The higher taxes are hitting small businesses in the city hard.
Philadelphia business owners are facing higher taxes after an exemption under the city’s business and income receipts tax, known as BIRT, was eliminated by Mayor Cherelle Parker last year following a lawsuit.
Under the exemption, businesses did not have to pay taxes on their first $100,000 of revenue.
Last year, city leaders encouraged business owners to seek help from a program that matches vetted accounting firms with small businesses as they navigate changing tax codes, the Philadelphia Free Business Tax Preparation Program.
“We understand that it’s a hard adjustment to make, and that’s why we do want to make sure we’re here to help businesses however we can with that guidance,” said Karen Fegely, acting director of the Philadelphia Department of Commerce, last year.
All for-profit commercial, limited liability, corporations, partnerships, and individual owners doing business in Philadelphia must pay BIRT. The tax is 5.71% on net income and a 1.410 mill rate, or $1.40 per $1,000, on gross receipts.
BIRT taxes businesses on their projected revenues and incomes for the upcoming year.
In fiscal year 2025, the city collected more than $700 million in revenue from BIRT. The revenue goes into the city’s General Fund.
All companies benefitted from the eliminated exemption under BIRT, but small businesses are now being hit the hardest due to Mayor Cherelle Parker’s actions.
“When the long-standing BIRT exemption ended, thousands of these businesses received a tax bill for the first time. For a small business trying to survive on tight margins, this tax can be the difference between staying open or closing its doors,” said Councilmember Michael Driscoll after the exemption was eliminated.
“The tax was originally designed for big corporations, and the exemption was a band-aid to shield independent business owners like me from a tax that wasn’t meant for them. In 2025, that band-aid was ripped off. That left many independent business owners – from electricians to hair stylists, writers to food truck vendors, mental health professionals to photographers – wondering just how much more their tax bill would be come April 15. Many Philadelphians now subject to the BIRT weren’t even aware that the exemption had been eliminated until they received a nasty tax bill from their accountant,” said one business owner in an op-ed.
Some small business owners even made the decision to move their businesses outside of Philadelphia’s city limits to avoid paying the higher taxes. The consequences of the exemption being eliminated are being felt by countless small businesses operating in the city.
Philadelphians owning small businesses are experiencing a tax increase in the thousands because Mayor Cherelle Parker eliminated the exemption that was designed to protect them.
