§ 113.2. Compensation subject to withholding.
All compensation shall be subject to withholding of tax by an employer. Regulations for residents and nonresidents shall be as follows:
(1) Residents. The following procedure shall be utilized by employers withholding Commonwealth Income Tax from a resident:
(i) If a Commonwealth resident renders service in this Commonwealth, his employer shall withhold Commonwealth tax from his compensation.
(ii) If the employer is subject to the jurisdiction of this Commonwealth and a Commonwealth resident is rendering services as his employee in another state, the following procedure shall be followed:
(A) If the other state does not have an income tax, he shall withhold on the compensation he pays to the employee.
(B) If the other state does have an income tax and the employer is withholding the tax, the employer is not required to withhold Commonwealth tax.
(C) If the employer is not withholding income tax for the state in which the services are rendered, he shall withhold Commonwealth tax.
(iii) If a Commonwealth resident is rendering services partly within and partly outside this Commonwealth, the following procedure shall be followed:
(A) If the other state does not have an income tax, he shall withhold on the entire compensation he pays to the employee.
(B) If the other state does have an income tax and the employer is withholding the tax, the following employer shall also withhold the following Commonwealth income tax on compensation for services rendered within this Commonwealth:
(I) The amount of compensation attributable to services within this Commonwealth shall be that proportion of the total compensation which the total number of working days employed within this Commonwealth bears to the total number of working days employed both within and outside this Commonwealth, exclusive of nonworking days. Nonworking days are normally considered to be Saturdays, Sundays, holidays, and days of absence because of illness or personal injury, vacation, or leave with or without pay.
(II) With respect to earnings of a traveling salesman or other employee whose compensation depends directly on the volume of business transacted by him, the amount attributable to services within this Commonwealth shall be that proportion of the compensation received which the volume of business transacted by him within this Commonwealth bears to the total volume of business transacted by him both within and outside this Commonwealth.
(C) If the employer is not withholding income tax for the state in which the services are rendered, he shall withhold Commonwealth tax on the entire compensation.
(2) Nonresident. The following procedure shall be utilized by employers withholding Commonwealth income tax from a nonresident:
(i) The tax shall be deducted and withheld on compensation paid to nonresident employees for services performed in this Commonwealth. Accordingly, if a nonresident employee performs all of his services in this Commonwealth, the tax shall be deducted and withheld from all compensation paid him.
(ii) If a nonresident employee performs services partly within and partly outside this Commonwealth, only compensation for services within this Commonwealth shall be subject to withholding.
(A) The amount of compensation attributable to services within this Commonwealth shall be that proportion of the total compensation which the total number of working days employed within this Commonwealth bears to the total number of working days employed both within and outside this Commonwealth, exclusive of nonworking days. Nonworking days are normally considered to be Saturdays, Sundays, holidays, and days of absence because of illness or personal injury, vacation, or leave with or without pay.
(B) With respect to earnings of a traveling salesman or other employee whose compensation depends directly on the volume of business transacted by him, the amount attributable to services within this Commonwealth shall be that proportion of the compensation received which the volume of business transacted by him within this Commonwealth bears to the total volume of business transacted by him both within and outside this Commonwealth.
(iii) The portion of compensation allocable to the Commonwealth may be determined by the employer on the basis of the preceding year’s experience, or on the basis of an estimate for the current year made by the employee or his employer. In either case, the employer shall make any necessary adjustment during the year to assure that the proper amount is withheld for the current year.
(iv) An employer shall withhold on all compensation paid to a nonresident who works partly within and partly outside this Commonwealth unless the employer maintains adequate current records to determine accurately the amount of compensation from Commonwealth sources.
(3) Tips.
(i) Every employee who, in the course of his employment, receives in any calendar month cash tips which are wages as defined in section 3401(a) of the IRC (26 U.S.C.A. § 3401(a)) shall report those tips in one or more written statements furnished to his employer on or before the 10th day following that month.
(ii) Employers are required to deduct and withhold tax only on tips of which the employer has the control, receipt, custody or payment or tips that are reported by the employee and only to the extent that the employer can collect the tax by deducting it from the employee’s compensation exclusive of tips.
Authority The provisions of this § 113.2 amended under section 354 of the Tax Reform Code of 1971 (72 P. S. § 7354).
Source The provisions of this § 113.2 amended December 26, 2003, effective December 27, 2003, 33 Pa.B. 6423. Immediately preceding text appears at serial pages (261983) to (261984) and (205381).
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