Carnegie Mellon University

Important PA Form 1099-MISC Withholding Tax Information

Pennsylvania Act 43 of 2017 – 1099-MISC Withholding

As of July 1, 2018, the university will withhold the required 3.07% Pennsylvania income tax on the following payments:

  • Payments reported on a Form 1099-MISC of Pennsylvania source non-employee compensation or business income to a non-resident individual or a single member LLC with a nonresident owner. 
  • A lessee of Pennsylvania real estate who makes a lease payment in the course of a trade or business to a non-resident individual, individual of a single member LLC, estate or trust. 

View the June 2018 Finance Bulletin [.pdf] for more information regarding the PA withholding changes. 

1099-MISC Withholding Exemption Certificate

As a result of the withholding obligation, suppliers who wish to be considered for exemption from the 3.07% income tax withholding must complete a Pennsylvania 1099-Misc Withholding Exemption Certificate [.pdf] (PA Withholding Exemption). The supplier should sign and complete the following sections: Payor Information, Payee Information, Exemption Reason, and Certification of Payee. If the supplier is using the exemption certificate located on the Finance Forms website, the Payor section is already completed. The Supplier Information Package - US [.pdf] includes the PA Withholding Exemption.  The Supplier Information Form – International [.pdf] does not include the exemption certificate, as international suppliers who receive form 1042-S are exempt from the withholding. To obtain the PA Witholding Exemption from existing suppliers, the the Finance Division recently contacted suppliers who 1) have an address outside of Pennsylvania and 2) have one of the vendor types that represent individual/single member LLC in Oracle via email or regular mail requesting that they complete the PA Withholding Exemption.  Payments to these suppliers are on hold until the university receives a completed form. 

Supplier Information Form – US Instructions for PA Income Tax Withholding Question

To assist you with the PA Income Tax Withholding question on the Supplier Information Form - US [.pdf], please review the following guidance.

Pennsylvania income tax is required to be withheld at a rate of 3.07% on payments reported on a Form 1099-MISC of Pennsylvania source non-employee compensation or business income to a non-resident individual or a single member LLC with a nonresident owner. This nonresident withholding requirement does not apply to payments for goods and materials or wages paid to employees.

  1. If Form W-9’s Box 3 “Individual/sole proprietor or single-member LLC” is checked, a supplier may be subject to PA income tax withholding. 
    1. If the individual/sole proprietor or member of the single-member LLC is not a resident of PA (see Pennsylvania Form REV-611 [.pdf] for guidance on PA residency), the supplier may be subject to PA withholding.
    2. If the supplier is not a resident of PA and is providing services to CMU inside the Commonwealth of Pennsylvania, the supplier is subject to PA income tax withholding. Please select “Yes” on the Supplier Information Form - US. Pennsylvania income tax of 3.07% will be withheld on your payments and remitted to the Commonwealth of Pennsylvania on your behalf.

2. If any other option is selected on Form W-9 in box 3 besides “Individual/sole proprietor or single-member LLC”, the supplier is not subject to PA income tax withholding.  Please select “No” on the Supplier Information Form - US and complete Form 1099 MISC Withholding Exemption Certificate.

3. If the supplier is providing services OUTSIDE of the Commonwealth of Pennsylvania or if NO SERVICES are being provided to CMU (i.e. the sale of goods/products), the supplier is not subject to PA income tax withholding. Please select “No” on the Supplier Information Form – US and complete Form 1099 MISC Withholding Exemption Certificate.

On the Pennsylvania Form 1099 MISC Withholding Exemption Certificate, the supplier should sign and complete the following sections: Payor Information, Payee Information, Exemption Reason, and Certification of Payee. If the supplier is using the exemption certificate located on CMU’s website, the Payor section is already completed.