Philadelphia Business Privilege Tax Changes

The city of Philadelphia recently passed two bills to amend the city's Business Privilege Tax (BPT).

Bill No. 110554 changes elements of the Philadelphia Business Privilege Tax (BPT) with the goal of making the BPT fairer to Philly-based businesses. All businesses will be able to exempt their first $100,000 in receipts from the BPT bill. This will be phased in beginning in tax year 2014 and will be fully implemented by 2016.

There is also a single sales factor apportionment section of this bill. This means that Philadelphia based businesses would pay the high rate (6.45%) net income portion of the BPT only on income derived from sales in Philadelphia, like all other businesses do. Currently, Philly based companies pay the net income tax on all of their sales, not just those in the city. The bill creates a tax credit for Philly based businesses to credit against their BPT for whatever sales they had outside the city that are taxed at the higher rate. In tax years 2013 and 2014, the city Revenue Commissioner can cap the tax credit if the city can't afford it, but for the tax year 2015 and after, the credit is 100%.

Bill 110548 exempts any new business that employs at least six new full-time employees who work in the city (at least three in the first year and six in the second) from the BPT and all licenses and fees for the first two years of operation. The bill excludes real estate developers.

If you have any questions regarding this topic or if you would like more information, please contact Jim Rogers at (856) 722-5300 ext. 203.

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Published by Haefele Flanagan

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