Business owners in Philadelphia who are grappling with the nuances of the Business Income & Receipts Tax (BIRT) can take a breath — at least for the moment. The City has rolled out a new set of guidelines for those facing BIRT for the first time due to recent legal decisions regarding the tax's exemption threshold. According to a city announcement, businesses previously not filing BIRT due to sales under $100,000 are now considered "new businesses" for tax purposes. This status change provides some relief in terms of how they will manage their BIRT liabilities.
The city is phasing in BIRT payments for certain businesses. Those who haven’t filed a return since 2022 due to Philadelphia sales remaining below the $100,000 threshold will not be required to make an estimated payment for 2026 taxes. "You will only have to pay for 2025 activity," the city's official announcement states. This gives businesses time to adjust to the new tax responsibilities without the immediate pressure of prepayments.
Looking ahead to the 2027 tax season, businesses will then have a choice, they can either split their BIRT payments into quarterly installments or settle the full amount along with their 2026 tax due. This option affords flexibility, particularly for smaller enterprises adjusting to the potentially significant addition to their fiscal planning.
However, by 2028, the leniency winds down. Businesses will need to pay a full estimated payment equal to their prior year tax bill. This ramp-up aims to integrate all affected businesses fully into the standard BIRT payment process, yet considering the legal landscape, this policy represents a gradual onboarding for those juggling the new tax burden. "In 2028, when you file your third return, you will be required to make a full estimated payment that is equal to the amount of the prior year tax due," the city's website confirms.
