This year, for the first time, changes to the Business Income and Receipts Tax means that the first $50,000 that a business has in Philadelphia sales and any profits from those sales are tax free!
Starting with Tax Year 2014, businesses in Philadelphia will receive a tax break on their Business Income and Receipts Tax (BIRT). BIRT is a tax levied upon both the net income and the gross receipts of a business. Every individual, partnership, association and corporation engaged in a business is required to file an annual BIRT return, whether they made a profit or not.
The new tax break exempts the first $50,000 earned by a business and the net income associated with it. The exemption amount increases to $75,000 for tax year 2015; and $100,000 for Tax Year 2016 and thereafter. The “gross receipts,” or the amount of money a business has made in a year, is taxed at a rate of $1.415 per $1,000. The “net income” is taxed at a rate of 6.43% and will be reduced gradually until it reaches 6% in tax year 2023.
This is great news for businesses in Philadelphia particularly for small businesses and independent contractors with limited gross receipts or net incomes. If you brought in less than $50,000 in 2014 your tax form isn’t wrong, your bill is $0.
For more information on the Business Income and Receipts Tax click here.