Pennsylvania Makes Multi-District Tax Reporting Easier


Businesses operating in multiple tax districts in Pennsylvania have an easier way to file their local income tax, a payroll practitioner said May 17.

Under the so-called “Walmart Rule,” businesses can file a petition to be given permission in file their local income tax in one district, said Bruce Phipps, CPP, who spoke at the American Payroll Association’s annual conference in National Harbor, Md.

If the petition is granted, the employer must file monthly instead of quarterly, said Phipps, who is the principal product manager for Oracle. This would mean that the employer would have to create a custom report because most systems are programmed for quarterly reporting, he said.

Under Pennsylvania Act 32 that deals with earned income tax withholding and reporting, employers must determine the applicable tax rate for employees subject to the tax and withhold at the highest rate for nonresidents, Phipps said.

Even if the employee’s home district has the higher tax rate, the employer must report the tax withholding to the district where the employee works, Phipps said.

Reporting to the employee’s work location is easier when the work and residential districts tax at the same rate because the employer does not have to split the tax rate between the earned income tax and school district tax of the employee’s home district, Phipps said.