Part 1 of 8 in How Philly Taxes You

If you operate a business in Philadelphia, you pay a tax on your gross receipts. Not on your profit. On your revenue. Every dollar that comes in the door.

The current rate, per § 19-2604 of the Code, is 1.410 mills on gross receipts (that is $1.41 per $1,000 of revenue) plus 5.71% on net income. Two taxes, one bill. Together they are called the Business Income and Receipts Tax, or BIRT, and the gross-receipts portion is the part that economists have been complaining about for forty years.

The reason is simple. A tax on gross receipts punishes high-volume, low-margin businesses. A grocery store, a hardware store, a wholesaler. The business that turns over its capital twelve times a year pays twelve times as much tax on revenue as the business that turns it over once, even if they make the same profit. The mechanics distort every business decision the operator makes — what to stock, what to charge, whether to expand.

Most major US cities have moved off gross-receipts taxation. New York repealed its general corporation tax on gross receipts decades ago. Chicago, Houston, Los Angeles: same. The literature is unambiguous. The Tax Policy Center, the Lincoln Institute, the Government Finance Officers Association, the National League of Cities: all of them have spent the last twenty years recommending that cities stop taxing receipts and tax income instead. Almost every city that has tried has done it.

Philadelphia is one of the holdouts. The City has known this for at least twenty years. There have been reform commissions, council resolutions, mayoral task forces, all of them recommending the same thing: phase out the gross-receipts portion, tax net income only. The City has, finally, agreed. The 2024 ordinance that the Mayor signed in 2025 sets a phaseout. The receipts rate drops each year. By 2038, it hits zero.

Thirteen years. The phaseout runs until 2038. That is how long it takes to walk a thirty-year-old mistake out the door. In the meantime, every grocery store in the City, every wholesaler, every low-margin business that has been lobbying for this for two decades, keeps paying the tax.

1.410 mills does not sound like much. It is a small number. But the gross-receipts tax is regressive in a structural way: it falls hardest on the businesses the City should most want to keep. The corner store. The restaurant that just opened. The wholesaler in the Port Richmond industrial corridor. The hardware store on Girard Avenue. These are the businesses that make a city feel like a city, and the City is taxing them on revenue, not on what they actually earn.

Phaseout to 2038 is a victory, in the sense that the City has finally agreed the tax is bad. It is also a defeat, in the sense that the businesses paying it will pay it for thirteen more years. That is the deal. The good news is the deal ends. The bad news is that the deal does not end soon.

If you run a business in Philadelphia, your accountant already knows. If you do not run a business in Philadelphia, the next time you wonder why your corner store closed, this is part of the answer.

Sources: Philadelphia Code § 19-2604; Philadelphia Department of Revenue, BIRT rates; PICPA Revenue Fact Sheet, December 2025.