The reciprocal agreement only applies to state taxes, it does not cover local taxes hence local taxes can be withheld by a PA municipality even if person a NJ resident. Per <a rel="nofollow" target="_blank" href="
http://www.state.nj.us/treasury/taxation/njit14.shtml">http://www.state.nj.us/treasury/taxation/njit...>
"The New Jersey/Pennsylvania Reciprocal Agreement does not apply to income or wage tax imposed and collected by the City of Philadelphia or any other municipality in Pennsylvania. That means a New Jersey resident who works in Philadelphia and pays city wage taxes can claim a credit for the taxes paid to Philadelphia."
A PA business is not required to withhold NJ state income taxes, but many do if requested.
