The Business Use and Occupancy Tax is a tax on the business, trade or other commercial use and occupancy of real estate located in Philadelphia. The tax is due if:
- Your business is physically located in Philadelphia.
- You operate your business from your Philadelphia residence.
- Tenants, sub-tenants or owners use the Philadelphia property for business purposes.
The tax is collected and the tax returns are prepared by the owner of the property and sent to the Department of Revenue. The Business Use and Occupancy Tax is filed at specific frequencies dependent on the maximum tax owed.
How to Calculate the Tax
For Tax Year beginning July 1, 2013 there is a new tax rate and new calculation method for this tax. The new tax rate is applied to the Assessed Value of the property.
The Assessed Value, as most recently returned by the Office of Property Assessment prior to the start of the Tax year, is provided on the tax return (UO1). The Maximum Tax on the Assessed value of the property for the period is shown on Line one (1) of UO1.
For tax year beginning July 1, 2013, there is a $177,000 Exemption Amount from the Assessed Value of each property actually used for the purposes of doing business. This translates into a $2,000 annual tax exemption ($167 per month or $500 per quarter) and this Exemption Amount is shown on Line eight (8) of UO1. For tax year beginning July 1, 2015 and thereafter, there is a $165,300 Exemption Amount from the Assessed Value of each property actually used for the purposes of doing business. With the new rate of 1.21% (effective July 1, 2015) this translates into a $2,000 annual tax exemption ($167 per month or $500 per quarter).
Where there are multiple business taxpayers using or occupying such property, the Exemption Amount shall be allocated equally among all such taxpayers. Every landlord shall provide to the tenants of a property the number of users or occupiers of the property.
Who Must File
- Every owner of real estate used or occupied for business purposes.
- Every landlord who collects rent for real estate used for business purposes. The landlord is required to collect the tax due and remit it to the City along with any portion of the tax for which the landlord or other person is liable.
The failure of any person to receive a tax return does not excuse them from the responsibility of filing a return and paying the tax due. The tax must be filed and paid on-line. Payment can also be initiated using our Electronic Funds Transfer program.
Exclusions from the Use and Occupancy Tax
- The portion of real estate used for living space. Any portion of the tax exempted for this reason must be reported on Line 4 of Form UO1.
- Real estate subject to the Pennsylvania Hotel Occupancy Tax. Any portion of the tax exempted for this reason must be reported on Line 3 of Form UO1.
- The portion of real estate used for non-profit business purposes. Each landlord required to collect the Use and Occupancy Tax shall be relieved of all responsibility with regard to the collection of tax if the landlord obtains from the user or occupier a copy of the Federal Exemption Notice and submits that copy with the first tax return filed after receipt of such notice covering the property concerned. Any portion of the tax exempted for this reason must be reported on Line 3 of Form UO1.
- The portion of real estate used for port related activities, i.e., piers, wharves and marine terminal facilities entering into or abutting either the Delaware or Schuylkill Rivers which are within the confines of the City of Philadelphia. Any portion of the tax exempted for this reason must be reported on Line 3 of Form UO1.
- Vacant Property. Commercial properties that are vacant are not taxed, but a landlord must still file a Form UO1 to indicate the vacancy. Similarly, the portion of a commercial property not in current business use is not taxed but must be reported. Use Line 2 of the Form UO1 for this purpose.