are the Local Taxes in Pennsylvania?
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
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
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
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
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
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
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
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.