171.06 COLLECTION OF TAX AT THE SOURCE.
(a) Duty of Withholding and Payment of Tax Withheld by Employer.
(1) It is the duty of each employer within, or doing business within the City, who employs one or more persons, whether as an employee, officer, director or otherwise, on a salary, wage, commission or other personal service compensation basis to deduct, each time any such compensation is paid, allocated or set aside to an employee the tax at the rate provided in Section 171.03 hereof on the qualifying wages, including sick and vacation pay, bonuses, commissions, incentive payments, settlements, stock options, grievance pay, severance pay, any pay as part of an employee buyout or wage continuation plan or other compensation due by such employer to each such employee and shall, on or before the fifteenth (15th) day of the month following such withholding, make a return and pay to the Tax Administrator the amount of taxes so deducted. However, the Tax Administrator shall have the authority to grant to employers with three or less resident employees permission for said employees to file individually. The return shall be on a form or forms prescribed by or acceptable to the Tax Administrator and shall be subject to the Rules and Regulations prescribed by the Tax Administrator. Nothing in this section prohibits an employer from withholding tax on a basis greater than qualifying wages. The tax shall be deducted by the employer from:
A. The gross amount of all salaries, wages, including sick and vacation pay, bonuses, commissions, incentive payments, settlements, stock options, grievance pay, severance pay, any pay as part of an employee buyout or wage continuation plan or other forms of compensation subject to the City income tax paid, allocated or set aside to residents of the City, regardless of the place where services are rendered; and
B. The gross amount of all salaries, wages, including sick and vacation pay, bonuses, commissions, incentive payments, settlements, stock options, grievance pay, severance pay, any pay as part of an employee buyout or wage continuation plan or other forms of compensation subject to the City income tax paid, allocated or set aside to nonresidents for work done or service performed or rendered in the City or as a result of employment in the City or other activities engaged in within the City.
C. An employer is liable for the payment of the tax required to be deducted and withheld, whether or not such tax in fact has been withheld.
(2) All employers within or doing business within the City are required to make the collections and deductions specified, regardless of the fact that the services on account of which any particular deduction is required, as to residents of the City, were performed outside the City.
(3) Employers who do not maintain a permanent office or place of business in the City, but who are subject to tax on net profits attributable to the City, under the method of allocation provided for in this chapter, are considered to be employers within the City and subject to the requirements of withholding.
(4) Commissions and fees paid to professionals, brokers and others who are independent contractors, and not employees of the payer, are not subject to withholding or collection of the tax at the source. Such taxpayers must in all instances file a declaration and return and pay the tax pursuant to the provisions of this chapter and Rules and Regulations.
(5) Where a nonresident receives compensation for personal services rendered or performed partly within and partly without the City, the withholding employer shall deduct, withhold and remit the tax on that portion of the compensation which is earned within the City in accordance with the following rules of apportionment:
A. If an employer is located within the City, all non-resident employees who report to the City location are taxable to the City unless the employer is withholding tax for other taxing municipalities where the employee’s work is performed. For purposes of determining the tax liability of non-resident employees who report to the City location and who perform their work in non-taxing locations, a flat percentage of twenty percent (20%) will be used as the percent of time in the City, provided the wages were withheld correctly.
B. If the nonresident is a salesman, agent or other employee whose compensation depends directly on the volume of business transacted or chiefly effected by him, the deducting and withholding shall attach to the portion of the entire compensation which the volume of business transacted or chiefly effected by the employee within the City bears to the total volume of business transacted by him within and outside the City.
C. The deducting and withholding of personal service compensation of other nonresident employees, including officers of corporations shall attach to the proportion of the personal service compensation of such employee which the total number of his working hours within the City is of the total number of working hours.
D. The fact that nonresident employees are subject to call at any time does not permit the apportionment of pay for time worked within the City on a seven-day per week basis. The percentage of time worked in the City will be computed on the basis of a forty-hour week unless the employer notifies the Tax Administrator that a greater or lesser number of hours per week is worked.
