You are correct that a nonqualified annuity is normally taxed in Pennsylvania. See https://revenue-pa.custhelp.com/app/answers/detail/a_id/368/~/are-distributions-from-an-annuity-taxa...
If it is showing as non-taxable, it may be for one of two reasons:
1. In the Pennsylvania interview, you checked one of the type of plans that is non-taxable on one of the screens with the heading "What kind of retirement income do you have from Pennsylvania?" Checking most (or all) of these entries will make the annuity non-taxable in PA.
2. You did not notice that in Pennsylvania, such distributions are reported as "interest" income. The note at the bottom of this screen ("What kind of retirement income do you have from Pennsylvania?) points out that TurboTax will transfer it automatically to PA Schedule A (which is not like Schedule A on the federal return; rather it is for Pennsylvania interest income).
