A state House member said he'll soon introduce legislation repealing a provision in Act 43 that he said makes the tax a liability of the payor, encourages payees not to file and risks nearby states ceasing their reciprocity agreements with the state.

According to state Rep. Francis Ryan, R-Lebanon, the Act 43 Tax Code has a
provision requiring entities to withhold Pennsylvania Personal Income Taxes and
other applicable taxes on out-of-state payments made to taxpayers of other states
when a 1099-MISC tax form is filed. The act also, according to Ryan, makes the
tax a liability of the payor, which he called “an extremely dangerous precedent”
because it entices a payee not to file and “effectively” shifts the tax burden to an
in-state business.

Ryan cited the state's reciprocity agreements with nearby states and New Jersey's 2016 announcement that it would break its reciprocity agreement with Pennsylvania by January 2017 as the urgent reasoning for his proposed repeal. Although New Jersey did declare it would leave its reciprocity agreement with Pennsylvania, New Jersey Gov. Chris Christie later said he would continue the agreement.

The reciprocity agreement allows someone who lives in Pennsylvania and works in New Jersey to file a Pennsylvania tax form and vice versa.

Currently, Pennsylvania has reciprocal agreements with Indiana, Maryland, New Jersey, Ohio, Virginia and West Virginia.
— V.H. •