Local Payroll Taxes: City and County

Beyond federal and state payroll taxes, many cities, counties, school districts and transit agencies tax wages or payrolls. These local taxes are easy to miss because different offices run them, with different forms, and a payroll provider will not set them up unless it knows where each employee lives and works. This guide tours the main local payroll taxes and the questions to ask for each one.

Pennsylvania: Act 32 earned income tax and local services tax

Under Act 32, most Pennsylvania municipalities and school districts collect a local earned income tax (EIT) through designated tax collectors. For an employee who lives and works in Pennsylvania, the employer compares the employee's total resident EIT rate with the work-location nonresident rate and withholds the higher of the two. Each municipality has a six-digit political subdivision (PSD) code, and employees complete a Residency Certification Form so the employer can choose the right rate. Employers register with the tax collector for each Pennsylvania worksite, including the home of a remote employee.

The local services tax (LST) is a flat annual amount set by local ordinance and withheld from pay for work in the municipality. If the combined rate exceeds $10, the law requires an exemption for people whose earned income in the area is under $12,000, and employers must stop withholding once an employee gives a valid exemption certificate.

Some special cases from the state's guidance:

• An out-of-state employer is not required to withhold local EIT for a Pennsylvania resident who physically works outside Pennsylvania, though the employee still owes the tax.
• For an employee who lives outside Pennsylvania and works there, the resident rate is 0% and the work-location nonresident rate applies, plus LST.
• Temporary assignments follow different rules for under 90 consecutive days and for 90 days or more.

Philadelphia

Philadelphia is outside Act 32. Employers withhold the Philadelphia Wage Tax on residents and on nonresidents who work in the city, and send it to the city. The city's page shows these rates, with further decreases planned:

Filing frequency depends on how much tax you withhold each month, from quarterly to weekly. Returns and payments are made online through the Philadelphia Tax Center, and paper returns are no longer accepted for this tax. Employers must also submit W-2 information to the city.

Ohio municipal income tax

Ohio cities and villages levy their own income taxes and set their own rates. Under Ohio Revised Code section 718.011, an employer is generally not required to withhold a municipality's tax on pay for services performed there on 20 or fewer days in a year. Exceptions include an employee whose principal place of work is in that municipality and workers at certain worksites expected to last more than 20 days. The principal place of work is generally the fixed location the employee reports to regularly. Check each city's rules and filing process.

Michigan city income taxes

Twenty-four Michigan cities levy taxes related to income. The state Treasury Department administers Detroit's income tax. Other cities, including Grand Rapids, Lansing, Saginaw and Pontiac, run their own forms, filing and payment. Treasury says it will begin processing Flint returns on January 1, 2027, for 2026 and later tax years.

St. Louis earnings tax

The City of St. Louis charges a 1% earnings tax. Residents pay it wherever they work, and nonresidents pay it on earnings from work in the city. Employers withhold it and file quarterly with the Collector of Revenue's Earnings Tax Department; the city lists quarterly reports due January 31, April 30, July 31 and October 31.

Indiana, New York City and Oregon

Indiana counties tax income, and the county of residence on January 1 generally controls withholding. New York City and Yonkers taxes are withheld through the New York State withholding system. We describe both in our state income tax withholding guide.

Oregon works differently. Alongside a statewide transit tax withheld from employee wages, TriMet and Lane County transit districts impose payroll taxes on employers, including for remote workers in those districts. See our multi-state payroll guide.

Other places to check

Other jurisdictions that tax pay or payroll include Birmingham, Alabama, which administers an occupational tax; Kentucky cities and counties with occupational license taxes; Maryland counties; Kansas City, Missouri; Wilmington, Delaware; and several Colorado cities with occupational privilege taxes. Rules and rates change and we have not summarized them here, so confirm with the local government.

Common mistakes

• Registering for state payroll taxes but never for the city or county.
• Not updating a remote employee's home municipality.
• Withholding the resident rate when the work-location rate is higher.
• Treating transit taxes as employee deductions when the employer owes them.
• Missing a local W-2 submission requirement.

How we can help

We determine where each employee lives and works, register the business with local agencies and run payroll for federal, state, county and city taxes. See our multi-state and local tax service, our payroll services, and our Pennsylvania page. This is general information, and a professional can look at your facts.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.