Philadelphia Business Taxes: A Comprehensive Guide

Philadelphia is a hub for businesses, offering a diverse economy and a wide range of industries to invest in.

The city's business-friendly environment is a major draw for entrepreneurs and small business owners.

Philadelphia's gross receipts tax is a key consideration for businesses operating in the city, with a tax rate of 3.924% on gross receipts.

This tax is a major source of revenue for the city, and is typically paid by businesses that sell goods or services within Philadelphia's city limits.

Philadelphia businesses are required to pay the Corporate Income Tax, Sales and Use Tax, and Business Privilege/License Tax.

These taxes can be complex, but understanding them is crucial for any business owner. The Corporate Income Tax, for instance, is a tax that applies to all corporations in the city, regardless of their physical presence.

Businesses in Philadelphia pay different types of taxes, including the Business Income and Receipts Tax (BIRT). The BIRT is a tax on both gross receipts and net income, with 74% of its revenue coming from the net-income tax and 26% from the gross-receipts tax, on average.

As a business owner, it's essential to be aware of these taxes and how they impact your business. For example, very large companies account for 86% of all BIRT dollars owed to the city, while the smallest company group owes less than 1% of all BIRT revenue.

Professional, scientific, and technical firms accounted for 25% of BIRT revenue on average over the study period, making them the biggest share of the total BIRT taxes owed to the city each year.

The real estate, rental, and leasing companies came in second, contributing 15% of BIRT revenue. Finance and insurance sector and the retail sector were nearly tied at 9% each.

Very large companies, with a median of $3.4 million a year in gross receipts, accounted for 86% of all BIRT dollars owed to the city on average over the period.

Companies that had been listed for 11 years or more supplied 64% of BIRT taxes, on average. This shows that older companies tend to contribute more to the city's revenue.

Corporations of any size or sector owed 48% of BIRT revenue, while partnerships contributed 43%. Sole proprietorships, on the other hand, supplied just 7% of BIRT revenue.

The net-income tax accounted for 74% of BIRT revenue, while the gross-receipts tax made up 26%. This indicates that the city relies more on income taxes than on taxes on gross receipts.

In Philadelphia, businesses pay a range of taxes that can be overwhelming to navigate. The Corporate Income Tax is one of the taxes businesses in Philadelphia must pay.

Businesses in Philadelphia also have to pay the Sales and Use Tax, which applies to most goods and services sold within the city. This tax is usually collected by the seller and remitted to the city.

The Business Privilege/License Tax is another tax that businesses in Philadelphia must pay. This tax is usually based on the business's net income or assets.

If you're a business owner in Philadelphia, it's essential to understand these taxes and how they apply to your business.

If you're a business owner in Philadelphia, you'll need to file your Business Income and Receipts Tax (BIRT) returns on time. Filing extension is available if you need more time, and we'll automatically grant you an extension of up to 60 days from the April due date.

You can file for an extension without needing a specific form, as filing an extension payment voucher serves the dual functions of filing an extended return and making the extension payment. This can be done either by paper or online.

Keep in mind that an extension of time to file your returns does not grant you any extension of time to pay your taxes. Payments made after the original due date are subject to interest and penalty charges.

If you owe taxes, you can file your BIRT returns and make payments through the Philadelphia Tax Center.

You can use this online platform to take care of your tax obligations quickly and easily.

Taxpayers owing $5,000 or more for the Business Income and Receipts Tax must pay those taxes electronically.

If you need more time to prepare and file your Philadelphia Business Income and Receipts Tax (BIRT) returns, you're in luck - you can get an automatic extension of up to 60 days from the April due date or the original due date of the BIRT return.

The extension period will match the federal extension period, which is up to six months from the original IRS filing due date. This means you can't file for an extension that exceeds the federal extension period.

To get an extension, you don't need to fill out a special form - simply filing an extension payment voucher either by paper or online will serve the dual functions of filing an extended return and making the extension payment.

Keep in mind that an extension of time to file your returns doesn't grant you any extra time to pay your taxes. Payments made after the original due date will be subject to interest and penalty charges.

Missing payments can have serious consequences. If you don't pay your taxes on time, the state of Pennsylvania can assess penalties and interest on the amount that is owed.

Being late with a payment can cost you. The penalty for late payment of corporate income tax is currently set at five percent of the amount due for every month you're late.

Late payments can add up quickly. This means that if you're late with a payment, you'll not only have to pay the original amount, but also a penalty, and potentially interest as well.

Businesses in Philadelphia have varying tax obligations depending on their size and sector. Obligations are lower on smaller businesses, higher on some sectors.

The Philadelphia Corporate Income Tax (CIT) applies to all corporations in the city, regardless of physical presence, and is calculated at a rate of 0.15 percent of the corporation's net income.

The city's net profits tax, or NPT, is levied on business entities that pass profits directly to owners, such as partnerships and sole proprietorships. The median NPT bill, averaged over four years, was $360.

The NPT raises about 1.8% of all local tax revenue on average, but payers significantly outnumber BIRT payers, with about 56,100 NPT payers compared to 35,500 BIRT payers.

Businesses must file BIRT returns and make payments through the Philadelphia Tax Center, and those owing $5,000 or more must pay electronically.

Businesses in Philadelphia have varying tax obligations based on their size and sector. For smaller businesses, obligations are lower.

The tax burden also differs across sectors. Larger sectors have higher obligations.

If you're a business owner in Philadelphia, it's essential to understand the tax obligations that apply to your specific business. This will help you plan and budget accordingly.

