The Business Income & Receipts Tax (BIRT) is based on both gross receipts and net income. Both parts must be ﬁled. This is a completely separate tax from the Net Profits Tax.
Section 103 of the Business Income and Receipts Tax Regulations provides information relating to what constitutes doing business in Philadelphia. A business meeting certain standards may qualify for “Active Presence” treatment and would be subject to tax on Gross Receipts only.
All businesses must obtain a Commercial Activity License from the Department of Licenses and Inspections (L&I). There are other industry and service specific licensing and permitting requirements that businesses must obtain from L&I.
The BIRT is filed and paid annually for business activity from the prior year. With each filing an estimate for the following year’s BIRT must be paid in full.
1.415 mills on gross receipts
6.30% on taxable net income
Beginning in tax year 2016, there is an exemption of the first $100,000 in gross receipts and a proportionate share of net income from the business income and receipts tax.
Who Must File
Every individual, partnership, association and corporation engaged in a business, profession or other activity for proﬁt within the City of Philadelphia must ﬁle a Business Income & Receipts Tax Return, whether or not they earned a proﬁt during the preceding year.
Persons engaged in real estate rental activity, residential included, are usually considered to be in business.
Every estate or trust, (whether the ﬁduciary is an individual or a corporation) must ﬁle a Business Income and Receipts Tax Return if the estate or trust is engaged in any business or activity for proﬁt within the City of Philadelphia.
If you maintain a Commercial Activity License but do not actively engage in business, you must ﬁle the BIRT return and indicate that no business occurred. If you do not ﬁle a return, you will receive a non-ﬁler notice and court costs could be imposed.
The failure of any person to receive a tax package does not excuse them from the responsibility of filing a return and paying the tax due. The tax can be filed and paid on-line.
Taxpayers can apply for an extension of time to file Business Income & Receipts Tax and Net Profits Tax returns. The extension allows you up to 6 months from the original due date to file the tax returns. You can file your returns at any time during that 6 month extension. However, please be aware that there are no extensions for the payment of taxes. Payments that are made after the original due date are subject to interest and penalty charges.
There are credits and exemptions that reduce the amount of BIRT owed to the city. The business still must file a BIRT return. Some of the programs that mandate specific City filing requirements include:
- Keystone Opportunity Zone (KOZ)
- Community Development Credit
- Jobs Creation Tax Credit
- Philadelphia Re-Entry Employment Program (PREP)
- Sustainable Business Tax Credit
- Green Roof Tax Credit
- Veterans Tax Credit
- Internship Tax Credit
Visit the Credits page under Tax Professionals for City filing requirements of specific credit programs. For a complete listing of all available credit programs, please visit the Office of Business Services or call (215) 683-2100.
Full Exclusion from BIRT
Review the City’s Code and Revenue’s Regulations for clarification on all exclusions of what is considered business activity in Philadelphia. This list is not exhaustive and it is the taxpayer’s responsibility to review all requirements. Exclusions are based on the fact and circumstance of each business.
In general, those organizations that are exempt from filing and paying the BIRT are:
- Nonprofits and religious organizations
- Individuals engaged in a hobby or other not-for profit activity
- Port related activity
- Public utilities
- The activities listed below if they occur for less than 10 days. Whether or not nexus has been created for activities occurring for 10 or more days will depend on the facts and circumstances of the business activity in Philadelphia.
- Meeting with suppliers of goods or services in Philadelphia;
- Meeting in Philadelphia with government representatives in their official capacity;
- Attending occasional meetings in Philadelphia (e.g., Board meetings, general internal corporate policy meetings and training, retreats, seminars and conferences sponsored by others, etc.);
- Holding recruiting or hiring events in Philadelphia; or
- Attending and/or participating at trade show in Philadelphia at which no orders for goods are taken and no sales are made.