Philadelphia BIRT Tax Rate: Reductions Through 2038 and Filing Deadline

For the 2026 tax year, the Philadelphia BIRT tax rate has two parts that are calculated separately and added together: 1.395 mills on gross receipts (that is, $1.395 for every $1,000 of taxable Philadelphia receipts) and 5.65% on net income attributable to the city.¹ Both rates sit on a scheduled glide path that continues to drop each year through 2038.

The Rate You Use Depends on the Tax Year

You pay the rate that was in effect during the year the income was earned, not the year you sit down to file. So if you are preparing a return in 2026 that covers tax year 2025 activity, the rates on that return are 1.410 mills on gross receipts and 5.71% on net income. Returns covering 2026 activity, which you will file in 2027, use the 1.395 mills and 5.65% figures.¹

The dual structure matters because the gross receipts component applies to revenue before expenses. A business pays something even in a year of thin margins or a net loss. That weighs heaviest on high-revenue, low-margin operations like restaurants and retailers.

Scheduled Rate Reductions Through 2038

The gross receipts rate held steady at 1.415 mills from 2008 through 2024. It began dropping in 2025 and is scheduled to reach zero by 2038. The net income rate follows a parallel decline, moving from 5.65% in 2026 down to 2.80% from 2038 onward.¹ A few milestones along the way:

2029: 1.380 mills on gross receipts, 5.50% on net income
2032: 0.955 mills, 4.95%
2035: 0.430 mills, 3.90%
2038 and after: 0 mills, 2.80%

The schedule is written into the city code, but future City Council legislation could change it. Treat the near-term rates as reliable and the distant ones as directional.

The $100,000 Exemption Is Gone

Through 2024, every business could exclude its first $100,000 of gross receipts from the BIRT calculation. That exemption was eliminated starting with the 2025 tax year after a legal challenge argued it violated Pennsylvania’s Uniformity Clause.² Every dollar of Philadelphia gross receipts is now taxable from the first dollar earned.

If your business had never filed BIRT because your Philadelphia revenue sat below the old $100,000 line, the city treats you as a “new business” for transition purposes. You do not owe estimated payments on your first return in 2026, and when you file in 2027 you can pay estimated tax in quarterly installments rather than the full amount up front on April 15.²

Apportionment If You Operate Beyond Philadelphia

A business that operates both inside and outside the city does not apply the BIRT rate to its entire worldwide income. Income is apportioned to Philadelphia using a single sales/receipts factor: the ratio of Philadelphia sales to total sales everywhere.³ The old property-and-payroll factors are no longer part of the formula.

For the net income piece, two calculation methods are available, and your choice on your first BIRT filing locks you in going forward:⁴

Method I (Schedule A) calculates net income directly from your business accounting records, subtracting cost of goods sold and ordinary business expenses from gross receipts.
Method II (Schedule B) starts with net income as reported on your federal return and adjusts from there.

If your revenue comes from both Philadelphia and non-Philadelphia sources, Schedule C-1 has to accompany the return to show how you arrived at the apportionment percentage. Filing without it can result in the city disallowing apportionment and billing you on your full income.³

Who the Rate Applies To

Every person or entity engaged in business for profit within Philadelphia must file a BIRT return, including corporations, partnerships, LLCs, and sole proprietors.⁵ The filing requirement applies whether or not you turned a profit. If you hold an active Commercial Activity License but had no activity, you still file a zero return. Non-filers get notices and potential court costs.⁶

Physical location in the city is not the only trigger. Since 2019, Philadelphia has applied an economic nexus standard: a business with no physical presence in the city has nexus if it generates at least $100,000 in Philadelphia gross receipts during any 12-month period. A suburban consultant with regular Philadelphia clients, a contractor at a city job site, or an online retailer shipping into Philadelphia can all cross that threshold.

If your business has stopped operating, formally close your BIRT account using the city’s Change Form. An open account with no return filed generates notices and can lead to penalties.⁴

Sole Proprietors and Partnerships: Add the NPT Rate

BIRT is not the only Philadelphia tax on business income. Non-corporate entities (sole proprietors, partnerships, and LLCs taxed as either) also file and pay the Net Profits Tax. Corporations pay only BIRT.⁷ NPT reaches Philadelphia residents on all business profits, including those earned entirely outside the city, and non-residents on the portion of profits earned within city limits.

Because both taxes hit net income, the city offers a credit to prevent full double taxation. Taxpayers subject to NPT can offset NPT liability by up to 60% of the BIRT paid on the net income component.⁷ The credit applies only to the net income portion of BIRT, not the gross receipts portion. If you are a sole proprietor or partner, leaving NPT out of your Philadelphia tax math is an expensive oversight.

Deadline and What Late Costs You

BIRT returns are due April 15.⁸ A federal filing extension automatically extends your BIRT filing deadline too, with no separate city form needed. The extension covers filing only. Any tax owed is still due April 15, and payments after that accrue interest and penalties even if your return is on extension.

Businesses owing $5,000 or more in BIRT must pay electronically.⁶ Late payments carry two separate charges. Interest runs from the original due date at the federal short-term rate plus five percentage points, recalculated each January. A penalty of 1.25% of the unpaid tax applies for each month or partial month the balance remains outstanding.⁹ On a large balance, those charges stack up quickly.

Failing to file at all, or filing a false return, can bring fines of up to $300 per offense, with a separate offense accruing on the first day of each month the failure continues.⁹ Six months of ignoring the obligation means six separate $300 fines on top of the interest and penalties already running on the underlying tax, and the city can pursue collection through court action.

1
American Legal Publishing. Philadelphia Code 19-2604 – Tax Rates, Credits, and Alternative Tax Computation
2
City of Philadelphia. City of Philadelphia Clarifies Business Income and Receipts Tax (BIRT) Policy to Ease Transition for Businesses Impacted by the Exemption Change
3
City of Philadelphia. 2025 City of Philadelphia Business Income and Receipts Tax Return Form
4
City of Philadelphia. 2025 BIRT NPT Filing Instructions – General Information
5
American Legal Publishing. Philadelphia Code 19-2603 – Imposition of Tax
6
City of Philadelphia. Business Income and Receipts Tax (BIRT)
7
City of Philadelphia. BIRT and NPT: Philly Business Taxes Explained
8
City of Philadelphia. Key Things to Remember Ahead of Tax Day
9
American Legal Publishing. Philadelphia Code 19-509 – Interest, Penalties and Costs