Here are the common taxes that businesses in Philadelphia are required to pay, categorized by sector size:

Keep in mind that the tax rates and types may vary depending on your business's specific circumstances.

The Philadelphia Net Profits Tax (NPT) applies to all businesses that have a net income from business operations in Philadelphia, including corporations, partnerships, limited liability companies, and sole proprietorships.

You'll need to file a NPT return if your business has a net income, and the median NPT bill, averaged over four years, was $360.

Most NPT payers are small, local businesses, with over 6 out of 10 filers being sole proprietorships, a type of business structure favored by lower-income entrepreneurs and family-owned businesses.

About two-thirds of NPT filers are city residents, a share that mostly held steady before and during the pandemic.

All NPT payers must file Business Income & Receipts Tax (BIRT) returns if their gross receipts exceed $100,000, to avoid double taxation.

To file a No Tax Liability (NTL) form, log into your Philadelphia Tax Center profile, find your BIRT account, and select "File, view, or amend returns."

The Philly Non-Resident Wage Tax 2020 is a tax that applies to all individuals who work in Philadelphia but don't reside in the city. If you're one of them, you'll need to pay this tax.

The tax is based on your wages, and it's calculated at a rate of 0.105 percent. This means that if you earn a certain amount of money from working in Philadelphia, you'll owe a small percentage of that amount as tax.

To give you a better idea, this tax is separate from other taxes you might pay, such as income tax or sales tax. It's a specific tax that's only applicable to people who work in Philadelphia but don't live there.

In Philadelphia, businesses have several taxes to pay, and it's essential to understand what they are and how they're calculated.

The Corporate Income Tax is a significant tax for businesses that earn income in Philadelphia, with a rate of 9.99 percent.

You'll also need to pay the Sales Tax, which is a combination of state, county, and city tax rates, totaling 8 percent.

Businesses with physical properties in Philadelphia must pay the Real Estate Tax, and the rate varies depending on the location and type of property.

Additionally, businesses in Philadelphia are required to pay the Business License Tax, which is a one-time payment of around $300 per year.

Here's a summary of the taxes you'll need to pay:

Philadelphia's business taxes are a two-part system, with the Business Income & Receipts Tax (BIRT) being based on both gross receipts and net income.

The BIRT rate is 1.415 mills on gross receipts, which translates to $1.415 per $1,000. This rate has remained the same since 2018.

You'll also need to file taxes on your net income, which is taxed at a rate of 5.99% in 2022, and 5.81% in 2023.

Here's a breakdown of the tax rates over the past few years:

The city also imposes a net profits tax (NPT) on partnerships, sole proprietorships, and certain other pass-through entities, with a rate of 3.75% in 2022, and 5.99% in 2022 for resident entities.

Philadelphia has adopted various business tax credits and exemptions to promote growth and offset high tax rates.

The Keystone Opportunity Zone (KOZ) is the biggest tax-relief program, exempting companies in designated areas from state and local business and property taxes.

The KOZ is many times bigger than all other tax-relief programs combined.

The Job Creation Tax Credit and the Community Development Corporation Tax Credit are among the most popular programs.

Businesses that claimed these credits had a slightly lower BIRT tax burden.

Recipients of credits had an average BIRT effective tax rate about a half of a percentage point lower than comparable businesses that didn't receive credits.

Philadelphia business taxes can be complex, but understanding the basics is key. The city has a Corporate Income Tax (CIT) that applies to all corporations, regardless of physical presence.

This tax is calculated at a rate of 0.15 percent of the corporation's net income. Business owners should take note of this requirement.

To file, you'll need to follow the Philly Corporate Income Tax instructions for the tax year in question.

If your business generates at least $100,000 in Philadelphia gross receipts during any 12-month period, you'll be considered to have nexus in the city and be subject to the Business Income and Receipts Tax (BIRT).

To determine if your business meets this threshold, simply compare your annual revenue to the $100,000 mark. This is a straightforward calculation that will help you understand your tax obligations in Philadelphia.

The BIRT regulations have a specific definition of "doing business" in Philadelphia, which can impact your tax liability. If your business qualifies for "active presence" treatment, you'll only be taxed on your gross receipts, not on your entire business income.

Qualifying for "active presence" treatment requires meeting certain regulatory criteria, which are outlined in Section 103 of the BIRT regulations.

In Philadelphia, corporations are only subject to the BIRT, while partnerships and sole proprietorships are subject to both the NPT and the BIRT.

This overlapping taxation can make it difficult to discern a clear difference in tax burden between one company type and another.

Sole proprietorships and partnerships have notably lower effective tax rates under the BIRT, at 2.6% and 2.9% respectively, compared to corporations at 4.7%.

The low BIRT tax burden on sole proprietors and partners is offset to some extent by their NPT tax burden.

Their size plays a significant factor as well, with sole proprietors having much less gross receipts and net incomes than corporations and partnerships, resulting in a bigger boost from the BIRT’s $100,000 exclusion.

Some businesses and organizations are exempt from paying the BIRT, including nonprofits, religious organizations, port-related activity, and public utilities. These exclusions are based on the specific circumstances and facts of each organization.

You can check the City's Code and Revenue's BIRT regulations to see if your business qualifies for an exemption. It's worth looking into if you think you might be eligible.

Businesses that have only been operating for two years might be able to get an exemption through the Jump Start Philly program. This program can provide a significant relief from BIRT taxes.