Saving Clause and Limitations

(b) (1) Notwithstanding the provisions of subsection (a) of this section to the contrary, any rate of tax imposed by ordinance of a city of the first class pursuant to the above cited Sterling Act on salaries, wages, commissions, compensation or other income received or to be received for work done or services performed within such city by persons who are not legal residents of such city, shall not, except as hereinafter provided, exceed the tax imposition rate of four and five-sixteenths per cent for the tax year 1977 or for any tax year thereafter.

(2) In the event such city by ordinance imposes a tax rate on residents or nonresidents in excess of the aforesaid tax rate on the income categories enumerated herein, the provisions of the ordinance imposing such tax rate increase on income of persons who are legal residents of such city, shall be deemed valid and legally effective within the meaning and application of subsection (a) herein. But the provisions of such ordinance imposing a tax rate in excess of four and five-sixteenths per cent with respect to persons who are not legal residents of such city shall be deemed suspended and without any validity to the extent that such tax rate exceeds the tax rate of four and five-sixteenths per cent on income of such nonresidents. And, such excess tax rate provisions shall remain suspended and without any validity until such date as the city of the first class, by ordinance, imposes a rate of tax on income of both legal residents or nonresidents of such city in excess of the tax rate imposition of five and three-fourths per cent per year. In such case the Legislature hereby declares such suspension to be removed and the tax rate valid as to nonresidents, provided, however, that such suspension is removed and the rate deemed valid only to the extent the tax rate imposed on income of such nonresidents does not exceed seventy-five per cent of the tax rate imposed by ordinance per year on the income of legal residents of such city. It is the intention of the Legislature by this subsection to impose certain terms and conditions with respect to the validity and legal effectiveness of the Sterling Act or of any ordinance of the city of the first class enacted pursuant thereto which imposes a tax on the income of nonresidents of such city.

(3) Notwithstanding the suspension provisions set forth heretofore, each city of the first class which imposes a tax pursuant to the above cited Sterling Act shall, by ordinance direct every employer maintaining an office or transacting business within such city and making payment of compensation (i) to a resident individual, or (ii) to a nonresident individual taxpayer performing services on behalf of such employer within such city, shall deduct and withhold from such compensation for each payroll period a tax computed in such manner as to result, so far as practicable, in withholding from the employe's compensation during each calendar year an amount substantially equivalent to the tax reasonably estimated to be due for such year with respect to such compensation. The method of determining the amount to be withheld shall be to withhold the highest amount of tax imposed with provision in such ordinance to provide refunds of the excess tax withheld to qualified nonresident taxpayers within four months of the end of each calendar year.

(4) In the event that all or any part of the provisions of subsection (b) of this section are declared by a court to be unconstitutional, it shall be the duty of the court to construe the remaining amendatory provisions to Article III in accordance with section 358.

(c) (1) Every employer having a place of business within this Commonwealth who employs one or more persons who are residents of a city of the first class shall, within thirty days after becoming such an employer, register with the revenue commissioner of a city of the first class the employer's name and address and such other information as the revenue commissioner may require.

(2) Every employer having a place of business within this Commonwealth who employs one or more persons who are residents of a city of the first class shall deduct from the salary, wages, commissions or compensation due that person, at the time of payment thereof, the tax imposed by the city of the first class on any salary, wage, commission or other compensation due that employe.

(3) Employers required to withhold taxes under the provisions of this subsection shall calculate the amount of salary, wages, commissions and compensation of employes as determined under the classes of income set forth in section 303 of this article.

(4) Every employer employing one or more persons who are residents of a city of the first class who pay any tax imposed under this article shall file a return and pay to the revenue commissioner the amount of taxes deducted as provided under clause (3) of this subsection. The return shall be on a form or forms furnished by the revenue commissioner and shall set forth the names and residences of each employe of that employer during all or any part of the period covered by the return, the amounts of salaries, wages, commissions or other compensation earned during such period by each employe, together with such other information as the revenue commissioner may require.

(5) The employer shall remit the return and the total tax deducted in accordance with time frames established by section 319 of this article.

(6) Annually, on or before the twenty-eighth day of February, every employer who has filed returns of tax withheld and remitted the tax through the year shall be required to file an Employer's Annual Reconciliation of Wage Tax Withheld, along with a copy of Form W-2 of the Internal Revenue Service for each employee, other listings or electronic data processing tapes, setting forth the following information: (i) name and address of employer; (ii) employer's Federal identification number; (iii) full name and residence address of each employee; (iv) employee's Social Security number; (v) total wages paid during the year before any deductions; and (vi) employer's city account number.

(7) Employers or their designated agents required to file with the revenue commissioner under this subsection shall not be required by the revenue commissioner to be bonded. Employer liability for taxes withheld under this subsection shall be the same as provided in sections 320 and 321 of this article.

(8) If an employer fails to deduct and withhold tax as prescribed in this subsection, it shall not relieve the employee from payment of such tax where payment cannot, for any reason, be obtained from the employer.

(359 amended June 16, 1994, P.L.279, No.48)