If you hire, engage, employ, or contract one or more individuals, as employees (including sole proprietors, partners, and corporate officers/members) to perform work or render services within the City of Scranton, then you are expected to file and pay the Payroll Preparation Tax.

A person shall be deemed to be conducting business within the City if one engages, hires, employs, or contracts with one or more individuals as employees, partners, or is self- employed and, in addition, does at least one of the following:

1. Maintains a fixed place of business within the City;

2. Owns or leases real property within the City for purposes of such business;

3. Maintains a stock of tangible, personal property in the City for sale in the ordinary course    of business;

4. Conducts continuous solicitation within the City related to such business; or

5. Utilizes the streets of the City in connection with the operation of such business, other than for the mere transportation from a site outside the City, through the City, to a  destination outside of the City.

The Scranton School Districts Payroll Preparation Tax is levied at a rate of 0.7553% or 0.007553 and is computed on a business’s total payroll expense attributable to the total number of days an employee, partner, member, shareholder, or other individual conducted business within the City.

A tax year is the twelve-month period that begins on January 1 and ends on December 31.

The Payroll Preparation Tax shall be paid quarterly.  The first three quarterly payments are due in the current tax year and the fourth quarterly payment is due in the subsequent tax year.  For example, the 2024 tax year Payroll Preparation Tax payment shall be paid on or before:

QUARTER DUE DATE

FIRST MAY 31, 2024

SECOND AUG 31, 2024

THIRD NOV 30, 2024

FOURTH FEB 28, 2025

Governmental Entities are exempt from paying the Payroll Preparation Tax. 

Institutions of Purely Public Charity are exempt from paying the Payroll Preparation Tax with respect to activities that are related to the charitable purposes for which the Institution was formed.  Institutions of Purely Public Charity must file quarterly returns indicating the gross compensation earned for all respective employees in that quarter. The tax due line will be completed as “0.”  

Institutions of Public Charity may be required to pay the Payroll Preparation Tax on that portion of its payroll expense attributable to business activity for which a tax may be imposed pursuant to section 511 of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §1 et. seq.).  Refer to section 511 of the Internal Revenue Code for more information.

The Scranton School District has appointed Berkheimer Tax Innovations as the administrator of the Payroll Preparation Tax.  A Payroll Preparation Tax return can be found on Berkheimer’s website at https://www.hab-inc.com/pptforms/ or by calling Berkheimer at (610)-599-3140.

You shall remit your Payroll Preparation Tax return, along with your check or money order made payable to HAB-PPT, to the following address:

HAB-PPT

PO Box 21810

Lehigh Valley, PA  18002-1810

You may contact Berkheimer Tax Innovations at ebpt@goberk.com or (610)-599-3140.

Rental income reported on an IRS Schedule C is taxable for Payroll Preparation Tax purposes.   However, rental income reported on an IRS Schedule E is passive income which is not taxable for Payroll Preparation Tax purposes.  A person filing an IRS Schedule E shall submit a copy of their Schedule E to Berkheimer Tax Innovations along with their tax return claiming an exemption from the Payroll Preparation Tax.

If the property owner files an IRS Schedule E for the 5 properties and has no employees, then the property owner would not be subject to the Payroll Preparation Tax. 

If the property owner files an IRS Schedule C for the 5 properties, then the property owner would be subject to the Payroll Preparation Tax, even if the property owner had no employees.

I was informed by Berkheimer Tax Innovations that my business was identified as being located in the City of Scranton and may be subject to the Payroll Preparation Tax.  My business is no longer located in the City of Scranton.  Do I need to file a Payroll Preparation Tax return?

If you received a notification that you may be subject to the Payroll Preparation Tax but your business is no longer located in the City of Scranton, please remit your return with no payment and a completed Payment Under Protest application stating the business is no longer located in the City of Scranton.  A Payment Under Protest application can be found on Berkheimer’s website at https://www.hab-inc.com/pptforms/ or by calling Berkheimer at (610)-599-3140.

If you received a notification that you may be subject to the Payroll Preparation Tax, but your business is closed, please remit your return with no payment and a completed Payment Under Protest application stating that the business is closed.  A Payment Under Protest application can be found on Berkheimer’s website at https://www.hab-inc.com/pptforms/ or by calling Berkheimer at (610)-599-3140.

