Business Income and Receipts Tax: Filing, Deadlines, and Credits

Philadelphia’s Business Income and Receipts Tax applies to every person or entity doing business in the city for profit, and for tax year 2025 it hits you twice: 1.410 mills on gross receipts and 5.71% on taxable net income, all reported on a single return due April 15, 2026. The other thing to know before anything else: the longstanding $100,000 gross receipts exemption is gone starting with tax year 2025, which means many small businesses that never had to file now do.¹

Who Has to File

Under Philadelphia Code Section 19-2603, the tax reaches every person engaging in any business in the city for profit. Sole proprietors, partnerships, LLCs, and corporations are all covered. You don’t need a Philadelphia storefront or office for the tax to apply. The code uses a broad “active presence” concept: any activity in the city through employees, agents, or independent contractors that helps create or maintain customer relationships is enough.²

Sending a sales rep to meet clients in the city, dispatching a technician, or running local deliveries with company vehicles all establish the connection Philadelphia needs to tax you. Regular solicitation of Philadelphia customers from outside the city can also trigger a filing obligation. If solicitation is your only activity inside the city, you owe the gross receipts portion of BIRT but not the net income portion.²

Businesses with no physical activity in Philadelphia still become subject to BIRT if they generate at least $100,000 in Philadelphia gross receipts during any twelve-month period ending in the current year. This economic nexus rule has applied since tax year 2019.¹ Remote sellers, consultants billing Philadelphia clients, and software companies with local subscribers should track their Philadelphia-sourced revenue against that threshold.

How the Tax Is Calculated

BIRT is two taxes on one return. You compute each separately and add them.

The gross receipts portion applies to your total revenue from Philadelphia business activity with no deductions for costs or expenses. For tax year 2025, the rate is 1.410 mills, or $1.41 per $1,000 of taxable receipts.¹

The net income portion applies to your profit after allowable business expenses. The tax year 2025 rate is 5.71%.¹

If your business operates both inside and outside Philadelphia, you apportion rather than pay on everything. The city uses a single-sales-factor method for the net income portion: the share of your total receipts sourced to Philadelphia sets the share of net income subject to tax.³ A consulting firm earning 30% of its revenue from Philadelphia clients would apportion 30% of its net income to the city. Keep clean records of where your revenue originates so you can support the ratio in an audit.

The Exemption Change You Need to Know About

For years, Philadelphia exempted the first $100,000 in gross receipts (and a proportionate share of net income), which effectively meant many small businesses and freelancers owed nothing. Starting with tax year 2025, that exemption no longer exists.¹ The city dropped it in response to a legal challenge, so there is no replacement benefit.

If your Philadelphia gross receipts were under $100,000 in prior years and you never filed, you have a filing obligation now. The city has offered some transition relief: businesses not required to file in the past three years because they fell below the old threshold will be treated as “new businesses” for purposes of estimated tax payments. They pay only the tax on their 2025 activity when filing in April 2026, with no estimated payment on top. When they file again in 2027, they can pay their estimated tax in quarterly installments instead of a lump sum.⁴

BIRT and the Net Profits Tax

Philadelphia also imposes a separate Net Profits Tax on non-corporate entities. If you’re a sole proprietor, partnership, LLC, freelancer, or consultant with 1099 income, you likely owe both BIRT and NPT.⁵ Corporations pay only BIRT.

To keep the same income from being fully taxed twice, the city allows NPT filers to offset up to 60% of what they paid on the net income portion of BIRT against their NPT liability.⁵ The credit is limited to the net income portion, not gross receipts. People routinely lose money here by filing one return but not the other, or by forgetting the credit entirely.

What You Need to File

Before you open the filing portal, gather three things:

Your Philadelphia Tax Identification Number, the unique number the Department of Revenue assigns to your business. You also need a PHTIN to get a Commercial Activity License.⁶
Your Federal Employer Identification Number, or your Social Security Number if you’re a sole proprietor with no employees.
Your federal return. Sole proprietors pull figures from Schedule C, corporations from Form 1120, partnerships from Form 1065. These federal figures are the starting point for both parts of the BIRT calculation.

