Local Taxation in PA

Information for all Pennsylvania Employers, outside of Philadelphia

Effective January 1, 2012, pursuant to PA Act 32, there was a new filing and payment system for the remittance of Local Earned Income Tax (EIT) in Pennsylvania. Previously, each municipality and school district in Pennsylvania was responsible for the collection and administration of its own earned income tax. Many municipalities hired outside tax collection services such as Berkheimer, Centax and Keystone Tax Bureau to name a few, to handle the administration of the EIT.

Effective January 1, 2012 this changed. Chester and Lebanon Counties chose to implement these changes effective January 1, 2011.

The following are the steps employers must take to be compliant with the regulations:

Determine if you need to register with the tax collector in your region.

If you are already registered with the designated tax collector in your region (per below), then you don't need to re-register.
If you are not registered with the designated tax collector for your region but are currently withholding EIT then you should have, or will soon receive, an application to register with the designated collector.
If you are not currently withholding EIT then you will need to register with the appointed tax collector.
If you are using a 3rd party payroll service (such as Paychex) they should be aware of your new responsibilities. Please contact them for further information.

Designated Tax Collectors by County in Philadelphia Region

Bucks and Chester: Keystone Tax Bureau
Montgomery: Berkheimer
Delaware: Centax

Residency Certification Form

All employers must have every employee complete a Residency Certification form. The employee must look up their 6 digit "PSD Code". The employer must retain the completed forms.

Determine the rate of withholding.

The rate the employer withholds will be the higher of the employer's rate or the employee's rate. You may need to update any software you use for processing payroll with the current rates, which, can be found at http://munstats.pa.gov/Public/FindLocalTax.aspx.

Employer to remit tax to their taxing authority quarterly.

Even if employers business location has no Earned Income Tax, employer must withhold for employees and remit to taxing authority.
The LST Tax (formerly OPT or EMST) is totally separate from the EIT regulations. Employer will withhold and remit this tax as in the past.
If employer's business is located in Philadelphia exclusively, employer will not be subject to the new regulations. Provided employer has no locations outside Philadelphia, employer will still withhold the City resident and non-resident rates as in the past.
If an employee moves, the employee must complete a new residency compliance form.
If employer uses a third party payroll service, employer will still need to complete the forms for employees. Please call your payroll service to determine the steps they wish you to take.
If you are an employee and currently making estimated payments for your EIT, you may not need to continue making estimates for your earned income tax.

Updated: February 2016

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