No.  It is ultimately the responsibility of the taxpayer (or their legal representative) to be informed of all municipal tax laws including the due dates of the required Payroll Preparation Tax returns.

If you conduct any business within the City of Scranton’s municipal boundary you are required to file a Payroll Preparation Tax return form, even if your business is not located in the City.

Yes.  An employer who conducts business within the City of Scranton on a temporary, seasonal, or itinerant basis shall calculate the tax on the total compensation earned while working within the City of Scranton during the applicable quarter.

Yes.  The company is conducting business within the City of Scranton.  You will determine the total payroll expense attributable to work done within the City of Scranton during the applicable quarter and that amount will be taxable.

You will calculate the total gross payroll of the employees who work within the City of Scranton during the applicable quarter and multiply it by 0.7553% or 0.007553.  If the employees who work in the office located outside the City of Scranton conduct no work within the City of Scranton, their gross compensation is not to be included in the gross taxable compensation.

Yes.  Pursuant to Act 222 of 2004 of the Pennsylvania General Assembly, only Government Entities are excluded from the requirements of filing a Payroll Preparation Tax return.

No.  The general contractor is only required to pay the tax on their own employees.  The subcontractor is required to register their business entity with the City of Scranton and remit all required Payroll Preparation Tax returns.

Yes.  The amount of a partner’s or self-employed person’s draws from net income from one or more businesses that have activities in the City shall be reported for the Payroll Preparation Tax.  For purposes of this regulation, taxable distributions are limited by the sum of draws or net income for that partner or self-employed person, whichever is less.

Yes.  Any person conducting business within the City of Scranton must file a quarterly return and pay the Payroll Preparation Tax unless your business is an exempt entity.

The Payroll Preparation Tax is levied on gross compensation, not gross receipts.  If your entity has any active payroll or compensation paid to any person for activity conducted within the City of Scranton, you are required to file the quarterly return and  pay the tax.  If the entity is active, yet there is no current payroll or net distributions/draws, then you must still file the quarterly return indicating “zero” for reportable compensation and tax due.

Is this hospital subject to the Payroll Preparation Tax?

Yes, if the hospital is the owner of the gift shop.  The payroll expense to operate the gift shop would be taxable.  If the charity has purchased or is operating branches, affiliates, subsidiaries, or other business entities that do not independently meet the standards of the “Institutions of Purely Public Charity Act”, then the tax shall be paid on the payroll attributable to such for-profit branches, affiliates, subsidiaries or other business entities, whether or not the employees are leased or placed under the auspices of the charity’s umbrella or parent  organization.

If the gift shop is owned and operated by an independent entity, that entity would be liable for the Payroll Preparation Tax on any and all gross compensation paid to owners or employees.

Yes.  The business is subject to the Payroll Preparation Tax for the time that work is performed within the City of Scranton hospitals and/or other city locations.  The payroll amount attributable to the City of Scranton shall be determined by applying an apportionment factor (percentage) to the total gross compensation earned by an employee, partner, member, shareholder, or other individual who works within the City of Scranton.

The construction company will determine the total payroll expense attributable to work done within the City of Scranton and that amount would be taxable.  The payroll expense attributable to work performed outside the City of Scranton would not be taxable to the Scranton School District.  See example below:

PAYROLL EXPENSE (for Oct-Nov- Dec) PAYROLL EXPENSE

General Office Staff $90,000.00 – taxable 

Construction workers expense for work in Scranton $1,000,000.00 – taxable 

Construction workers expense for work out of Scranton $500,000.00 – not taxable 

Total Taxable Payroll Expense   $1,090,000.00

Total Taxable Payroll Expense $1,090,000.00

Multiply Total Payroll Expense by Tax Rate x 0.007553

Total Tax Due (Due on 2-28) $8,232.77

The first return is due August 31 based on the current quarter’s payroll from May 15 thru June 30.

The business will be expected to file and pay the fourth quarter Payroll Preparation Tax obligation for the month of October on or before February 28 of the subsequent calendar year.