What are the Local Taxes in Pennsylvania?

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Pennsylvania law allows local governments and school districts to use a wide variety of taxes to fund their services. The multitude of taxes may appear confusing initially, but each is straightforward. This web page describes the major local taxes.

1. Real Property Tax

The real property tax is a tax on the value of the real property (land, buildings, and other improvements) owned by a taxpayer. It is sometimes called the real estate tax. The amount of real property tax a taxpayer owes depends upon the value of their property and the local tax rate. Property values for tax purposes are determined by an assessment process conducted by the county government. These assessed values may be very different than the actual market value of the properties.

2. Occupation Tax

The occupation tax has roots in England during the seventeenth and eighteenth centuries. At that time, many occupations were created by grant or title and could be sold or transferred between individuals. Occupations thus often were a form of property which could be bought and sold, much like real estate.

It is not surprising then that the occupation tax is very similar to the real property tax. The tax is levied on the value of residents' occupations, as determined by the county tax assessors office. The occupation of school bus driver may have an assessed value of $25, for example, while that of a lawyer may be $290. Assessed values are not based upon income, so all members of the same occupation will pay the same amount of occupation tax even if their income differs dramatically.

The local jurisdiction levies a tax rate on these occupational assessments. The occupation tax is collected from residents, without regard to where they actually practice their occupation.

The occupation tax can also be levied as a flat rate tax. Every person who works pays the same amount, regardless of their occupation. The maximum levy as a flat rate is $10 per person, while there is no limit if the occupation tax is levied as a tax rate.

3. Emergency & Municipal Services Tax

Prior to Act 222 of 2004, the Emergency & Municipal Services Tax used to be called the Occupation Privilege tax, and is a tax on the privilege of working in the jurisdiction. All persons employed in the jurisdiction levying this tax must pay, regardless of whether they are legal residents of the jurisdiction. Municipalities and school districts can exempt low-income residents from paying the tax (Act 222 allows these jurisdictions to exempt taxpayers with annual income of less than $12,000 from paying this tax). The maximum levy is $52.

4. Per Capita Tax

The per capita tax is a flat rate tax, levied on adults who live in the jurisdiction. It is sometimes known as the "head," "poll," or "residence" tax. All adults pay the same amount, regardless of their income level.

5. Earned Income Tax

The earned income tax is a kind of income tax levied only on residents' earned income (such as wages, salaries, or other reimbursements for work). Unearned income, such as interest, dividends, pensions, and social security are exempt from the tax. Unlike the federal or state income taxes, the earned income tax allows no exemptions or standard deductions. A jurisdiction can collect earned income tax from non-residents who work in the jurisdiction but do not pay an earned income tax in their "home" jurisdiction.

The rate that the borough collects is 1/2%.  That is the maximum that a township or borough is allowed to levy and collect.

6. Realty Transfer Tax

The realty transfer tax is a tax on the sale of real estate. The maximum levy is 1 percent of the sales price. If both the municipality and school district levy this tax, both must share the 1 percent.

7. Amusement Tax

The amusement tax is a tax on the privilege of engaging in an amusement. It is tax levied on the admissions prices to places of amusement, entertainment, and recreation. Amusements can include such things as craft shows, bowling alleys, golf courses, ski facilities, or county fairs. The amusement tax is considered a tax on patrons, even though it is collected from the operators of the amusement.

8. Mechanical Devices Tax

The mechanical devices tax is a tax on coin-operated machines of amusement, such as jukeboxes, pinball machines, video games, and pool tables. The tax rate is set as a percentage of the price to activate the machine.

9. Mercantile Tax

The mercantile tax is levied on the gross receipts of local businesses. It sometimes is known as the business gross receipts tax, or business privilege tax. The mercantile tax can be levied on wholesale and retail trade, as well as restaurants. The Local Tax Reform Act of 1988 prohibited imposing any new mercantile taxes after November 30, 1988, though jurisdictions which were using the tax at that time are allowed to continue to levy it.

10. Personal Property Tax

The personal property tax is similar to the real property and occupation taxes, in that it is levied on the value of property owned by residents. The property it taxes is intangible personal property, such as mortgages, other interest bearing obligations and accounts, public loans, and corporate stocks. The personal property tax has sometimes been called an honesty tax because the only way a county knows the value of a taxpayer's personal property is if that taxpayer is honest enough to report it.