Pennsylvania Local Business Taxes: Earned Income Tax, Local Services Tax and Business Privilege Taxes

Most new Pennsylvania business owners plan for state filings and forget the local layer. Pennsylvania has no state general business license and no county business license, but that does not mean your business owes nothing locally. Under Act 511 of 1965, local governments such as school districts and municipalities can levy their own taxes. The three that matter most for a new business are the Earned Income Tax (EIT), the Local Services Tax (LST) and, in a small number of older municipalities, business privilege and mercantile taxes. Which of these you owe depends on your address, your employees and your type of business.

This guide explains what each tax is, how to find the collector that applies to your address, and what to confirm before you open. This content is informational only and is not legal or tax advice. Local rates and rules are set by individual taxing bodies and change over time, so verify every figure with the collector or municipality named here. For complex situations, including multi-municipality operations, employee withholding questions or an existing business, talk to a qualified CPA or attorney.

The three local taxes at a glance

Tax	Who pays	Typical rate or amount	Who handles it
Earned Income Tax (EIT), often called the PA local income tax	Residents, and nonresidents who work in a taxing jurisdiction. Self-employed owners may owe it on net profits.	Usually 1 percent, set locally. Reading residents pay 3.6 percent.	The EIT collector for your county tax collection district
Local Services Tax (LST)	Employed workers, withheld by the employer	Up to $52 a year	The local collector designated by your municipality (confirm)
Business privilege tax (BPT) and mercantile tax	Businesses in the few municipalities that were grandfathered	Set locally. Examples appear below.	The municipality (confirm)

Act 511 and the collection districts behind it

Act 511 of 1965 is the state law that authorizes local taxes. In 2008, Act 32 reorganized how those taxes are collected. Pennsylvania was divided into county tax collection districts, and each district has one EIT collector responsible for the taxing bodies inside it. The collectors you will most often see on local tax paperwork are Berkheimer, Keystone Collections Group, Jordan Tax Service and HAB.

This means the EIT collector is set by where you are, not by a statewide office. Two neighboring towns can have different collectors, different school districts and different rates. Never assume the collector or rate from the next town over.

Earned Income Tax: the one most owners will pay

The EIT is usually 1 percent, but each taxing jurisdiction sets its own rate, so the combined rate depends on your address. Reading is the notable exception, with a 3.6 percent rate for residents. The rate that applies to you is the one published for your municipality and school district for the tax year, so confirm it rather than relying on a rate you read somewhere else.

Employers withhold EIT from employee wages and remit it to the collector. If you are a sole proprietor, or an owner of an LLC taxed as a sole proprietor or partnership with no W-2 wages, you may owe EIT on your net business profits instead. Ask your collector how self-employed owners file and when payments are due.

How to find your PSD code and collector

Every Pennsylvania address sits inside a school district, and the school district's Pennsylvania School District (PSD) code is the key to finding the right local taxing bodies. Searching for a PA local tax lookup or a PSD code lookup is the fastest way to start. Use this sequence:

1. Start with the physical address where the business operates. Get the municipality and school district name for that address.
2. Find the PSD code for that school district using a PSD code lookup or the school district's own records.
3. Use the Department of Community and Economic Development (DCED) tax register lookup, or a PA municipal tax lookup, to see which local taxes the municipality levies and which collector it uses.
4. Contact the EIT collector directly and ask for current rates, registration requirements, filing forms and deadlines. Get the answers in writing.

The PSD code and municipality together tell you which EIT collector applies. Lookup tools are a starting point only. Confirm the result with the collector before you register.

Local Services Tax: a small annual levy with an exemption

The Local Services Tax is capped at $52 a year. Not every municipality levies it, so check whether yours does. Where the levy is more than $10, employees who earn under $12,000 a year must be exempted. Those workers file an exemption certificate with their employer, and the employer stops withholding for them. Employers are responsible for withholding the LST from covered employees and remitting it, so set up the withholding process before your first payroll.

If you have only owner-operators and no employees, the LST may not apply to you. Confirm with your collector.

