I want to start a business in Philadelphia. What taxes do I have to pay and how do I register?
Businesses must first register for their Commercial Acitivity License and their Business Income and receipts Tax. In general, corporations are liable for the business income and receipts tax. Individuals and partnerships are liable for Business Income and Receipts and Net Profit taxes. All entities operating in Philadelphia and having employees must withhold and remit wage tax on the compensation paid to employees. If the business is located in Philadelphia, it would also be liable for Business Use & Occupancy Tax. There are other taxes that may be applicable based on your business type. For more complete information please contact Philadelphia’s Office of Business Services.
Why did I receive a tax bill or am getting sued if I no longer operate a business in the city?
Because of unpaid previous balances or unfiled tax returns from the time you were in business. You must file a change form
to close the account and file all missing returns for years you were in active business. Follow the instructions and contact information on the letter received to resolve your tax issues.
What taxes must I pay if I am a freelancer or indpendent contractor?
If you received payment for work performed in Philadelphia and the payer (employer/client) does not withhold Philadelphia Wage Tax on your behalf for that work because you are treated as an "independent contractor" (even if you don't have employees), you are treated as a business by the City of Philadelphia. You must apply for a Commercial Activity License to work in the City. The Department of Licenses adn Inspections issues the Commercial Activity License. In addition to the license, you are liable to the City for paying tax on your earnings, since no Wage Tax is being withheld. You are also likely to owe Net Profits and Business Income and Receipts Taxes.
Can I use a tax preparation software from a vendor, such as Turbo Tax, to prepare my tax returns?
Only if the company's software has been approved by us. Click here for a list of approved software vendors.
Does Philadelphia have an income tax?
No, but the City imposes other taxes including taxes on wages and business income that you may be subject to.
I can’t get through on the phone when I call
Try calling during non-peak periods, before 10 a.m. or after 3 p.m. Monday mornings in tax season are an especially busy time. You can also e-mail your request to firstname.lastname@example.org
. We ask for your patience as this is a very busy time of year. Try to use our website as much as possible for resolution to your questions. You can view and pay your outstanding tax balances and file returns on our website.
Can I send one check for the Net Profits Tax, Business Income and Receipts Tax and estimated Net Profits Tax returns?
Yes. Write your account number on the check and include the appropriate coupon(s) in the postage paid envelope provided in your tax package.
My business closed last year but you still sent me a tax booklet. Why?
Use a Change Form
to notify us that you are no longer in business. Corporate entities may be entitled to a partial refund of the prior year Business Income and Receipts Tax paid. You must file any missing returns and pay any outstanding tax due for years you were in business.
How do I register as a disregarded entity?
Can I look at my tax account on-line?
You can look at open balances and filed returns through the website.
Why are their processing fees for paying on-line?
They are the fees the on-line payment processor charges.
Does Philadelphia have any reciprocal agreements with any other states or other jurisdictions within Pennsylvania relating to the remittance of Philadelphia Wage Tax?
Residents of Philadelphia are required to pay Philadelphia Wage Tax on all wages. Philadelphia residents employed in other localities in Pennsylvania should instruct their employers not to withhold other local income taxes from their paychecks. Non-residents of Philadelphia residing in Pennsylvania and employed within the City of Philadelphia must pay the Philadelphia Wage Tax on all compensation earned in Philadelphia. Non-resident compensation not subject to Philadelphia Wage Tax (due to services rendered outside of Philadelphia) may be subject to taxation in the employee's home jurisdiction. The City of Philadelphia is not a party to any reciprocal tax agreements with any other State or political subdivision thereof. Non-residents of Pennsylvania cannot claim a tax credit against Philadelphia Wage Tax for income taxes paid to any other State or political subdivision thereof. Residents of Philadelphia employed outside of Pennsylvania may be required to file and pay a local income tax in that jurisdiction in addition to Philadelphia Wage Tax.
Does Act 166 affect Philadelphia Wage Tax or Net Profits Tax?
No, please contact the Commonwealth
for further information.
If I registered for the wage tax account but have no employees at the time, do I still need to file?
Yes, file a $0, no tax liability, return. This can be done on-line.
I lost the Wage Tax coupon book used to remit wage tax on my employees. How do I get another book?
Call 215-686-6600 to request another coupon book. Please have the account number and identify which tax is needed when you call. You can also e-mail this request to email@example.com.
Do I need to send the Philadelphia Department of Revenue a listing of 1099's I have distributed and, if so, is there a transmittal form required?
There is no transmittal form but 1099's should be sent to:
Philadelphia Department of Revenue
Forms Processing Unit
Municipal Services Building
Public Service Concourse
1401 John F. Kennedy Boulevard
Philadelphia, PA 19102
How much does my estimated BIRT payment for next year need to be so I don’t incur any penalties?
To not have penalties applied,the estimate should be equal to the base tax with the same due date. It should at least equal what you owe for the current year.
How many years can I claim for my loss on my BIRT?
Does Philadelphia allow as a deduction the special first year depreciation allowance on certain property acquired after September 10, 2001 and before September 11, 2004?
No. This special allowance depreciation is not allowed as a deduction in determining taxable net income for Business Income and Receipts Tax and Net Profits Tax purposes.
Why I am receiving a non-filer notice if my business is closed?
A change form indicating that your business has ceased operations has not been received. Please file returns for returns for your last year of business and send in a change form
My business has multiple locations, do I need to file a return for each location?
Philadelphia filings need to be made in the same manner as those that are filed to the IRS. In general, all locations under the same EIN can be on the same return, but again, refer to the IRS filing guidelines.
Does Philadelphia have combined reporting with Pennsylvania?
Can I get help with my tax return?
No, you need to obtain your own preparer.
What is the Business Privilege Tax?
The Business Privilege Tax is the former name of the Business Income and Receipts Tax. There are no other differences.
If I have incurred an overall loss and no tax is due, must I file a Net Profits Tax return?
Yes. A return must be filed even if an overall loss is incurred. If no return is filed, non-filer penalties could be imposed.
Does the Net Profits Tax take the place of the net income portion of the Business Income and Receipts tax?
No. Unincorporated business are required to file and pay both the Net Profits Tax (NPT) and the Business Income and Receipts Tax (BIRT). There is a credit that can be taken on the NPT based on the amount of tax owed from your BIRT.
I just received a letter concerning missing 1099s but I already supplied them, who do I notify of this?
Send in requested documentation with the notice. W-2s are for earnings tax. 1099s are for business income and receipts tax and for net profits taxes.
Why hasn't the check I sent in to pay my taxes/water been processed yet?
- During late winter/early Revenue experiences very high mail and check volume to pay water bills, real estate taxes, and business taxes. It may take two weeks for a check to process.
- It may take a few weeks for a check to process if you did not include your payment coupon and did not write the account/property on the check. Payment coupons allow for automatic check processing. Lack of payment coupons requires manual account and check verification.
- If it has been more than a couple of weeks and your check still has not cleared, please call us.
How do I register my entity as a nonprofit?
A copy of the 501(c)3 is needed to register an entity as a nonprofit.