PSD Code (Political Subdivision Code)

Pennsylvania's Act 32 consolidated local earned income tax collection into county-based tax collection districts. Every municipality and school district has a six-digit Political Subdivision code: the first two digits identify the tax collection district, the next two the school district, and the last two the municipality. Each employee has a resident PSD code for where they live and a nonresident PSD code for the work location.

Employers obtain both codes from the Residency Certification Form the employee completes at hire, then withhold local earned income tax at the higher of the two applicable rates and remit to the tax officer for the work-location collection district, which distributes the money to the employee's home jurisdiction. Local services tax follows the work location and is tracked separately, alongside the federal obligations described in the IRS overview of employment taxes.

Common errors include leaving a resident code as all zeros, which is only appropriate for out-of-state residents, failing to update codes when an employee moves or changes worksites, and remitting to the wrong collector after a location change. Because the resident rate follows the employee's address, remote and hybrid staff need a fresh certification form whenever they relocate. Verify addresses against the state's official address lookup rather than relying on mailing city names, which often do not match the taxing municipality. At year end the PSD code and local wages sit in the state and local boxes of the W-2, so confirm both before the W-2 filing deadline rather than correcting them afterward.

Frequently asked questions

Where does an employer get an employee's PSD codes?

From the Residency Certification Form the employee completes at hire. It captures the resident code for the home address and the nonresident code for the work location. Verify the address against the state's official lookup, because mailing city names frequently do not match the actual taxing municipality.

Which local rate applies when the two differ?

Withhold at the higher of the resident and nonresident rates. Remittance goes to the tax officer for the work-location collection district, which then distributes the money to the employee's home jurisdiction. Local services tax is handled separately and follows the work location instead of the residence.

What should happen when an employee moves?

Collect a fresh Residency Certification Form and update both codes before the next payroll. Remote and hybrid staff relocate more often than anyone tracks, and stale codes send money to the wrong collector. Leaving a resident code as all zeros is only appropriate for out-of-state residents.