Business privilege and mercantile taxes: a shrinking list

Business privilege and mercantile taxes are the local taxes most likely to surprise a new owner, and the ones most likely to be missed. Under Act 145, effective since November 30, 1988, Pennsylvania municipalities have not been allowed to enact new business privilege or mercantile taxes. Only municipalities that already levied them before that date can keep charging them. That is why these taxes show up only in a handful of places.

Current examples include the following. Confirm each one with the municipality before you rely on it.

• Reading: a business privilege tax of 1 to 2.25 mills, plus a $55 license. A mill is $1 for every $1,000 of the tax base, so confirm exactly what the base is.
• Bethlehem: a $25 business license that must be obtained 90 days before you open.
• Allentown, Harrisburg, Lower Merion, Radnor and Upper Merion: also charge these taxes or licenses under their grandfathered authority. Rates and rules differ, so check each one directly.

The list is not permanent. Scranton repealed its business privilege tax in 2022. That is a reminder never to assume a municipality still charges a tax because an older guide said it did. Always check the municipality's current requirements, and ask whether a license is needed before you sign a lease or open the doors.

Philadelphia and Pittsburgh run separate systems

Philadelphia and Pittsburgh do not follow the standard county collector model described above. Each runs its own local tax system, with its own registration, rates and filing rules. If your business is in either city, do not rely on the general Pennsylvania rules in this guide. Confirm registration, filing and rate questions directly with the City of Philadelphia or the City of Pittsburgh.

What is not a local business license

Many owners searching for a business license in Pennsylvania are really looking for a few specific things. Here is what does and does not exist:

• No general state business license. Pennsylvania does not require one for every business. The Bureau of Corporations and Charitable Organizations does not issue activity licenses. Some trades do need a state license, such as home improvement contractors, who register with the Pennsylvania Attorney General.
• No county business license. County governments do not issue general business licenses. Local municipal requirements are the ones to check.
• No registered agent. Pennsylvania uses a registered office instead. Every filing entity must list a Pennsylvania street address. A post office box alone is not accepted. A business with no Pennsylvania address may contract with a Commercial Registered Office Provider (CROP) under 15 Pa.C.S. section 109. Listing a CROP without a contract can carry civil and criminal penalties.
• No LLC publication requirement. Pennsylvania LLCs do not have to publish a notice in a newspaper. Corporations are different, so check the rules for your entity type.
• No PA-100. The PA-100 was retired in 2022. Tax registration now happens through myPATH.

You can search existing business names and file formation documents through Business Filing Services at the Department of State. For state tax accounts, such as sales tax, use the myPATH registration page from the Pennsylvania Department of Revenue. State tax registration does not replace local registration, so you will still need to contact your collector and municipality.

Pre-opening checklist for local taxes

1. Confirm the municipality and school district for the business address, and record the PSD code.
2. Identify the EIT collector for that address and request current rates, registration forms and filing deadlines.
3. Ask whether the municipality levies the Local Services Tax, and set up withholding for covered employees if it does.
4. Ask whether the municipality levies a business privilege tax, mercantile tax or business license. If it does, find the deadline. In Bethlehem, the license must be obtained 90 days before opening.
5. Register for state tax accounts through myPATH.
6. Keep written confirmation of every rate, exemption and deadline you receive from a collector or municipality.

Questions to confirm with each agency

The points below vary by location and change over time. This guide does not give a verified figure for them, so ask the named agency for the current answer:

• The current EIT rate for your municipality and school district, and how self-employed owners file.
• Whether the municipality levies the Local Services Tax, and the current amount.
• Whether the municipality levies a business privilege tax, mercantile tax or license, and the current rate, tax base and license fee.
• The registration process, filing frequency and due dates for each local tax.
• Whether the Philadelphia or Pittsburgh system applies if your business is in either city.

When to get professional help

Local tax rules are tied to specific addresses, and a mistake can mean penalties, late filings or missed licenses. A CPA can help you set up payroll withholding and self-employment filings. An attorney can advise on entity choice and whether a municipal license affects your lease or operating agreement. Bring your PSD code, municipality, planned employee count and business address to that first conversation. Use this guide as a starting point and confirm every figure with the agency that administers it. This is informational content, not legal or tax advice.