Frequently Asked Questions

What Is Earned Income Tax (EIT) Withholding?

Local income taxes in Pennsylvania are variously termed earned income taxes, wage taxes or net profits taxes or a combination of these terms.

The earned income tax is a tax levied as a percent of earned income. The Local Tax Enabling Act requires every employer having a factory, workshop, branch, warehouse or other place of business within the taxing jurisdiction to register with the earned income tax officer of that district. All employers with work sites within the taxing jurisdiction are required by law to deduct the earned income tax from their employees at that site if the tax is listed in the Earned Income Tax Register of the Department of Community and Economic Development. If the municipality and/or school district's tax rates are not listed in the Register, employers are not required to withhold taxes levied under the Local Tax Enabling Act from employee wages. Except for the city of Philadelphia and the Pittsburgh School District, employers have no legal responsibility to withhold taxes levied by jurisdictions where they have no worksites. In 2004 the Local Tax Enabling Act was revised to say that the local earned tax deduction is to be based on the Pa. State taxable income.

If an ordinance contains a provision imposing the earned income tax on nonresidents, the employer is required to withhold from all employees regardless of their place of residence and remit the money to the tax officer. Responsibility for transmitting withheld taxes of nonresidents to the employees' place of residence rests with the tax officer, not with the employer.

Where the ordinance taxes residents of the taxing district only, the employer is required to withhold only from resident employees. Any other withholding under a resident-only taxing ordinance is voluntary on the part of the employer, usually done for the convenience of the employee. If the ordinance levies taxes on residents only, the municipal earned income tax officer may and refuse to accept withholdings for any nonresidents. In such a case the employer is left with the choice of refunding the withholdings or transmitting them directly to the nonresident's tax officer. Some employers with work locations in resident-only jurisdictions withhold from all employees as a matter of company policy, deciding to the shoulder the additional filing costs as a benefit to their employees.

The exception to this rule is the earned income tax levied by the Pittsburgh School District. The district may require withholding of its tax from any nonresident employer who is believed to employ any resident of the district. Beginning in 1994 state law has required all Pennsylvania employers to withhold the Philadelphia wage tax from all employees who are Philadelphia residents regardless of where they work.

What Is Occupational Privilege Tax (OPT) Withholding?

The occupational privilege tax is a flat rate tax levied by a municipality and/or school district on all individuals working within the taxing jurisdiction. The situs for the occupational privilege tax is the actual location where the individual taxpayer works. It is not the headquarters of the employer where the payroll checks are prepared. If a taxpayer works in more than one political subdivision during the tax year and is subject to more than one occupational privilege tax, the Act establishes priorities of liability. The situs of the tax is the place of employment; therefore, no taxing district may levy this tax as though it were another kind of per capita tax. It is intended to be a tax only on persons gainfully employed. If gainful employment takes persons into more than one taxing district levying the tax, priorities of collection are as follows.

(1) the political subdivision in which the person maintains the principal office or is principally employed;

(2) the political subdivision in which the person resides and works if, of course, the political subdivision of residence imposes the tax;

(3) the political subdivision in which a person is employed imposing the tax which is nearest the person's home.

The place of employment is to be determined as of the day the taxpayer first becomes subject to the tax during the calendar year. The legislative intent as expressed in the law is that no person is to pay more than $10 in any calendar year for occupational privilege taxes, regardless of the number of political subdivisions where they work during a year. A tax receipt showing payment at an earlier date in the same calendar year must be accepted by all other political subdivisions where an individual subsequently becomes liable for the tax.

Taxing bodies may require employers to withhold occupational privilege taxes if the tax is listed on the Register for Occupational Privilege Taxes prepared by the Department of Community and Economic Development. In order to have employers withhold taxes, the taxing district must have its tax listed in the Register.

Using the EIT/OPT Tax Register

To successfully use the EIT/OPT Tax Registers you will need some of the following bits of information: county name, municipality name, municipal code, school district, and/or the school district code.

There are three tax registers that you can choose from to find local withholding tax information. Each of the tax registers is described below.

* EIT/OPT Tax Rates Only Earned Income and Occupational Privilege Tax rates only. This report does not contain tax collector information.

* EIT Tax Rates and Collectors Earned Income Tax rates and tax collector information.

