A. Exemption. Any person whose total earned income and net profits from all sources within the City of Reading is less than $12,000, or less than $1,000 for the school district for any calendar year in which the tax is levied, is exempt from the payment of the tax for that calendar year. In addition, the following persons are exempt from payment of the tax:
(1) Any person who has served in any war or armed conflict in which the United States was engaged and is honorably discharged or released under honorable circumstances from active service if, as a result of military service, the person is blind, paraplegic or a double or quadruple amputee or has a service-connected disability declared by the United States Veterans' Administration or its successor to be a total 100% disability.
(2) Any person who serves as a member of a reserve component of the armed forces and is called to active duty at any time during the taxable year. For the purposes of this subsection, "reserve component of the armed forces" shall mean the United States Army Reserve, United States Navy Reserve, United States Marine Corps Reserve, United States Coast Guard Reserve, United States Air Force Reserve, the Pennsylvania Army National Guard or the Pennsylvania Air National Guard.
B. Procedure to claim exemption.
(1) A person seeking to claim an exemption from the local services tax may annually file an exemption certificate with the City of Reading and with the person's employer affirming that the person reasonably expects to receive earned income and net profits from all sources within the City of Reading of less than $12,000 in the calendar year for which the exemption certificate is filed. An exemption certificate is to be provided to the City of Reading Finance Director. The exemption certificate shall have attached to it a copy of all the employee's last pay stubs or W-2 forms from employment within the City of Reading for the year prior to the fiscal year for which the employee is requesting to be exempted from the tax. Upon receipt of the exemption certificate and until otherwise instructed by the City of Reading or except as required by Subsection B(2), the employer shall not withhold the tax from the person during the calendar year or the remainder of the calendar year for which the exemption certificate applies. Employers shall ensure that the exemption certificate forms are readily available to employees at all times and shall furnish each new employee with a form at the time of hiring. The exemption certificate form shall be the uniform form provided by the City of Reading.
(2) With respect to a person who claimed an exemption for a given calendar year from the tax, upon notification to an employer by the person or by the City of Reading that the person has received earned income and net profits from all sources within the City equal to or in excess of $12,000 in that calendar year or that the person is otherwise ineligible for the tax exemption for that calendar year, or upon an employer's payment to the person of earned income within the municipality in an amount equal to or in excess of $12,000 in that calendar year, an employer shall withhold the local services tax from the person under Subsection B(3).
(3) If a person who claimed an exemption for a given calendar year from the tax becomes subject to the tax for the calendar year under Subsection B(2), the employer shall withhold the tax for the remainder of that calendar year. The employer shall withhold from the person, for the first payroll period after receipt of the notification under Subsection B(2), a lump sum equal to the amount of tax that was not withheld from the person due to the exemption claimed by the person under this subsection, plus the per-payroll amount due for that first payroll period. The amount of tax withheld per payroll period for the remaining payroll periods in that calendar year shall be the same amount withheld for other employees. In the event the employment of a person subject to withholding of the tax under this subsection is subsequently severed in that calendar year, the person shall be liable for any outstanding balance of tax due, and the City of Reading may pursue collection under this Part.
(4) Except as provided in Subsection B(2), it is the intent of this Subsection B that employers shall not be responsible for investigating exemption certificates, monitoring tax exemption eligibility or exempting any employee from the local services tax.
C. Refunds. Any taxpayer eligible for a refund of the local services tax due to a double deduction, an erroneous deduction or who became eligible for an exemption within a calendar year may request a refund. Any request for refund under this section shall be filed in writing with the Finance Director and shall be in accordance with 53 Pa.C.S.A. §§ 8425 and 8426. No refunds shall be made for amounts overpaid in a calendar year that do not exceed $1.