By Meg Eynon, Vice President, The Payroll Factory®
Published: 1 JUL 07

The Pennsylvania Governor signed Bill 218 on June 21, 2007 to amend the administration of the Emergency and Municipal Services Tax.

The first change is to the name of the tax. The tax has been changed to the “Local Services Tax” (LST) the purpose of which is to help emergency medical service providers who saw a significant drop in donations after the EMS tax was enacted. The name change is to clarify that the tax revenues support all local services.

The next change requires that local areas collecting more than $10 for LST should instruct employers to withhold the tax from employees in installments on a pro-rata basis determined by the number of payroll check dates for the calendar year. For example, a $52 tax would be collected at a rate of $1 per week for employees who are paid weekly or $2 per biweekly period for employees who are paid every other week.

The bill also requires that local areas collecting more than $10 for LST will be required to exempt taxpayers with total earned income and net profits of less than $12,000 annually. Employees seeking exemption from this tax are required to provide an exemption certificate from the local collection agency to his or her employer on an annual basis to verify that the employee reasonably expects to earn less than $12,000 during the calendar year.

Also, there are rules for employees with more than one employer. An employee with more than one employer should provide a pay sub from his or her principal employer and an “employee statement of principal employment” (this form is under development by the State) to his or her other employer(s). Employers will be relieved from liability for failing to withhold LST from employees who provide appropriate documentation that their principal employment is elsewhere.

What you should expect:

  • Employers should receive notification of the LST tax amount from their local jurisdictions. Also, with this notice are typically the remittance coupons for the LST for the year. Both of these forms should be sent directly to The Payroll Factory® upon receipt.
  • The Payroll Factory® will be automatically configure the LST deduction to be on an installment basis for your company beginning with your company’s first check date in 2008 if your local collection amount exceeds $10.
  • Companies are required to withhold all LST from employees until a certificate of exemption is presented to them or the “employee statement of principal employment” is presented to them by their employee.
  • It will be individual companies’ responsibility to notify The Payroll Factory® of any exemptions to this tax deduction.

If you have any further questions regarding this tax, how it will effect your payroll processing or if there is any way in which we can help you further, please contact us at 610.644.4569 and speak to one of our customer service representatives.