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The City of Philadelphia Department of Revenue issued Frequently Asked Questions (“FAQs”) regarding its Wage Tax policies in light of COVID-19.  Philadelphia applies the “requirement of employment” test in order to determine whether a non-resident’s base of operations is the employer’s Philadelphia location. If a Philadelphia employer requires a non-resident employee to perform duties outside of Philadelphia (including working from home), that employee is exempt from the Wage Tax for those days spent fulfilling that requirement.  However, if a non-resident works from home for his or her own convenience, that employee is not exempt from the Wage Tax, even if the Philadelphia employer authorizes the work from home arrangement. 

The FAQs provide that wages of non-resident employees who followed their employer’s policies prohibiting them from working in Philadelphia due to COVID-19 are not subject to the Wage Tax.  The FAQs also attempt to address some of the unique circumstances brought about by the pandemic.  For instance, some employers have implemented policies of dividing their employees into teams, with each team alternating weeks they are physically in the office.  The Department’s guidance explains that in such scenarios, wages of non-resident employees would be subject to the Wage Tax for the weeks that they are working in the Philadelphia workplace, but not for the weeks they are working remotely.  Likewise, for employers with rules in place allowing a certain percentage of the workforce to come into the office, the wages of the non-resident employees required to work from home are not subject to Wage Tax except on the days they report to the Philadelphia location.

The Department’s guidance also approved use of certain language as evidence of a sufficient work-from-home policy for purposes of determining whether non-resident employees are subject to the Wage Tax.  Similarly, the Department approved certain language that an employer may utilize in directing its employees to work from home due to underlying medical conditions.  Notably, the Department pointed out that those employees forced to work remotely due to childcare issues would still be subject to the Wage Tax because the Department views such work-from-home conditions as occurring for the convenience of the employee.

If you have any questions about how Philadelphia’s Wage Tax FAQs affect you, please contact us.  Jennifer Karpchuk can be reached at jennifer.karpchuk@chamberlainlaw.com.