Issue/Symptom/Question

Administer Pennsylvania Local Services Tax

Applies To

Penta for Windows

Payroll

Reference Manual

Resolution/Fix/Answer

This Business Process is ideal for companies that operate in Pennsylvania localities and assess the Local Services Tax (LST). After completing this Business Process, you will have set up Pennsylvania Local Services Tax and processed payroll to calculate the tax.

1. Create Local Taxing Authorities for Each Work Location Assessing the LST

Local Taxing Authority records provide values necessary for processing local withholding taxes.

Refer to Pennsylvania LST publications for rate and other requirements of the localities your employees work in.

A. Enter basic information for the Local Taxing Authority.

Payroll > Setup > Taxes > Local Taxing Authorities

1. Enter values in the following Master tab fields:

• Locality Code

• Name

• State Code (enter PA)

• Tax Type Code (enter PA-LST)

• ADP Local Code (enter if ADP provides local tax filing services for you)

• EFW2 Tax Type

1. Enter values in the Accounting tab fields:

• Accrual Account

• Vendor Id

1. Enter values in these Calculation tab fields:

• Effective Date

• Withholding Operations

• In the Order # field enter 1.

• In the Operation # field enter 33.
  PENTA opens the Pennsylvania Local Services Tax pop-up. Enter values in the following fields:

• Effective Date

• Annual Amount
  Note: Per Pennsylvania LST requirements, PENTA withholds the LST tax’s Annual Amount as a lump sum amount from the first eligible check if the Annual Amount qualifies for lump sum withholding. Otherwise, PENTA prorates the Annual Amount based on pay period frequency.

B. Set up additional Local Taxing Authorities as needed and commit your changes.

1. Repeat Step 2.A for each Local Taxing Authority you need.

1. Close the window to commit your changes.

2. Link Pennsylvania LST Local Taxing Authorities to Pennsylvania EIT Local Taxing Authorities

For taxing jurisdictions that assess both Pennsylvania EIT (Earned Income Tax) and Pennsylvania LST, link the LST Local Taxing Authority to the Pennsylvania EIT Local Taxing Authority via the following steps. PENTA processes the LST when the EIT Local Taxing Authority is the employee’s work location.

A. Link Pennsylvania LST Local Taxing Authorities to Pennsylvania EIT Local Taxing Authorities.

Payroll > Setup > Taxes > Local Taxing Authorities

1. Query a Local Taxing Authority of Tax Type PA-EIT.

1. In the Other Localities in Jurisdiction block, enter the Lcl Cd (Local Code) of the Pennsylvania LST Local Taxing Authority for that jurisdiction.

1. Repeat Steps 2.A.1 – 2.A.2 for each Pennsylvania locality assessing the LST.

1. Close the window to commit your changes.

Note: If any Pennsylvania taxing jurisdictions assess only LST, refer to the How to Administer Local Taxing Authorities Business Process and perform Step 3 (Assign Local Taxing Authorities).

3. Exclude Hours Classes from LST Assessment, if Applicable

All Hours Classes are taxable by default. If earnings associated with any of your Hours Classes should be excluded from Pennsylvania LST, perform this step; otherwise, proceed to the next major step.

A. Exclude an Hours Class from LST.

Payroll > Setup > PTO and Hours Classification Codes > Hours Classification Codes

1. Query the number of the Hours Class you need to exclude from Pennsylvania LST.

1. Click the Taxability button.
   PENTA opens the Tax Overrides for Hour Class pop-up window.

1. In the Local Tax dropdown menu, select the Local Taxing Authority the tax does not apply to.
   PENTA displays the Local Taxing Authority’s Tax Type.

1. Repeat Step 3.A.3 for each Local Taxing Authority the tax does not apply to.

1. Close the pop-up window.

1. Repeat Steps 3.A.1 – 3.A.5 for each Hours Classification needing exemption.

1. Close the window to commit your changes.

4. Process Payroll

Per Pennsylvania LST requirements, PENTA withholds an LST tax annual amount as a lump sum amount from the first eligible check—if the amount qualifies for lump sum withholding. Otherwise, PENTA prorates the annual tax amount based on pay period frequency. An employee may be subject to LST for multiple taxing jurisdictions up to the maximum allowed for the tax year.

For employees working in multiple jurisdictions on the first day of an assessment period, PENTA uses the jurisdiction with the most taxable hours.

A. Perform the Process Payroll Checks Business Process.

PENTA Reference Manual > Payroll > Business Processes > Process Payroll Checks

1. Refer to and perform the Process Payroll Checks Business Process.

1. Return to this Business Process and proceed to Step 4.B.

B. Review Pennsylvania withholding if needed.

PENTA Reports > Report Initiation

1. If you need to review earnings and taxes, generate one or more of the following reports:

• Employee Local Tax Report (Report Code EMPLOCALTAX)

• Local Withholding Report (Report Code LOCALWH)

• PR Tax Status Report – Local (Report Code PR_LCLTAXSTATUS)

• Local W/H by Std Report Codes (Report Code LOCALWH-STD)

• Local W/H by Std Rpt Codes – Smy (Report Code LOCALWH-STD-SMY)

PENTA Reports > Report Monitor, Print, and View

1. Print and/or preview the report(s) to review Pennsylvania withholding.

1. If the report(s) reveal erroneous withholding, return to the appropriate window and make the necessary changes.

Next Possible Actions

If you need to make adjustments, update employee local taxing authorities and/or tax rates.

Note: Only update tax rates when local taxing authorities issue tax rate changes.

Payroll > Setup > Taxes > Local Taxing Authorities

1. Query the Pennsylvania local taxing authority record that requires a new tax rate.

1. Open the Tax Detail tab.

1. Enter the Effective Date of the new tax rate.

• Enter 1 in the Order # field.

• Enter 33 in the Operation # field.
  PENTA opens the Pennsylvania Local Services Tax pop-up window. Enter values in the following fields:

• Effective Date

• Annual Amount

1. Repeat these steps for each Pennsylvania locality with a new tax rate.

1. Close the window to commit your changes.