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July 01, 2022 | Posted in:

Philadelphia Budget Update: Decrease in the Business Income and Receipts Tax (BIRT)

As inflation continues to sweep the country causing prices to rise, one cost that is about to drop is the City of Philadelphia’s Business Income and Receipts Tax (BIRT). Effective July 1, 2022, the net income portion of the city’s Business Income and Receipts Tax — which applies to any person or business pursuing profit — will be cut from 6.2% to 5.99%. Supporters of this decrease see it as an opportunity to help small businesses during these challenging times.

Business Income Receipts Tax UpdateBusiness Income and Receipts Tax (BIRT)

With the new annual budget taking effect on July 1st, Philadelphia officials have cut the net income portion of the BIRT to its lowest level in more than five decades. Every individual, partnership, association, limited liability company (LLC), and corporation engaged in a business, profession, or other activity for profit within the City of Philadelphia must file a BIRT return. Including:

  • Commercial or residential real estate rental activity
  • Estates, trusts, or non-profits engaged in any for-profit business or activity in Philadelphia
  • Those who main a Commercial Activity License (CAL) but do not actively engage in business

In all of these situations, you MUST file a BIRT return, whether or not you made a profit. However, businesses with less than $100,000 in Philadelphia taxable gross receipts are not required to file a BIRT return. Instead, they may choose to file a No Tax Liability (NTL) form. The BIRT must be filed and paid by April 15 (Tax Day) of each year, based on business activity from the previous calendar year.

City Wage Tax Update

Another update in the city’s budget that may impact your business is a decrease in the Philadelphia City Wage tax as of July 1, 2022.

The rate is reduced to 3.79% from 3.87% for residents and slightly down to 3.44% from 3.45% for non-residents. 

For more information on payroll tax wage rates, see our Abacus Payroll Tax Alert and sign up of our end-of-year alerts. 

 

If you have further questions about how these tax updates affect your Philadelphia based business, touch base with an Alloy Silverstein Accountant and Advisor today.

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