Pennsylvania Act 32 Explained: PSD Codes, the Higher-Of Rule, and the Two Dates That Matter

What Act 32 is and why Pennsylvania is unusual

Act 32 is the Pennsylvania law that governs how employers withhold and remit local earned income tax. Earned income tax, or EIT, is a tax that Pennsylvania municipalities and school districts levy on wages. If you have an employee who works in Pennsylvania outside Philadelphia, you are almost certainly withholding it.

Most states have one income tax and one place to send it. Pennsylvania has thousands of municipalities and school districts, and a large share of them levy their own EIT at their own rate. Before Act 32, an employer could owe withholding to hundreds of separate local collectors. The system was slow, inconsistent, and easy to get wrong.

Act 32 fixed the routing problem without eliminating the local taxes. According to the Pennsylvania Department of Community and Economic Development, known as DCED, the state is now divided into 69 tax collection districts. Each district has one designated tax officer who collects EIT for every municipality and school district inside it. As an employer, you deal with the tax officer for the district where your work location sits, not with each town individually.

The trade-off is that you now have to know two things about every employee: exactly where they live and exactly where they work. That is what the rest of this guide is about.

What a PSD code is and how to find it

A PSD code is a six-digit number that identifies a specific Pennsylvania municipality and the school district it belongs to. PSD stands for political subdivision. DCED explains that the code is what routes the withheld tax to the right municipality and school district. Get the code right and the money lands where it should. Get it wrong and someone else’s town gets your employee’s tax.

Every employee has two PSD codes that matter to you: one for their home address and one for your work location. You look both up with the same tool, DCED’s Find Your Withholding Rates by Address lookup at apps.dced.pa.gov.

Run the lookup again any time an employee moves or changes work sites. Do not carry a code forward from a prior employee who “lived in the same town.” Look it up fresh every time.

The Residency Certification Form (CLGS-32-6): who fills it out and when

The Residency Certification Form is a one-page state form, numbered CLGS-32-6, that captures an employee’s home address, your work address, and both PSD codes. DCED’s guidance is that the employee completes it at hire and again any time their address changes. You keep the completed form on file. Some DCED guidance also says to give your tax collector a copy, so ask yours what it wants.

Think of it as the local tax equivalent of the federal W-4. It is the employee’s written statement of where they live, and it is your evidence that you withheld based on the information you were given.

In practice, have the employee fill in their address and sign, then complete the PSD code and rate fields yourself using the DCED lookup. Employees rarely know their PSD code, and asking them to find it is how errors creep in. Attach a printout of the lookup result to the form.

Make the form part of your onboarding packet so it never gets skipped. Add a reminder in your address-change process too. When an employee updates their address for their paycheck or benefits, that is your cue to collect a new CLGS-32-6 and rerun the lookup.

The higher-of rule, with a worked example

Act 32 does not make you withhold both the home rate and the work rate. It makes you withhold one of them: whichever is higher. DCED, Berkheimer, and Symmetry all describe the rule the same way. You compare the employee’s resident rate at home with the non-resident rate at your work location, and you withhold the greater of the two.

Then you send the money to the tax officer for your work location’s tax collection district, regardless of which rate won. That tax officer is responsible for routing the employee’s share back to their home municipality and school district if that is where it belongs. The PSD codes on your filing are what make that routing possible.

Here is how the arithmetic works.

Two common mistakes to avoid. First, do not withhold at the work location’s resident rate. The work location rate that matters is the non-resident rate, which is often different. Second, do not skip withholding because the employee lives in a place with no EIT. If your work location has a non-resident rate, that rate is the higher one, and you withhold it.

Where and when to remit

You remit withheld EIT to the tax officer for the tax collection district where your work location sits. DCED’s FAQs are clear on this point. If you have one work location, you have one tax officer, even if your employees live in a dozen different districts.

The standard schedule is quarterly. DCED requires employers to file and pay within 30 days after the end of each calendar quarter.

There is one important exception for multi-site employers. If you have work locations in more than one tax collection district and you choose to remit everything through a single tax officer, DCED requires you to file monthly instead of quarterly. The convenience of one collector comes with a faster filing cycle. If that describes your company, make sure payroll knows the schedule changed.

Your tax officer will have its own filing portal and account setup process, though the returns themselves use DCED’s standard forms. Berkheimer is one of the appointed tax officers in the region and publishes an Act 32 FAQ for employers. Others serve other districts. The DCED lookup tells you which one is yours.

The January 1 and July 1 rate checks

Local EIT rates are not fixed. Municipalities and school districts can change them, and both Berkheimer and Symmetry point to the same two dates when changes take effect: January 1 and July 1.

That gives you a simple calendar rule. Twice a year, before you run the first payroll of January and the first payroll of July, rerun the DCED lookup for every work location and every employee home address in your records. Compare the results to what is in your payroll system. Update anything that moved.

For a small company this takes an hour. For a company with employees spread across many townships, it is worth building a spreadsheet that lists every address, both PSD codes, both rates, and the date you last checked. If your payroll provider says it updates rates automatically, spot-check a few anyway. You are the one who signs the return.

The Local Services Tax in one paragraph

Act 32 covers EIT, but many Pennsylvania municipalities also levy a Local Services Tax, or LST, on people who work there. According to DCED’s Local Services Tax page, the LST is a flat annual amount per worker rather than a percentage of wages, and it is capped at $52 per taxpayer per year across the municipality and school district combined. Many municipalities levy less than the cap. When the combined rate exceeds $10 for the year, you must withhold it pro-rata across pay periods rather than all at once. Where a municipality’s LST is more than $10, there is also a mandatory low-income exemption for employees who earn less than $12,000 in that jurisdiction for the year, and your tax officer’s instructions will tell you how employees claim it. You look up the LST rate for your work location with the same DCED address lookup you use for EIT. You remit it to the LST collectors the lookup lists for that location, which are not always the same as your EIT tax officer.

Why Philadelphia is different

If your work location is inside the City of Philadelphia, most of this guide does not apply to you. Philadelphia sits outside Act 32. It does not use PSD codes for its own tax, it does not remit through a tax collection district tax officer, and it does not follow the higher-of rule.

Instead, the City levies its own wage tax, with its own rules for who is covered. You register with and remit to the Philadelphia Department of Revenue directly. The rates, schedules, and forms are all the City’s own. We cover that system in detail in Philadelphia wage tax for employers.

The place where the two systems collide is the employee who crosses the line. If your office is in Conshohocken and an employee lives in Philadelphia, or your office is in Philadelphia and an employee lives in Bucks County, you need to understand how the City’s wage tax interacts with the Act 32 withholding for that person. That interaction has its own rules, and the Philadelphia article walks through it. Do not assume the higher-of rule handles it, because Philadelphia is not part of the higher-of system.

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