1. The determination of tax liability of nonresidents working in and out of the corporate limits is to be computed on the formula of the total number of days worked in the City divided by the total number of days worked during the year and the resulting percentage applied to the total annual income from qualifying wages including sick leave, holiday pay, vacation pay and other wage continuation plans during periods of disability, sickness or absence from work. Where no record can be substantiated of the number of days worked, the figure 260 is to be used as the total number of days worked.
E. Wages of occasional entrants as defined in Section 171.03(a)(2)C. are not subject to withholding.
F. Wage continuation plans paid by the employer or third party agent on behalf of the employer for the purpose of health, rest, recuperation or other reward are deemed to have the same tax situs as the primary job assignment or job location of the employee and are taxable on the same ratio as the normal earnings of such employee for this primary job assignment.
(6) An employer shall withhold the tax on the full amount of any advances made to an employee on account of commissions.
(7) An employer required to withhold the tax on compensation paid to an employee shall, in determining the amount on which the tax is to be withheld, ignore any amount allowed and paid to the employee for expenses necessarily and actually incurred by the employee in the actual performance of his services, provided such expenses are incurred in earning compensation, including commissions, and are not deducted as a business expense by the employee.
(8) An employer whose records show that an employee is a nonresident of the City and has no knowledge to the contrary shall be relieved of the responsibility of withholding the tax on personal service compensation paid to such employee for services rendered or work done outside the City by such employee, provided, however, that such employer must withhold the tax on all personal service compensation paid such employee after the Tax Administrator notifies said employer in writing that such employee is a resident of the City. All employees are required to notify the employer of any change of residence and the date thereof.
(9) An employer shall not be required to withhold the City tax from the qualifying wages earned by a resident of the City for work done or services performed in another taxing municipality which imposes a tax upon such qualifying wages of such City resident if such employer withholds the tax on such resident's wages or other compensation for such other taxing municipality. Except, where such municipal tax is for a smaller amount than the tax imposed by this chapter, the employer shall withhold and remit the difference to the City.
(10) The Tax Administrator shall have authority to enter into agreement with other taxing municipalities permitting an employer to withhold the entire tax on the qualifying wages, including sick and vacation pay, bonuses, commissions, incentive payments, settlements, stock options, grievance pay, severance pay, any pay as part of an employee buyout or wage continuation plan or other forms of compensation subject to the City income tax of a floater either for the taxing municipality in which the employer has his principal place of business or the taxing municipality in which the employee resides.
(b) An employer is not required to make any withholding with respect to an individual’s disqualifying disposition of an incentive stock option if, at the time of the disqualifying disposition, the individual is not an employee of the corporation with respect to whose stock the option has been issued.
(c) (1) An employee is not relieved from liability for a tax by the failure of the employer to withhold the tax as required by a municipal corporation or by the employer’s exemption from the requirement to withhold the tax.
(2) The failure of an employer to remit to the municipal corporation the tax withheld relieves the employee from liability for that tax unless the employee colluded with the employer in connection with the failure to remit the tax withheld.
(d) Compensation deferred before the effective date of this amendment is not subject to any municipal corporation income tax or municipal income tax withholding requirement to the extent the deferred compensation does not constitute qualifying wages at the time the deferred compensation is paid or distributed.
(e) So long as the taxes withheld by an employer for the City during the measurement period are less than three hundred dollars ($300.00) per month, payments may be made quarterly on or before the last day of the month following the end of the quarter, subject to the approval of the Tax Administrator. The Tax Administrator may grant an exemption to an employer from the duty to make payment of withheld taxes by electronic funds transfer upon application for such exemption by the employer and the employer’s demonstration to the Tax Administrator that the requirement to make payment of withheld taxes by electronic funds transfer will impose a hardship upon the employer. The Tax Administrator may revoke either approval granted in this section whenever the Tax Administrator has reason to believe that the conditions for granting such authorization have changed, were judged incorrectly, were not met, or when it is in the best interest of the City to do so. Notice of withdrawal shall be made in writing and, in such case, the employer must begin to file in accordance with this section.
