Frequently Asked Questions
What is the ACT 199 – Local Services Tax?
The ACT 199 – Local Services Tax is a local tax payable by all individuals who hold a job or profession within a taxing jurisdiction imposing the tax. It is due quarterly on a prorated basis determined by the number of pay periods for a calendar year.
How to File:
Return a completed LST-1 form on or before the quarterly due dates. Please correct any error in district, business name, and address. You are required to include a list of individual employees and their social security numbers.
How to Withhold for Your Employees:
If the total LST rate enacted exceeds $10, the tax must be assessed and collected on a prorated basis determined by the number of payroll periods established by an employer for a calendar year. The tax assessed on each employee for a payroll period is calculated by dividing the total rate of the LST by the number of payroll periods established by the employer for the calendar year. When calculating the prorated share, employers are required to round down to the nearest one-hundredth of a dollar. For instance, a $104 tax would be collected at $2 per week for employees paid weekly or at $8.67 per month for taxpayers paid monthly.
Reporting for Self-Employed Individuals and Employers:
If you report your business earnings as a profit or loss on a Schedule with the Federal or State Governments (i.e. Schedule C or E), the form LST-3 should be filed quarterly if the enacted rate is greater than $10.00. If the enacted rate is $10 or less, the tax may be remitted in a lump sum during the first quarter of employment. Submit the LST-3 for yourself, in addition to the LST-1 for your employees. If you have no employees, indicate “No Employees” on the first quarter form, and submit along with the LST-3. If you are issued a W-2 for business earnings, you should not file the LST-3. In this case, report the Local Services Tax for yourself along with your employees on the LST-1 form.
Your canceled check is sufficient proof of payment. If you need an additional receipt, include a self-addressed stamped envelope.
Low Income Exemption:
Employers located in areas with a combined tax rate exceeding $52 are required to exempt employees whose total earned income and net profits earned in the taxing jurisdiction is less than $15,600 (or if higher, the exemption established by the tax jurisdiction) rate for the calendar year. Employees must file an annual exemption certificate to receive the exemption request. If an employee exceeds the low income exemption, employers are required to withhold a “catch-up” lump sum tax equal to the amount of tax that was not withheld from the employee as a result of the exemption and continue withholding the same amount per pay period that is withheld for other employees. Please be advised that the school district portion may not have an earnings exemption, or may be less than the municipal exemption in which this portion of the tax may still be due. If no exemption request is submitted and the employee does not meet the exemption amount by the end of the year, a refund request may be submitted by the taxpayer. Click here to download an Act 199 Exemption Certificate.