Pennsylvania Local LST and EIT Payroll Taxes

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Pennsylvania Local LST and EIT Payroll Taxes

Background

If you are an employer in Pennsylvania, you will need to withhold and remit local tax on behalf of your employees, based on your company’s location and also your employee’s residence.  There is an alphabet soup full of acronyms you’ll need to be familiar with:

EIT – Earned Income Tax:  Employees working in Pennsylvania will pay a local Earned Income Tax (EIT).  The tax rate is determined by where the employee lives and works.  The employee will be taxed by the higher of the two rates. 

PSD – Political Subdivision Code:  This is a 6-digit number that identifies the location of the township, borough, or city, and will determine the employee’s local tax rate.  Based on the addresses that you have entered, the software should automatically select these for you. However,  please confirm the PSD code for your own business location, in addition to the PSD code for each employee.  You can look up a PSC code on the state’s PSD Codes and EIT Rates page.  

LST – Local Services Tax:  This is a local tax that only applies to certain locations. Employers in these locations will need to withhold and remit the LST on behalf of employees.  All employers with work sites within the taxing jurisdiction are required to deduct the LST from their employees at the site of employment if the tax is listed in the Official Tax Register.

Frequently Asked Questions:

Q: Do I need to register for all local income tax withholdings for my business and my employees?

A: As an employer, you are required to register your business with each local tax collector for your PA worksite location(s)

You do not need to register your business with the local tax collectors for your employees’ home municipalities—unless you have employees who work from home, thus establishing additional worksite locations.

With the exception of Pittsburgh and Philadelphia, all PA local taxes will be remitted and filed to the worksite jursidction.

Q: How are Pennsylvania local taxes displayed on employee paychecks?

A: EIT is determined by the employee home and work address. The software will calculate the higher EIT rate of the two. However, begining in February 2022, the software will display the tax jurisdiction where the EIT taxes will be remitted and filed.

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