pennsylvania solely because of the pandemic did not trigger nexus for CNIT purposes.  However, as of June 30th the temporary rule expired.  Reverting back to the standard nexus provisions, unless the remote work is protected by Public Law 86-272, the remote employee working in Pennsylvania will subject the out-of-state employer to the CNIT.  

Public Law 86-272 provides that a business is protected from a taxing jurisdiction’s income tax if its activities within the jurisdiction are limited to solicitation of sales of tangible personal property, which is sent for approval and shipped by common carrier from outside of the jurisdiction.  With an increasingly services based industry, many businesses fall outside of the protections of Public Law 86-272.  However, those businesses that are still able to claim its protections should pay extra attention to the responsibilities and actions of their remote workforce.  Public Law 86-272 only protects activities ancillary to the solicitation of orders – activities that go beyond mere solicitation will cause an employer to lose the protection of Public Law 86-272.  Businesses should confirm that their remote worker’s activities do not cause the company to lose the valuable protection of Public Law 86-272.

Apart from the CNIT, the presence of a remote employee in Pennsylvania may subject a business to sales tax collection requirements.  As with the CNIT, Pennsylvania temporarily waived nexus requirements for sales tax purposes.  However, again, that waiver expired on June 30th.  Many states, including Pennsylvania, moved to economic nexus for purposes of sales tax.  Thus, companies with $100,000 of sales into Pennsylvania are already responsible for collecting Pennsylvania’s sales tax, regardless of the presence of a remote worker.  Yet, those smaller businesses with sales into Pennsylvania that fell below the threshold and were not collecting or reporting should pay particular attention and review whether the presence of a remote worker in Pennsylvania may be subjecting them to a new collection and reporting requirement for sales tax purposes.   


Similar to Pennsylvania, Philadelphia also implemented temporary nexus waivers during the pandemic.  More specifically, during the pandemic, the Philadelphia Department of Revenue announced that it would temporarily waive the legal nexus thresholds that provide that the presence of employees working temporarily from home within Philadelphia establishes sufficient nexus for an out-of-Philadelphia business to subject it to the Business Income and Receipts Tax (“BIRT”) and Net Profits Tax (“NPT).  The waiver only applied if and when the employee was working from home solely as a result of the pandemic.  Like Pennsylvania, those temporary waivers expired on June 30th.   

Reverting back to standard nexus provisions, the presence of a continued remote workforce in the city will subject an entity to nexus for purposes of the BIRT.  The business will have nexus for tax year 2021 and future years based solely on the activities of one remote employee, unless those activities are protected by Public Law 86-272. 

As with the CNIT for Pennsylvania tax purposes, it is important that Public Law 86-272 protected companies with remote workers in Philadelphia assess the responsibilities and actions of their remote workforce.  Such a review is essential to ensure there is not a loss of the key protection the law affords.  However, those businesses should keep in mind that the BIRT is a hybrid tax – containing both a net income portion and a gross receipts portion.  Public Law 86-272 protection only extends to the net income portion of the BIRT, not the gross receipts portion.  Therefore, businesses with protection under Public Law 86-272 do not escape the BIRT entirely – those entities are still responsible for the gross receipts portion of the tax.

Additionally, during the pandemic, Philadelphia provided a temporary waiver of its apportionment rules.  The temporary rule allowed for an alternative apportionment that did not factor the resident remote employee working in Philadelphia solely by virtue of the pandemic into the sourcing for purposes of the BIRT and NPT.  However, with respect to non-resident employees who were performing services in their assigned business locations within Philadelphia and were not previously required to work from home but were temporarily doing so due to the pandemic, such services were deemed performed within Philadelphia for the purposes of sourcing receipts for BIRT and BPT. 

Philadelphia’s special apportionment provision expired June 10, 2021, when the Governor’s emergency declaration ended.  With the end of the special apportionment provisions, the city reverted back to its standard apportionment provisions, which provide that taxable receipts related to services do not include those receipts received from services actually performed outside the limits of the city.  Taxable receipts that occur both inside and outside the city are to be segregated. See Phila. Code § 2601.  Businesses with remote employees should consider the impact those employees may have on their BIRT and NPT apportionment.

While these standard nexus provisions are nothing new, there has been a vast increase in the number of employers permitting employees to work remotely post-pandemic.  Businesses with remote employees in Pennsylvania and/or Philadelphia should review the effect their continued remote workforce will have on nexus for purposes of the various state and local taxes.

Jennifer Karpchuk is the co-chair of the State and Local Tax (SALT) Controversy and Planning practice at Chamberlain Hrdlicka. She may be reached at jennifer.karpchuk@chamberlainlaw.com.

  • Jennifer  Karpchuk

    Jennifer W. Karpchuk is co-chair of Chamberlain Hrdlicka’s state and local tax practice.  She represents companies and individuals in all aspects of state and local tax litigation, controversy, compliance and planning.  She has ...