* OPT Tax Rates and Collectors Occupational Privilege Tax rates and tax collector information.

Each register is similar in format, requiring the user to fill in the desired search criteria. It is not necessary to fill in every field.

Please note: When searching by municipality name or school district name, use uppercase letters. Place the % symbol at the end of the municipality or school district name (without a space i.e., ALLENTOWN%).

What is The Occupation/Per Capita Tax?

The Occupation/Per Capita taxes are sometimes referred to as the personal taxes. The tax is levied on the occupation of every resident over 18 who resides within the St. Marys Area School district. The School assessment board determines from the job description you submit what your occupation code is. It is based entirely on what your job description is and your income has no basis for determining your occupation code.

The codes and values that are assigned were established by the County. As the school district maintains their own occupation assessment rolls separate from the county rolls both the county and the school district should be advised of any change of occupation status. If your occupation status changes after December 31st the change would apply to next years taxes. Although the bills are only mailed in July they are based on the previous year.

The Per Capita taxes are simply head taxes levied at a flat rate on every resident. The current rate for the Act 511 per capita tax is $5.00 and the Sec. 679 per capita tax is $5.00.

The school levies an occupation millage when the budget is established and this rate is used to calculate your bill. . The current levy is 1450 mils. To determine your face amount due simply multiply your assessed value by 1.45.

The bills are mailed every July. There are three periods at which the taxes are due. From July 1st through August 31 your bill is due at discount. From September 1st through October 30th it is due at face. From November 1st through December 31st it is due at penalty. Any bills not paid by December 31st are submitted for wage attachment.

There is an exemption from the current year taxes if your earned income from the previous year was $5,000.00 or less. Again this is based on your earned income only.

Related FAQs

Where do we register for local income tax withholdings?

As an employer, for earned income taxes, you register with the earned income tax officer of the municipality/school district where your Pennsylvania business site is located. Examples of business sites include but are not limited to factories, warehouses, offices and residences of home based employees.

For occupational privilege taxes you register with the occupational privilege tax officer of the municipality/school district where your Pennsylvania business site is located. Examples of business sites include but are not limited to factories, warehouses, offices, businesses and residences of home based employees

Are we required to withhold local income taxes from all of our employees?

All employers with work sites within the taxing jurisdiction are required by law to deduct the earned income and occupational privilege taxes from their employees at that site if the tax is listed in the Earned Income Tax Register or Occupational Privilege Tax Register of the Department of Community and Economic Development.

Must we withhold from employees who reside in Pennsylvania but work at our facility in another state?

The Local Tax Enabling Act does not require you to withhold earned income taxes from an employee who resides in Pennsylvania working for you in a facility in another state. Some employers do withhold and remit earned income taxes as a benefit to their Pennsylvanian residents who work out of state. The Act does not require employers to withhold Occupational Privilege taxes from an employee since this is a tax levied at the actual work location.

Who is a non-resident?

A non-resident is anyone who resides outside the taxing district.

Are we required to remit local tax withholdings to each non-resident's taxing jurisdiction?

Responsibility for transmitting withheld taxes of nonresidents to the employees' place of residence rests with the tax officer, not with the employer.

Must we also register and remit local tax withholdings to the school district?

The Act requires employers to register only with school districts who have a different collector than the municipality.

Are there any exceptions for withholding local taxes for the municipality/school district?

Yes, Philadelphia and Pittsburgh have exceptions. Philadelphia falls under the Sterling Act and requires employers to withhold and remit earned income taxes for all their employees who reside in Philadelphia even if they are employed at a site outside of Philadelphia. Pittsburgh City School District has a similar requirement.

Are we required to withhold the occupational privilege tax for each taxing jurisdiction for an employee who works at multiple business sites?

The legislative intent as expressed in the law is that no person is to pay more than $10 in any calendar year for occupational privilege taxes, regardless of the number of political subdivisions they work in during a year.

Are we required to withhold the occupational privilege tax for a new employee who has who has worked for another entity in this or another taxing jurisdiction?

A tax receipt showing payment at an earlier date in the same calendar year must be accepted by all other political subdivisions where an individual subsequently becomes liable for the tax. When the employee provides a copy of the tax receipt a deduction is not required.