(Ord. 2005-57. Passed 11-29-05; Ord. 2015-40. Passed 11-24-15.)
(f) Employer Considered as Trustee.
(1) Each employer in collecting the tax shall be deemed to hold the same, until payment is made by such employer to the City, as a trustee for the benefit of the City, and any such tax collected by such employer from his employees shall, until the same is paid to the City, be deemed a trust fund in the hands of such employer.
(2) Each employer shall be liable for the payment of the tax required to be deducted and withheld, whether or not such tax in fact has been withheld.
(g) Personal Liability for Collection and Payment of Tax. Any person who is required to withhold tax from qualifying wages, including sick and vacation pay, bonuses, commissions, incentive payments, settlements, stock options, grievance pay, severance pay, any pay as part of an employee buyout or wage continuation plan or other compensation, shall pay all such tax to the City in accordance with the provisions of this section. In the event taxes withheld from the qualifying wages of employees are not paid to the City in accordance with the provisions of this section, all officers, members, managers, employees, and trustees having control or supervision of or charged with the responsibility of filing the return and making payment are jointly and severally personally liable for the tax not returned or paid to the City as well as any related interest and penalties, and are also criminally liable under the provisions of Section 171.12. The dissolution, termination, or bankruptcy of a corporation, limited liability company, or business trust does not discharge an officer’s, member’s, manager’s, employee’s, or trustee’s liability for a failure of the corporation, limited liability company, or business trust to file returns or pay said taxes.
(h) Withholding Return; List of Employees.
(1) Each employer shall file a withholding tax reconciliation form showing the sum total of all compensation paid all employees, the portion of which, if any, was not subject to withholding along with an explanation for same, and the portion of which was subject to withholding, together with the amount of such withholdings remitted. Such return shall include Form W-2 for each employee or a list of employees containing W-2 information concerning each employee from whom the City tax was withheld, showing the name, address, zip code and social security number of each such employee, the total amount of compensation paid during the year and the amount of City tax withheld. If the total tax withheld from any employee included tax withheld and remitted to another taxing municipality, the amount of same shall be separately shown on the return of information to the City concerning each employee. The withholding tax reconciliation shall be filed by each employer on or before February 28 following the end of such calendar year.
(2) If more than the amount of tax required to be deducted by this chapter is withheld from the employee's pay, the excess shall be refunded by the employer to the employee. If less than the amount of tax required to be deducted is deducted and withheld by the employer in any pay period or pay periods, the deficiency shall be deducted in subsequent pay periods.
(3) When an employer has withheld the tax from all wages of a nonresident of the City and such nonresident has been employed outside the City for all or a part of the time and has been withheld for or has paid taxes due another municipality as a result of that employment, such employee shall file a claim with the Tax Administrator covering such erroneous withholding and the Tax Administrator shall, upon verification thereof by the employer, refund to the employee the amount of such withholding paid to another municipality, subject to the requirements and limitations contained in Sections 171.11 and 171.14.
(i) Form 1099 Reporting. In addition to the wage reporting of this section, any person required by the Internal Revenue Service to report on Form 1099-Misc. payments to individuals not treated as employees for services performed shall also report such payment to the City when the services were performed in the City. The information may be submitted on a listing, and shall include the name, address and social security number (or federal identification number), and the amount of the payments made. Federal Form(s) 1099 may be submitted in lieu of such listing. The information shall be filed annually on or before February 28.
(j) Domestic Servants. However, no person shall be required to withhold the tax on the qualifying wages, commissions, other compensation and other taxable income paid to domestic servants employed exclusively in or about such person’s residence. However, such domestic servants shall be responsible for filing and paying their own returns and taxes.
(k) Fractional Parts Of Cents. In deducting and withholding tax at the source and in payment of any tax due under the Ordinance, a fractional part of a cent shall be disregarded unless it amounts to one-half cent (.005) or more in which case it shall be increased to one cent (.01).
(Ord. 2003-96E. Passed 12-23-03; Ord. 2015-40. Passed 11-24-15.)