Forming your business entity in Delaware—specifically, a corporation—gives you a lot of flexibility, but you may still need to follow local laws depending on what state you operate in.
Specifically, if you do business in Pennsylvania, you need to register with the state. We’ll walk through the process and simplify it. But first, how can you tell whether you’re legally doing business in Pennsylvania?
When to register as doing business in Pennsylvania
Delaware C corps—and all other business corporations formed outside of Pennsylvania—are referred to as “foreign” corporations by the Commonwealth. In order to do business in Pennsylvania, you must receive foreign qualification in the state. Entrepreneurs should make sure to file for the correct business licenses and pay the appropriate business taxes to avoid costly fines down the road.
Pennsylvania statutes do not specifically define what is considered "doing business" in the state. However, Pennsylvania statutes provide that the following activities would not require you to register with the State:
Maintaining a bank account in the state
Soliciting or obtaining orders that are require acceptance outside of Pennsylvania.
Selling through independent contractors
Passively owning real estate
When to register to collect sales tax in Pennsylvania
Every state has rules about when a company is required to pay sales tax. These are called sales tax nexus rules.
You can think of the nexus as a special version of that state’s border; if you perform certain business activities within that border, you fall into the state’s sales tax nexus, and you’re required to register for and collect state sales tax.
Typically, these actions take the form of buying and selling goods and services.
In Pennsylvania, the sales tax nexus rules only apply to sellers who sell physical goods or services to Pennsylvania residents.
Until 2018, selling or buying non-physical goods—like subscriptions to streaming services, SaaS memberships, etc.—did not, generally speaking, qualify you for sales tax nexus. After an important court ruling in 2018, that changed. Now, if you buy or sell non-physical goods or services in a state, you may fall within its sales tax nexus.
Pennsylvania Sales Tax Nexus (physical goods and property)
If you have physical presence in Pennsylvania, then you will likely need to collect and remit sales tax. You may be physically present in a state if you have warehouses, retail spaces, or employees and/or representatives of the business in the state.
You will need to pay sales tax as long as you have physical presence regardless of any minimum thresholds. You can learn more about physical presence for sales tax purposes through the State's website.
Pennsylvania Sales Tax Nexus (non-physical goods and property)
The new state sales tax laws applying to non-physical (ie. internet) sales allow you to qualify for sales tax nexus even without physical presence or goods. In Pennsylvania, you need to cross a certain threshold to qualify.
Whether you are a limited liability company or professional service, you will need to collect and remit sales tax if you collect $100,000 or more in retail sales from Pennsylvania in the current or previous year.
If you would like to take a deep dive, you can check out the State's website.
As usual, this isn’t legal advice—just a guide. If you’re not 100% clear on whether you fall within Pennsylvania’s sales tax nexus, it’s best to confer with your legal counsel and/or an accountant that has expertise in Pennsylvania’s legal code and tax regulations.
How To Register To Do Business In Pennsylvania
You must complete the following steps to become a "qualified foreign business" in Pennsylvania:
- Select a corporation name under which to do business. Most corporations choose a name they registered with incorporating in Delaware; however, you may choose a name that is different from the name you incorporated with. This is typically referred to as a fictitious name.
- Fill out an application. You’ll need to file a Foreign Registration Statement to the Pennsylvania Department of State. This is often referred to at the Certificate of Authority in most other states. You will also need to file a docketing statement along with your Foreign Registration Statement. You will include information such as the location of your principal office, state of incorporation or home state, and business name.
- Pay the fee. Now you pay the Pennsylvania Department of State a $250 filing fee.
- Submit your Foreign Registration Statement.
- Wait. Processing typically takes 10-20 business days.
Once you’re approved to operate as a qualified foreign association in Pennsylvania, you’ll need to comply with certain requirements.
Compliance as a Qualified Foreign Business in Pennsylvania
To stay in compliance and continue legally doing business in Pennsylvania as a foreign entity, you need to meet two requirements: maintaining a registered agent and filing your decennial report. On top of that you will also need to pay your corporate net income tax.
Registered Agent in Pennsylvania
Your registered agent in Pennsylvania is your point of contact with local authorities. The registered agent is responsible for receiving any service of process and forwarding any relevant information to you. If you don’t have a physical address for your company in Pennsylvania, it may be advantageous to find a registered agent to receive state notices on your behalf.
Foreign corporations are required to have a registered office in Pennsylvania. The office cannot be a P.O. box, rather it must be a physical mailing address of your registered agent or a licensed registered agent service.
Your registered agent will forward any important information, such as business mail, to you. There are a number of commercial registered office provider that contract out registered agents. They typically cost $50 – $100 per year.
Deciennial Reporting In Pennsylvania
Every two years, you must file a statement with the State, updating any changes to the company address or the composition of the Board and officers. You’ll include info like:
- The legal name of your business
- The name and address of your registered agent
- The names and addresses of board members, managers, and officers
Your annual report filing fee is $70.
Paying Corporate Net Income Tax
Pennsylvania has a corporate net income tax. A corporate net income tax is a direct tax imposed on the income of a corporation. For more information on paying your corporation income tax, please see the following guidance from the Pennsylvania Department of Revenue.
Sales Tax Registration In Pennsylvania
Hiring And Paying Employees In Pennsylvania
When you hire a new employee in Pennsylvania, federal and state laws require that you report new hires to the state within 20 days of their hire. You can report your new hires online.
Your payroll provider should be able to take care of paycheck withholdings, but it’s up to you to register as an employer with the State and set up your employer account online.
For a comprehensive guide of your responsibilities, Pennsylvania provides the following information.
The Easiest Way To Register Your Business In Pennsylvania
Qualifying your corporation as a foreign business in Pennsylvania means you’ve got to keep track of a lot of moving parts. Failing to file the right forms, provide the right information, or stay on top of compliance laws can lead to serious headaches.
Capbase makes it easy. When you incorporate your Delaware corporation on Capbase, we will generate the required information needed to register to do business in Pennsylvania and keep you up to date on any required filings.
The compliance calendar inside your Capbase account will notify you of upcoming fees, reporting, or other requirements, so you can keep your startup in good standing with Pennsylvania state officials. Try Capbase today.
Written by Beth Zhao
Beth is a second year law student at The George Washington Law School. She is a member of the Public Contract Law Journal.
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