Cost of Doing Business in the Lehigh Valley
Cost is a major consideration when a company chooses a state. Pennsylvania continues to rank as one of the most competitive states in the Northeast and the Lehigh Valley is committed to maintaining a healthy and friendly business climate. We invest in local infrastructure, education and training of our workforce. We are committed to making community improvements and attracting jobs to our region.
To learn more please contact Jarrett Witt at 610.266.0523 or gro.yellavhgihelnull@ttiwj.
Pennsylvania Taxes
Overview of Pennsylvania’s Corporate Income Tax Rates
- Currently at 9.99 percent (House Bill 2150, proposes dropping the corporate net income to 6.9 percent in 0.5-percentage point increments over six years, beginning in 2014).
- This tax is levied on federal taxable income, without the federal net operating loss and special deductions, and modified by certain additions and subtractions.
Capital Stock/Foreign Franchise Tax
- Capital stock value for businesses in the Commonwealth is based on a company’s net income and net worth.
- The rate for 2012 is 1.89 mills, and the rate for 2013 is .89 mills. The tax is scheduled to be phased out by 2014.
- Assets used in manufacturing, processing, and research and development activities are exempt.
Minimum Wage
- Pennsylvania – $7.25 per hour.
- Federal – $7.25 per hour.
Personal Income Tax
- Pennsylvania imposes a flat 3.07 percent rate on partnerships, S corporations, business trusts and limited liability companies that are not taxed as corporations for federal purposes.
Personal Property Tax
- Pennsylvania does not impose a tax on personal property.
Sales and Use Tax
- Pennsylvania – 6 percent
- Retail sales of tangible personal property and some services. Exemptions for resale; isolated or bulk sales; goods used in manufacturing, processing, or research and development.
Real Estate Transfer Tax
- Imposed on the real value of property, including contracted improvements, transferred by deed, instrument, long term lease, or other writing.
- Most localities impose 1percent in addition to the state rate of 1percent.
State Unemployment Insurance
- Paid on the first $8,000 of wages for each employee on an annual basis.
- The current new employer rate (excluding construction) is 3.5 percent.
- After the first two years, each employer receives an experience rating based on the stability of its employment experience.
Workers’ Compensation
- Mandatory coverage of employees engaged in the “regular course” of the employer’s business.
- Certain occupational classes are excluded.
Pennsylvania Tax Credits and Abatements
Pennsylvania offers a wide variety of tax credits and abatements for job
creation and investment. High level overview of these tax credits are below.
For a complete overview of Commonwealth funding, please see http://www.newpa.org/
Job Creation Tax Credits (JCTC)
The Job Creation Tax Credit program awards a $1,000-per-job tax credit to
businesses that exhibit leadership in technology and create new jobs in the
Commonwealth within three years of the project start date. Job Creation Tax Credits (JCTC)
Keystone Opportunity Zones (KOZ)
Pennsylvania’s Keystone Opportunity Zone Program provides for tax credits,
abatements and exemptions for income taxes (corporate and personal), capital
stock/foreign franchise tax, state and local sales and use taxes for purchases
for use in the zone, real property tax, local gross receipts taxes, local net
profits taxes and local use and occupancy taxes. The credits, exemptions and
abatements may be up to 100 percent of the tax liability based upon the percentage
of business conducted within the Keystone Opportunity Zones (KOZ).
Keystone Special Development Zone (KSDZ)
The Keystone Special Development Zone (KSDZ) program was established for the purpose of providing incentives to for-profit businesses that locate and operate in designated geographic zones. Pennsylvania continues to have a surplus of abandoned, deteriorated commercial and industrial sites in need of revitalization. The KSDZ program is an incentive-based tax credit program to foster redevelopment of these former industrial and commercial sites.
Keystone Special Development Zone (KSDZ)
Research and Development Tax Credit
Allows companies holding qualifying Research and Development Tax Credits
to apply for approval to sell those tax credits and assign them to the buyer(s).
Research and Development Tax Credit
Keystone Innovation Zone Tax Credit Program
An incentive program that provides tax credits to for-profit companies less
than eight years old operating within specific targeted industries within the
boundaries of a Keystone Innovation Zone (KIZ) Program. With a total pool of
up to $25 million in tax credits available to KIZ companies annually, the KIZ tax
credit program significantly contributes to the ability of young KIZ companies to
transition through the stages of growth Keystone Innovation Zone Tax Credit Program
Neighborhood Assistance, Enterprise Zone Tax Credit (NAP/EZP)
An incentive program that provides tax credits to private companies investing
in rehabilitating, expanding, or improving buildings or land located within
designated enterprise zones. Neighborhood Assistance, Enterprise Zone Tax Credit (NAP/EZP)
Local Taxes — High level overview of potential Local Taxes
(Not all taxes are universally levied. Depending on the locality there could be other taxes that are administered.)
Please see View detailed taxes and rates
Real Estate Property Tax
- Counties, school districts and municipalities levy property taxes in Pennsylvania.
- Assessed Value (determined by the County Real Estate Tax Assessor) multiplied by millage/ tax rate. The “total millage rate” for a property includes the county, school, and municipal (township) tax rates.
- Not imposed on machinery and equipment, business inventories or personal property.
Earned Income Tax
- The earned income tax is a tax levied as a percent of earned income (Typically around 1 percent of gross wages)
Local Services tax (LST) / Occupational Privilege Tax (OPT)
- Most municipalities impose a LST or an OPT, which can range from $10 to $52 per year.
Business Privilege and Mercantile Tax
- Assessed on the gross receipts of businesses.
Local Tax Credits and Abatements
Local Economic Revitalization Tax Assistance (LERTA)
LERTA is a property tax abatement program that creates a graduated increase in the payment of taxes on improvements and new construction to commercial, industrial and other business property located within the City of Bethlehem’s state-designated Enterprise Zone and the North Side Central Business District. This incentive creates a 10 percent graduated increase in the payment of taxes on new construction of commercial, industrial and other business property over a 10-year period. The graduation of taxes applies only to the taxes that are attributable to the improvement project.
Keystone Opportunity Zones (KOZ)
Pennsylvania’s Keystone Opportunity Zone Program provides for tax credits, abatements and exemptions for income taxes (corporate and personal), capital stock/foreign franchise tax, state and local sales and use taxes for purchases for use in the zone, real property tax, local gross receipts taxes, local net profits taxes and local use and occupancy taxes. The credits, exemptions and abatements may be up to 100 percent of the tax liability based upon the percentage of business conducted within the Keystone Opportunity Zones (KOZ).
