Hiring your first employee in Pennsylvania

What do you have to register for before your first payroll?

One application covers two agencies. Pennsylvania's online business tax registration opens your employer withholding account and your unemployment compensation account at the same time, and collects your workers compensation coverage information too. It does not cover everything: local earned income tax withholding is registered separately through the local tax collector, and workers compensation insurance itself must be bought from an insurer or the State Workers' Insurance Fund.

Does Pennsylvania require income tax withholding?

Yes. You register with the Pennsylvania Department of Revenue, before your first pennsylvania payroll. the unemployment account opened by the same registration carries a hard deadline of 30 days after covered services are first performed.

Pennsylvania taxes wages at a flat 3.07% and you withhold from residents on all compensation and from nonresidents on work done in the state. The trap that catches out-of-state employers is the second layer underneath: Pennsylvania municipalities levy a local earned income tax, and any employer with a worksite in the state must withhold and remit it. A home office counts as a worksite, so hiring one remote worker can pull you into local withholding for that person's municipality on top of the state rate. A Local Services Tax may apply as well.

What unemployment insurance does Pennsylvania charge a new employer?

A new Pennsylvania employer pays 3.822% on the first $10,000 each employee earns, so roughly $382 per employee in the first year. Pennsylvania is one of the few states where employees pay unemployment tax too. On top of your employer contribution you must withhold 0.07% from every employee's gross wages, and unlike your own contribution that withholding has no wage cap at all, so it applies to the whole paycheck all year. The employer side is capped at the first $10,000 per employee: 3.8220% for a newly liable non-construction employer, or 10.5924% for a newly liable construction employer. Register within 30 days of the first day covered work is performed, because missing that adds a 3% delinquency loading to your rate.

Do you need workers compensation insurance in Pennsylvania?

Yes, from your first employee. Pennsylvania sets no headcount to reach, so there is no free window before coverage is required.

Coverage is mandatory from your very first employee, including part timers and family members such as a spouse or children. There is no opt-out route for an ordinary business: you either buy a policy from an insurer or the State Workers' Insurance Fund, or get approval to self-insure. The only escape is if every single worker falls into a narrow excluded category. Going without coverage is not just a fine, it can mean criminal prosecution with penalties running per day of noncompliance.

How quickly must you report a new hire in Pennsylvania?

Within 20 days of the date of hire. Reports go to the Pennsylvania New Hire Reporting Program.

You report every employee who lives or works in Pennsylvania within 20 days of the date of hire, which means the first day services are performed for wages, not the offer date. Rehires count if the worker returns after a layoff, termination, separation or unpaid leave longer than 30 days. If you have employees in more than one state and want to report them all to Pennsylvania, you must register with the national Multistate Employer Registry first and report electronically, since multistate employers cannot use paper.

Does Pennsylvania have paid family leave or state disability insurance?

No. Pennsylvania runs no state paid family leave fund and no state disability insurance, so there is no payroll deduction of that kind and no extra account to open.

Pennsylvania has no statewide paid family leave or temporary disability insurance program, so there is no state payroll deduction of that kind. The full list of employer accounts the Commonwealth asks you to register for covers unemployment, withholding and workers compensation, and nothing else of this type. Note this is a statement about state law only: some Pennsylvania cities have their own paid sick leave ordinances that apply to employees working within city limits.

Do you need a sales tax permit in Pennsylvania?

The sales, use and hotel occupancy tax licence is free. You must have it in hand before your first taxable sale, not after. The licence renews automatically every five years, but only if you have no outstanding returns or unpaid Pennsylvania tax, so a lapsed filing can quietly cost you the licence. If you sell only through a marketplace that already collects Pennsylvania tax for you, you do not need a licence at all.

Does a marketplace like Amazon or Etsy handle the tax for you?

The marketplace facilitator is responsible for collecting and remitting Pennsylvania sales tax on the sales it facilitates. If every one of your Pennsylvania sales goes through a platform that collects for you, you do not have to register or file here at all. The moment you add a direct channel the picture changes: you count your direct sales plus any marketplace sales where the platform did not collect, when testing whether you have crossed into a filing obligation. The old option of sending customers use tax notices instead of collecting has been abolished.

If your sales drop, when can you stop collecting?

Pennsylvania tests economic presence once a year on a fixed calendar, so the obligation does not switch off the moment your sales drop. Sales are measured over a calendar year and the resulting collection period runs from April 1 of the following year through March 31 of the year after that. In practice a year when you fall below the threshold still leaves you collecting until the following March 31. Do not assume the account closes itself either: keep filing until you formally end the registration.

Does Pennsylvania charge a tax on revenue rather than profit?

Pennsylvania does levy a tax literally called the Gross Receipts Tax, but it is nothing like Washington's B&O or Ohio's CAT and almost certainly does not touch you. It applies only to specific regulated industries: telephone and telegraph, electric suppliers, and certain transportation companies. An ordinary business pays corporate net income tax or passes income through to owners instead, and never files this. There is no small business exclusion because there is no general application to exclude anyone from.

Do you have to register your out-of-state company in Pennsylvania?

$250 flat for both, unlike states that scale the corporate fee with authorized shares. Amending a foreign registration later costs another $250.

An out-of-state LLC or corporation registers by filing a Foreign Registration Statement together with a docketing statement, and the fee is $250 whichever entity type you are. This is separate from and additional to your payroll and sales tax registrations, which do not qualify you to do business here. The fee is nonrefundable, so sort out entity name availability before you file.

Where these figures come from

Every number on this page was read on Pennsylvania's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.