Pennsylvania Statutes Title 72 P.S. Taxation and Fiscal Affairs § 7316.1. Requirement of withholding tax

(a) Every employer maintaining an office or transacting business within this Commonwealth and making payment of compensation (i) to a resident individual, or (ii) to a nonresident individual taxpayer performing services on behalf of such employer within this Commonwealth, shall deduct and withhold from such compensation for each payroll period a tax computed in such manner as to result, so far as practicable, in withholding from the employe's compensation during each calendar year an amount substantially equivalent to the tax reasonably estimated to be due for such year with respect to such compensation.  The method of determining the amount to be withheld shall be prescribed by regulations of the department.

(b) Whenever the Pennsylvania State Lottery or a person making a Pennsylvania State Lottery prize payment in the form of an annuity is required to withhold Federal income tax under section 3402 of the Internal Revenue Code of 1986, as amended (Public Law 99-514, 26 U.S.C. § 1 et seq.), or backup withholding under section 3406 of the Internal Revenue Code of 1986, as amended, from a gambling or lottery prize payment awarded by the Pennsylvania State Lottery that is taxable under this article, the Pennsylvania State Lottery or the person making the annuity payment shall deduct and withhold from the prize payment an amount equal to the amount of the prize payment subject to withholding under section 3402 or 3406 of the Internal Revenue Code of 1986 multiplied by the tax rate in effect under this article at the time the prize payment is made.