If all of your business activity is inside Philadelphia, you file the shorter BIRT-EZ. If you have operations both inside and outside the city and need to apportion, you file the full BIRT return with the schedules that match your accounting method: Schedule A for businesses using cost of goods sold, Schedule B for other net income calculations, and so on.⁷

Deadline and Extensions

The tax year 2025 return is due April 15, 2026, mirroring the federal deadline. The Department of Revenue automatically grants up to 60 days beyond that. If the IRS grants you a federal extension, Philadelphia matches it up to the federal extension’s termination date, generally six months from the original IRS filing due date.¹

An extension to file is not an extension to pay. The full tax is still owed by April 15. Payments made after that accrue interest and penalties even if your filing extension is valid. If you don’t know your exact liability yet, estimate it and pay that amount by the deadline. You don’t need a separate extension form; filing an extension payment voucher through the Philadelphia Tax Center covers both the request and the payment.¹

The Estimated Payment That Doubles Your Check

BIRT doesn’t just require you to pay what you owe for last year. When you file, you must also prepay 100% of the prior year’s liability as an estimated payment toward the following year’s return.¹ Filing your 2025 return in April 2026 means paying the 2025 tax plus an estimated payment equal to that same amount toward 2026. Your April check can be roughly double what you might expect.

Two exceptions soften this:

First-year filers owe no estimated tax on their first return. You pay only the tax on the year’s activity.¹
Second-year filers owe the estimate but can split it into quarterly installments due April 15, June 15, September 15, and January 15. This option is available only in the second filing year.¹

From year three on, the full estimated payment is due as a lump sum by April 15. Pay less than 100% of the prior year’s liability and you may be billed for interest and penalties on the shortfall.⁷ The estimated payment you made this year is credited against next year’s actual liability, and you pay any difference or take the overpayment as a credit.

Credits That Reduce Your Bill

The Job Creation Tax Credit rewards businesses that add jobs in the city. It is worth 2% of annual wages paid for each new position or $5,000 per new job, whichever is higher.⁸ To qualify, you must either create 25 new jobs or increase your workforce by at least 20% within five years, and commit to keeping operations in Philadelphia for that same five-year period.

Non-corporate filers should also make sure they are claiming the 60% NPT offset against the net income portion of BIRT described earlier.⁵

Penalties for Paying or Filing Late

Late payments carry a penalty of 1.25% of the unpaid balance per month, or any fraction of a month.⁹ Interest accrues separately on top of the penalty, at a rate tied to the federal short-term rate plus five percentage points, calculated annually.¹⁰

Failing to file at all is a separate violation. Each month without a return counts as a distinct offense, and the city can impose fines of up to $300 per offense.¹⁰ Non-filing can also create tax clearance problems that block you from obtaining city permits and licenses.⁷ If you can’t pay the full amount, file on time and pay what you can. That limits the damage.

How to File and Pay

The Philadelphia Tax Center is the city’s online portal for returns, payments, and account management.¹¹ You can pay from a bank account or by credit card and receive immediate confirmation. Paper returns are still accepted by mail; use certified mail if you go that route so you have proof of timely filing.

The Commercial Activity License

Before you do business in Philadelphia, you need a Commercial Activity License. It links your operations to the entity registered for BIRT, and the city expects you to have it before applying for any other business licenses.¹² There is no fee for the license itself. You apply through the Philadelphia Tax Center using your PHTIN.

If You Stop Doing Business in Philadelphia

When you close, sell, or leave the city, notify the Department of Revenue and close your BIRT account. You can do this online through the Philadelphia Tax Center or with a printable change form.¹³ Leaving the account open invites non-filer penalties and tax clearance problems that tend to surface at the worst possible moment.

1
City of Philadelphia. Business Income & Receipts Tax (BIRT)
2
amlegal.com. Philadelphia Code 19-2603 – Imposition of Tax
3
City of Philadelphia. Section 507 Single Sales Factor Apportionment Tax Credit
4
City of Philadelphia. City of Philadelphia Clarifies Business Income & Receipts Tax (BIRT) Policy
5
City of Philadelphia. BIRT and NPT: Philly Business Taxes Explained
6
City of Philadelphia. Get a Tax Account
7
City of Philadelphia Department of Revenue. 2025 BIRT and NPT Filing Instructions
8
City of Philadelphia. Job Creation Tax Credit
9
City of Philadelphia. Interest, Penalties, and Fees
10
amlegal.com. Philadelphia Code 19-509 – Interest, Penalties and Costs
11
City of Philadelphia. Access the Philadelphia Tax Center
12
City of Philadelphia. Get a Commercial Activity License
13
City of Philadelphia. Change Form: Update or Close a Tax Account