Service tax .. is it legal ?

In Pennsylvania, our city has an old law on the books that requires all service providers to pay a 6 mill tax. $6.00 on every $1000 of gross receipts with no deductions allowed. If I gross $200,000 and have $200,000 in expenses for the year the IRS says I owe them nothing and the state of Pa says I owe them nothing, but the city wants me to pay $1200 in service taxes. Does this sound legitimate ?

Your tax sounds like a typical gross receipts tax. There is nothing illegal about a gross receipts tax. A lot of municipalities and other government units throughout the country have such tax. They have been found constitutional and legal in very many court cases.