Allentown Business Privilege Tax: Rates, Filing, and Exemptions

The Allentown Business Privilege Tax is an annual tax on the gross receipts of any for-profit business operating inside Allentown city limits. Rates run from $1.00 to $3.00 per $1,000 of gross receipts depending on whether the activity is wholesale, retail, service, or rental. Returns and full payment are due by April 15 each year for the prior calendar year’s receipts, and every business also needs a separate $35 annual Business Privilege License before it can legally operate in the city.¹

Who Has to Pay

Any person, partnership, or corporation carrying on a for-profit activity within Allentown owes the tax. The city code’s definition of “business” sweeps in selling merchandise, providing services, and collecting rent, among other commercial activities.²

The decisive word is “within.” If your business is headquartered elsewhere but you regularly perform work or make sales inside Allentown, those receipts are taxable here. Receipts from services performed outside the city, or from goods shipped to out-of-state buyers as interstate commerce, are not.

Landlords are often surprised to learn they’re covered. If you collect rent on property located inside city limits, that rent counts as rental business volume and is taxed at the rental rate. And because the tax is on gross receipts rather than profit, you can owe it in a year your business lost money on paper.

Rates by Business Type

Allentown applies rates by the nature of each transaction, not by the general character of the business. A wholesaler that occasionally sells directly to a consumer pays the retail rate on those particular sales. The four categories are:¹

Retail: 1.5 mills, or $1.50 per $1,000 of gross receipts
Wholesale: 1 mill, or $1.00 per $1,000 of gross receipts
Service: 3 mills, or $3.00 per $1,000 of gross receipts
Rental: 3 mills, or $3.00 per $1,000 of gross receipts

Service and rental are taxed at double the retail rate, which catches many owners off guard. A consulting firm with $200,000 in gross receipts owes $600; a retail shop with the same revenue owes $300. If your business mixes categories, you have to separate the totals and apply each rate to its own bucket.³

How to Calculate and File

The tax is measured by actual gross receipts from the preceding calendar year. A return filed in April 2026 covers 2025 business volume.¹ “Gross receipts” means total cash, credits, or property received before any deduction for expenses or overhead. Start with revenue, not net income.

The city’s official Business Privilege Tax form walks through the calculation. Enter your gross volume for each category, multiply by the matching rate, and total it.³ Keep records that break revenue down by source and location: 1099s, ledgers, and your federal return schedules all help if your figures are ever questioned.

April 15 Deadline and Late Penalties

The completed return and full payment are both due April 15 each year, the same date as your federal filing.¹ Returns go to the City of Allentown Department of Finance. If you mail a paper return, certified mail gives you a dated postmark.

Miss the deadline and the city immediately adds a flat 5% penalty to the unpaid tax. After that, an additional 0.5% per month in penalty and 0.5% per month in interest accrue until the balance is paid in full.⁴ On a balance that sits for several months, those charges add up fast.

Willful failure to file or pay also carries criminal exposure. Refusing to file, obstructing an audit, or submitting a fraudulent return is a summary offense carrying a fine of $50 to $500 plus costs, and failure to pay the fine can mean up to 90 days in jail. Each day of a continuing violation is treated as a separate offense.⁵ Prosecution is rare in practice but remains on the books.

Exemptions

Several activities are excluded from the business privilege tax:¹

Wages and salaries. Employment income is not business income for this tax.
Nonprofit corporations and associations operating as public charities or for religious or educational purposes.
Federal, state, and local government entities and political subdivisions.
Companies whose rates are set by the Pennsylvania Public Utility Commission, on those utility receipts.
Goods manufactured, produced, or grown in the city, including the processing and preparation of those goods for market. This protects manufacturers, farmers, and producers on their own output.
Receipts from transactions that qualify as interstate commerce.

The manufacturing exemption draws the most questions. It covers producers on what they make themselves, but a manufacturer that also runs a retail storefront selling third-party goods still owes the retail rate on those separate sales.

The $35 Business Privilege License

Before you can operate legally in Allentown, you need a Business Privilege License. It costs $35 per year and is valid for the calendar year.⁶ You can apply through the city’s online self-service portal or in person at the Bureau of Revenue and Audit.

Each separate business location needs its own license, and renewal happens at the start of each calendar year. The fee is owed whether or not you turned a profit, and the license should be displayed at your place of business. Operating without one invites penalties and complicates your annual tax filing.

If You Disagree With an Assessment

If you don’t file a return, the Director of Finance can estimate your gross volume and assess tax on whatever amount the department considers reasonable. You’ll get written notice of the amount and the appeal process.⁷ Estimated assessments tend to run higher than what the taxpayer actually owed, which is why keeping clean records matters.

If you disagree with the Director’s final decision, you have the right to appeal to the Lehigh County Court of Common Pleas.⁷ Pennsylvania’s Local Tax Enabling Act sets the broader framework for challenging local tax ordinances themselves if you believe the tax is unlawful.⁸

Other Allentown Taxes That May Apply

The business privilege tax is not the only local obligation for an Allentown business. Two others routinely surprise new owners.

Earned Income and Net Profits Tax

Allentown also taxes earned income and net business profits. Residents pay 1.975%; nonresidents working or earning profits in the city pay 1.28%. Where the business privilege tax hits gross receipts, this one applies to net profit after legitimate business deductions. The annual return is also due April 15, and anyone with net profits must make quarterly estimated payments on April 15, June 15, September 15, and January 15.⁹

In practical terms, an Allentown service business pays two local taxes: the business privilege tax on gross receipts and the net profits tax on what’s left. Both land on the same date, so plan April cash flow around both.

Local Services Tax

Allentown also charges a $52 annual Local Services Tax on every individual who works within city limits.¹⁰ Employers withhold it from pay on a pro-rata basis each payroll period and remit it within 30 days after the end of each quarter. Self-employed workers pay the $52 themselves. Anyone earning less than $12,000 annually from all sources within the city is exempt.

1
City of Allentown, PA. Allentown Code 570-3 – Tax Rate and Basis; Business Volume Determination; Exemptions and Records
2
City of Allentown, PA. Allentown Code 570-1 – Article I Business Privilege Tax
3
City of Allentown. Business Privilege Tax Form
4
City of Allentown, PA. Allentown Code 570-4 – Returns; Interest and Penalty for Late Payment; Receipt
5
City of Allentown, PA. Allentown Code 570-9 – Violations and Penalties
6
City of Allentown. Business Licenses
7
City of Allentown, PA. Allentown Code 570-5 – Assessment
8
Pennsylvania General Assembly. Local Tax Enabling Act
9
City of Allentown, PA. Allentown Code 570-46 – Article VI Earned Income Tax
10
City of Allentown, PA. Allentown Code 570-34 – Article V Local Services Tax