How to Calculate and File Philadelphia Gross Receipts Tax

The City of Philadelphia’s Business Income and Receipts Tax (BIRT) is a dual-component tax applied to most businesses operating within the city, calculated on both gross receipts and taxable net income. This structure means a business may owe tax even if it does not realize a profit for the year. The BIRT is a separate obligation from other local taxes, such as the Net Profits Tax (NPT), and combines two calculations: one on total revenue and the other on profitability.

Determining Your Filing Obligation

A business must file a BIRT return if it is engaged in any trade, profession, or other activity for profit within Philadelphia. This requirement extends to all forms of business structures, including sole proprietorships, partnerships, LLCs, and corporations. Even entities that hold a Commercial Activity License but are not actively conducting business are required to file a return to declare no business activity occurred. This includes activities like the rental of commercial or residential real estate.

The filing obligation is based on economic nexus. A business is considered to have nexus and is subject to the BIRT if it has a substantial connection to the city. This standard, aligned with principles from the Supreme Court case South Dakota v. Wayfair, Inc., means even businesses without a physical office in the city can be required to file if their sales or other business activities in Philadelphia are significant.

Certain organizations are exempt from the BIRT. These include nonprofit organizations, though they may be subject to the tax on any unrelated business income they generate. Other exempt entities can include public utilities and specific types of investment companies.

Calculating the Business Income and Receipts Tax

The total BIRT liability is the sum of two calculations. For tax year 2025, the tax on gross receipts is 1.410 mills ($1.41 for every $1,000 of taxable gross receipts). The tax on net income is 5.71% of taxable net income. The gross receipts portion of the tax is scheduled to be gradually phased out.

Gross Receipts Component

Gross receipts are the total amount of money and other considerations received from all business activities, including cash, credits, and property. Certain receipts can be excluded from the taxable base, such as dividends and interest from other members of the same affiliated group. The calculation subtracts these allowable exclusions from total gross receipts.

Net Income Component

Taxable net income is determined using one of two irrevocable methods. Method I calculates net income based on the business’s own accounting system. Method II starts with federal taxable income and applies Philadelphia-specific adjustments. For losses incurred in tax years 2022 and later, a net operating loss (NOL) can be carried forward for up to 20 years.

To illustrate the calculation, consider a small business with $250,000 in taxable gross receipts and $50,000 in taxable net income. The gross receipts tax would be $250,000 multiplied by 0.00141, resulting in a tax of $352.50. The net income tax would be $50,000 multiplied by 0.0571, resulting in a tax of $2,855. The total BIRT liability for this business would be the sum of these two amounts, which is $3,207.50.

Required Information and Forms for Filing

Before beginning the filing process, a business must gather several key pieces of information. This includes its Philadelphia Tax Account Number and its federal Employer Identification Number (EIN) or, for sole proprietors, a Social Security Number (SSN). You will also need the final calculated figures for your total gross receipts and your taxable net income, which are determined in the calculation phase.

The City of Philadelphia provides two main forms for the BIRT: the standard BIRT form and the simplified BIRT-EZ form. A business is eligible to use the BIRT-EZ form only if 100% of its business activities were conducted within Philadelphia. This form is simpler because it does not require the complex apportionment calculations needed for businesses that operate both inside and outside the city. Trade show vendors are also directed to use the BIRT-EZ form.

If a business operates both within and outside the city, it must use the standard BIRT form, which includes schedules for apportioning income and receipts. Both the BIRT and BIRT-EZ forms can be obtained from the City of Philadelphia’s Department of Revenue website.

The Filing and Payment Process

The primary method for filing and paying is through the Philadelphia Tax Center, the city’s online tax portal. This electronic system is mandatory for taxpayers who owe $5,000 or more in BIRT. The online portal allows for payments directly via eCheck or credit/debit card.

Alternatively, businesses can file a paper return by mail. The completed form should be sent to the specific P.O. Box designated for BIRT returns by the Department of Revenue. If a payment is included, it should be a check or money order with the payment coupon, mailed to a separate address specified for payments.

The annual deadline for filing the BIRT return and paying the tax due is April 15 for the preceding calendar year’s business activity. Businesses are also required to make estimated tax payments for the upcoming year. For the second year of filing, a business must pay estimated tax equal to 100% of the prior year’s actual tax liability, which can be paid in quarterly installments. For all subsequent years, the full estimated tax payment is due by the April 15 deadline along with the annual return.