Are you a telecommuter? If the company does not require you to perform the work in Texas and you perform the work in Texas for your convenience, PA deems that the compensation is taxable by PA. If the company required you to perform the work in Texas, then it would not be PA sourced income.
Do you telecommute?
For Pennsylvania, all wages earned from an employer in that state are allocated to that state unless, by necessity, the nonresident’s work must be performed from his or her out-of-state location - See more at:
http://www.journalofaccountancy.com/issues/2009/jun/20091371.html#sthash.7O3zQebs.dpuf
http://www.koscpa.com/newsletter-article/state-tax-consequences-telecommuting/
SweetieJean - can you possibly cite an official reference from the State of Pennsylvania Dept of Revenue regarding this issue (not from a third party website)?
<a rel="nofollow" target="_blank" href="http://www.revenue.pa.gov/FormsandPublications/PAPersonalIncomeTaxGuide/Documents/pitguide_chapter_07.pdf">http://www.revenue.pa.gov/FormsandPublications/PAPersonalIncomeTaxGuide/Documents/pitguide_chapter_07.pdf</a>
(pages 72-73)
I am not super familiar with this topic, but I do know PA and NY are among the toughest with this. Its my understanding that if you work outside of PA for a PA company by choice even if your employee wants you to, that its still PA source income and taxable.
Now, the more interesting scenario, is if there is no way you could work in PA for the PA company - i.e. there is no space at the office for your job etc. In that case, I would argue that it meets the necessity requirement that the work be performed outside the state and thus not subject to tax. I **believe** that is the interpretation of the law that PA applies also. But, PA is very big on the W2 controlling the character of the income, so the user will want to speak with HR ASAP.
61 Pa. Code 109.8 seems to refer to employees who work both within and without PA. Not clear whether it applies to non-residents who never set foot in PA. Not trying to argue, just trying to clarify the rules as much as possible!
That is the portion of the code that PA relies on in applying the "Convenience of the Employer Doctrine" (the link I posted above goes into detail about that and its application). Other states have similar language, most notably NY. This issue was litigated in NY and was upheld by the NY courts. To my knowledge, it has never been litigated in PA fully. The link below does a pretty good job of explaining it and cites the PA and NY codes (though the article is written for NY because they are the toughest in applying it).
<a rel="nofollow" target="_blank" href="http://files.ali-cle.org/thumbs/datastorage/lacidoirep/articles/PTL_PTXL0511-GOLUBOFF_thumb.pdf">http://files.ali-cle.org/thumbs/datastorage/lacidoirep/articles/PTL_PTXL0511-GOLUBOFF_thumb.pdf</a>
I suspect that the state puts pressure on the employer to withhold the tax. The taxpayer will probably have little success in convincing his employer to stop withholding.
Note that NY allows an exception if the employee never steps foot in NY. I can find no reference how PA treats that situation.
<a rel="nofollow" target="_blank" href="http://www.albanylawreview.org/Articles/Vol72_3/72.3.0011%20Borie.pdf">http://www.albanylawreview.org/Articles/Vol72_3/72.3.0011%20Borie.pdf</a>
[edited] Where do you physically work? As a nonresident, you would pay PA income tax only on compensation for services you perform in Pennsylvania. Your PA employer would then withhold PA tax from the exact amount of your PA-taxable compensation.
Note: But if you are a telecommuter, see afc472's comment and reference.
if you work in PA some of the year, e.g. you go to business meetings, you are subject to PA tax on the salary for those days. You will have to file a non-resident PA return to get back the withholding for the days you didn't work there.
You should talk to your employer about withholding
I physically live and perform my work in Texas, have never left Texas for meetings or such. My check has been deducted for Pennsylvania WH, Pennsylvania SUI EE and Lanfhorn LST (WHAT IS THAT?????)
PA is notrious for local income and "occupational" taxes under various names. You may have to do some research to be able to discuss with your employer, whether these are applicable to you (they probably aren't)
<a rel="nofollow" target="_blank" href="http://www.newpa.com/local-government/local-income-tax-information/local-services-tax/#.V5N85fkrLVQ">http://www.newpa.com/local-government/local-income-tax-information/local-services-tax/#.V5N85fkrLVQ</a>
<a rel="nofollow" target="_blank" href="http://www.newpa.com/local-government/local-income-tax-information/local-services-tax/#.V5N8FPkrLVQ">http://www.newpa.com/local-government/local-income-tax-information/local-services-tax/#.V5N8FPkrLVQ</a>
If you are a non-resident of PA and never physically work in PA, then you are not subject to PA income tax. Talk to your company's HR or payroll department and inform them that you are not subject to PA state tax withholding. As Hal_Al said, next year you'll have to file a 2016 non-resident PA return to get a refund of the PA taxes they've already incorrectly withheld.
"When nonresidents perform services partly within and partly outside the commonwealth, only compensation for
services performed within the commonwealth is subject to Pennsylvania withholding." (from page 9, <a rel="nofollow" target="_blank" href="http://www.revenue.pa.gov/FormsandPublications/FormsforBusinesses/Documents/Employer%20Withholding/rev-415.pdf">http://www.revenue.pa.gov/FormsandPublications/FormsforBusinesses/Documents/Employer%20Withholding/rev-415.pdf</a>)
BUT, see SweetieJean's and afc42's comments above if you are a telecommuter. A telecommuter is one who does not commute to a central place of work, but instead works via the internet from home or some other alternate location of their choosing.