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Philadelphia Wage Tax Reduced Beginning July 1

Posted on by Kate Horay

The City of Philadelphia will reduce its Wage Tax rate starting July 1, 2018. The rate change has an immediate impact on all businesses that operate in the city, or that hire Philadelphia residents. The new rates are:

  • 3.8809% (.038809) for residents of Philadelphia
  • 3.4567% (.034567) for non-residents

All paychecks issued by businesses with a pay date after June 30, 2018 must have Philadelphia City Wage Tax withheld at the new rates.

Likewise, the City has lowered its Earnings Tax rate starting to July 1, 2018. The new Earnings Tax rates are 3.8809% (.038809) for residents and 3.4567% (.034567) for non-residents.

The Earnings Tax is essentially the same as the Wage Tax. The main difference is how the tax is collected and paid to the City of Philadelphia. The Wage Tax is collected from an employee’s paycheck and paid to the City by an employer. When your employer does not collect the Wage Tax on your behalf, you pay Earnings Tax directly to the City.

Philadelphia’s Net Profits Tax (NPT) and School Income Tax (SIT), which mirror the Wage Tax, will also decrease.  For Tax Year 2018, the new NPT rates are 3.8809% (.038809) for residents and 3.4567% (.034567) for non-residents. For Tax Year 2018, the new SIT rate for residents is 3.8809% (.038809). Only residents of Philadelphia are liable for SIT.

Supreme Court Decides Further Taxing on Internet Sales

Posted on by Kate Horay

Last week in Wayfair vs. South Dakota, the Supreme Court decided that states may charge sales tax to online retailers, even if they do not have a physical presence in that state. This 5-4 decision reverses the decision made in 1992 in the Quill Corp vs. North Dakota case.

This new tax system will affect online retailers, consumers, and local businesses. Online retailers have changed the way American people shop, as e-commerce has become a huge part of the nation’s economy. By previously avoiding tax, consumers were drawn to purchasing goods online. The Supreme Court decision may now persuade consumers to make purchases in a physical store since the sales tax rate will be the same for online and other purchases.

Larger retailers like Amazon and Wayfair will be impacted more so than smaller, online retailers like Etsy. The ruling gives local businesses a chance to make a comeback against online moguls. Consumers just need to be mindful that they will have to start paying slightly more for their convenient online purchases.

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