Pennsylvania Local Services Tax (LST) and Occupational Privilege Tax (OPT) calculation method for employees who change jurisdictions within a single year

Calculate the taxes as follows:

1. Divide the authority's annual maximum amount by the pay period frequency to determine the interim pay period tax. For taxing jurisdictions levying on OPT, the interim pay period tax is the annual maximum amount.

2. Determine which comparison should be performed.

   1. The interim total service tax equals the sum of the interim pay period tax, the year-to-date (YTD) tax for the authority (YT), and the prior worksite tax amount for the given tax type.
      1. Prior Worksite LST (tax type '84') amounts are maintained through the Tax API YTD Tax Prior Worksite Tax parameter ('PT'); Prior Worksite OPT (tax type '51') is maintained through the Tax API Year-to-Date OPT Prior Worksite Tax parameter.
   2. If the interim total service tax is greater than the annual cap amount, then perform the comparison to the annual cap.
      1. If the employee has worked only in taxing jurisdictions that levy OPTs, the employee annual cap is $10.
      2. If at any point during the year, an employee worked in a taxing authority that levies an LST, the employee annual cap is $52.
   3. If the interim total service tax is less than or equal to the annual cap amount, then perform the comparison to the authority maximum.

3. Comparison against annual cap:
   1. If the interim total service tax is greater than or equal to the annual cap amount, then the pay period tax equals the annual cap minus the YTD tax for the given authority and the prior worksite tax amount for the given tax type (see step 2.a.1 above)

4. Comparison against the authority maximum
   1. If the YTD tax for the given authority is greater than or equal to the authority maximum, then the pay period tax equals zero.
   2. If the sum of the YTD tax for the given authority and the interim pay period tax is greater than or equal to the authority maximum, then the pay period tax equals the authority maximum minus the YTD tax.

If the tax amount is to be proportioned between the municipality and its associated school district, then:

1. Divide each authority's effective maximum amount by the total maximum between the coterminous pair to determine each authority's coterminous rate.

2. Each authority's pay period tax equals the calculated pay period tax  (see above) multiplied by the coterminous rate.

   1. Each authority's pay period tax should be rounded down to the nearest cent, to ensure annual caps are not exceeded.

Example 1:

Employee A previously worked in Ben Avon Borough in Allegheny county and already has a $10 OPT withheld. The employee now works in Brackenridge Borough/Highlands School District, and is paid on a bi-weekly pay period. This coterminous pair mandates an actual OPT of $10 - $5 for Brackenridge Borough and $5 for the school district. Therefore, the following calculation applies to the new worksite:

• Interim pay period = $ 10 annual OPT cap

• Interim total service tax = ($10.00 interim pay period tax) + ($10 'OT') + ($0 'YT') = $20.00

• The interim total service tax is greater than the OPT annual cap of $10, therefore

• • ($10 annual OPT cap) - ($0 'YT'+$10 "OPT") = $0 pay period tax

• Brackenridge Borough and Highlands SD each receive $0 pay period tax

Example 2:

Employee B previously worked in Ben Avon Borough in Allegheny county and already has $10 OPT withheld. The employee now works in Pittsburgh/Baldwin-Whitehall School District, and is paid on a bi-weekly pay period. This coterminous pair mandates an annual LST of $52-$47 for Pittsburgh and $5 for the school district. Therefore, the following calculation applies to the new worksite:

• Interim pay period tax = $52/26 pay periods = $2

• Interim total service tax = $2 interim pay period tax + $10 "OT" = $0 "YT" = $12

• The interim total service tax is less than the annual cap of $52 therefore,

• • $ "YT" + $2 interim pay period tax = $2 < $52 authority maximum

• Pittsburgh's coterminous rate = $47 / $52 = 0.903846; Baldwin-Whitehall SD's coterminous rate = $5 / $52 = 0.096154

• Pittsburgh's pay period tax = $2 x 0.903846 = $1.80, rounded down

• Baldwin-Whitehall SD's pay period tax = $2 x 0.096154 = $0.19 rounded down

Example 3:

Employee C has worked in other Pennsylvania taxing jurisdictions and already had $10 OPT withheld and $3.98 LST withheld. The employee now works in Fawn Township/Highlands School District, and is paid on a bi-weekly pay period. This coterminous pair mandates an annual LST of $20 - $15 for Fawn Township and $5 for the school district. Therefore, the following calculation applies to the new worksite:

• Interim pay period tax = $20 / 26 pay periods = $0.77

• Interim total service tax = .77 interim pay period tax + $10 "OT" + $3.98 "PT" + $0 "YT" = $14.75

• The interim total service tax is less than the annual cap of $52 therefore,

• • $0 "YT" + .77 interim pay period tax  = .77 < $20 authority maximum

• Fawn Township's coterminous rate = $15 / $20 = .75; Highlands SD coterminous rate = $5 / $20 = .25

• Fawn Township's pay period tax = .77 x .75 = .57, rounded down

• Highland SD's pay period tax = .77 x .25 = .19, rounded down