Sunday, June 7, 2015

Scranton Becomes First PA Municipality to Increase LST

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The city of Scranton, Pennsylvania, recently increased its Local Services Tax (LST) from $1/ week to $3/week (or $52/year to $156/year). This increase is retroactive to January 1, 2015. The Scranton Single Tax Office is mailing notices to affected employers.

On April 23, a Lackawanna County judge approved the mayor of Scranton’s request to triple the LST to $156 a year. This ruling permitted the Scranton City Council to proceed with enacting an ordinance, which it did at its council meeting on May 7. The LST increase impacts 34,000 people who work in Scranton. It is expected to generate $4.2 million in revenue for the city’s 2015 budget.

Pennsylvania state law allows the LST increase. Last year, Act 199 was enacted to strengthen Pennsylvania’s Municipalities Financial Recovery Act (Act 47 of 1987). The act seeks to help distressed municipalities reestablish financial stability. This includes allowing a municipality to petition a court for an increase in the LST (ordinarily capped at $52 a year). The LST rate can be tripled to a maximum of $156 a year. An exemption must be provided, however, for a person whose total earned income and net profits from all sources within the municipality is less than $15,600 a year.

Employers need to amend their first quarter LST returns to account for the extra amount withheld. They will need to collect the retroactive amount for the LST increase from employees as soon as possible. Employers do not have to collect LST from terminated employees.

Read PayState Update Issue No. 12 , Vol. 17 for more details on Scranton’s LST increase.