Business registration & legal
Philadelphia Business License (2026): The Commercial Activity License, BIRT, Net Profits Tax and Wage Tax
Philadelphia business license 2026: the free Commercial Activity License, BIRT at 5.65% and 1.395 mills, the lost $100,000 exemption, NPT and wage tax.
Edited by Sumeet YadavFounder & editor, MSMETOOLS · fact-checked against official sources
Contents (10)
- 1. Who needs a Commercial Activity License
- 2. How to get a Philadelphia business license
- 3. Other licenses you may need
- 4. Business Income and Receipts Tax (BIRT) in 2026
- 5. Net Profits Tax and the 60% credit
- 6. Wage Tax, Earnings Tax and School Income Tax
- 7. Worked examples
- 8. Use and Occupancy Tax and other changes
- 9. Common mistakes
- 10. What to do next
Opening a business in Philadelphia, whether it's a corner store in Kensington, a design studio in Fishtown or a contracting firm based in the suburbs with jobs in the city, starts with a Philadelphia business license called the Commercial Activity License. The license itself is free. What costs money is the set of city taxes that come with doing business here, and those changed significantly for 2025 and 2026. This guide covers who needs the license and how to get it, the 2026 rates for the Business Income and Receipts Tax (BIRT), the Net Profits Tax (NPT) and the Wage Tax, the end of the $100,000 BIRT exemption, and worked examples in dollars. Every figure was checked on City of Philadelphia pages in October 2026.
Quick answer
Anyone doing business in Philadelphia, including businesses based outside the city, needs a Commercial Activity License (CAL) from the Department of Licenses and Inspections. It's free, issued online through eCLIPSE once you have a Philadelphia tax account, and it never expires. You then owe the city's business taxes.
BIRT for tax year 2026: 1.395 mills ($1.395 per $1,000) on gross receipts + 5.65% on net income
The $100,000 BIRT exemption ended with tax year 2025
Sole proprietors and LLCs also file the Net Profits Tax (3.735% residents), with a 60% BIRT credit
Wage Tax from July 1, 2026: 3.735% residents, 3.425% non-residents
Philadelphia sales tax rate: 8%
Who needs a Commercial Activity License
The City's rule is simple: any person or legal entity that does business in Philadelphia needs a Commercial Activity License. That includes sole proprietors working from home, partnerships, LLCs and corporations, and it includes businesses located outside the city limits that do business in Philadelphia. A plumber based in Cherry Hill who takes jobs in South Philly needs one, and so does an online seller shipping from a Germantown rowhouse.
A few activities use an Activity License Number instead of a full CAL. The City lists renting up to three units in a building you live in, operating a nonprofit, and getting a vacant property license, whether residential or commercial. If you fall into one of those groups, you register for the number rather than the license.
The CAL is also the gateway to everything else. The City tells businesses to get the CAL before applying for any other business license from Licenses and Inspections (L&I), because those applications ask for it. A restaurant, rental property, contractor or food truck needs the CAL first and its trade license second.
How to get a Philadelphia business license
The order matters, because the license application checks your tax registration.
1. Register for a Philadelphia tax account. Before applying for the CAL, you need a City tax account number and a BIRT account, which you set up online through the Philadelphia Tax Center. You'll need your federal Employer Identification Number, or your Social Security Number if you're a sole proprietor without employees. The name on your tax account must match your legal entity exactly, and any trade name you'll use must be listed on that account too.
2. Apply for the CAL in eCLIPSE. eCLIPSE is L&I's online licensing system. Register with an active email address, start a Commercial Activity License application and enter your tax account details. The City says the license is issued automatically when you apply online. You can also book an appointment at the Permit and License Center in the Municipal Services Building, 1401 John F. Kennedy Boulevard, where the license is issued while you wait.
3. Be current on City taxes. The application is refused if you owe City taxes. That catches people who had a past business, or who own property with unpaid real estate tax, so clear any balances first.
4. Add any trade license. Once you have the CAL, apply for the specific licenses your business needs.
There's one ownership detail worth knowing. For company-owned property, the application asks for the name and mailing address of each individual with more than 49% ownership, or the two individuals with the largest interests.
Getting licensed in Philadelphia
- 1
Form your entity and get an EIN
EIN guideLLCs and corporations register with the Pennsylvania Department of State first. Get a free EIN from the IRS.
- 2
Register on the Philadelphia Tax Center
Create your City tax account and BIRT account. Add any trade name to the account.
- 3
Apply for the Commercial Activity License in eCLIPSE
Get a Commercial Activity LicenseIt's free and issued automatically online. You must be current on all City taxes.
- 4
Register for Pennsylvania sales tax if you sell taxable items
Pennsylvania sales tax guideApply through myPATH. In Philadelphia you collect 8%.
- 5
Apply for trade licenses and permits
Food, rental, contractor, vendor and other licenses come after the CAL, from L&I or the Health Department.
Other licenses you may need
The CAL is a general registration. Regulated activities need a second license on top, mostly from L&I in eCLIPSE. Common examples include a rental license for residential landlords, contractor licenses for building and trade work, food licenses from the Department of Public Health for restaurants, food trucks and food stores, and vendor licenses for sidewalk and street sales. Some trades also need state licenses: for example, Pennsylvania licenses cosmetologists, barbers and many health professions through the Department of State, and liquor licenses come from the Pennsylvania Liquor Control Board.
If you sell taxable goods or services, you need a Pennsylvania Sales, Use and Hotel Occupancy Tax License from the state Department of Revenue, applied for through myPATH. In Philadelphia you charge the 6% state rate plus the 2% city rate, 8% in total. The state license renews automatically every five years if your returns are up to date. Our Pennsylvania sales tax guide explains what's taxable, filing frequency and the vendor discount. For a wider view of city, state and federal permits, see our business licenses guide.
Business Income and Receipts Tax (BIRT) in 2026
BIRT is Philadelphia's main business tax. Every individual, partnership, association, LLC and corporation engaged in a for-profit business, profession or activity in the city must file, whether or not it made a profit. The City specifically includes residential and commercial rental activity, and businesses that hold a Commercial Activity License but aren't actively doing business.
BIRT has two parts, both owed every year:
- a gross receipts portion, charged in mills (thousandths of a dollar) on Philadelphia receipts; and
- a net income portion, a percentage of taxable net income apportioned to Philadelphia.
The City is cutting both rates gradually. For tax year 2025, the return due April 15, 2026, the rates were 1.410 mills on receipts and 5.71% on net income. For tax year 2026, the return due April 15, 2027, they fall to 1.395 mills ($1.395 per $1,000) and 5.65%. The City's longer-term plan is to eliminate the gross receipts portion and bring the net income rate down to 2.8% by fiscal year 2039, with bigger reductions scheduled after 2030.
BIRT rates by tax year
| Tax year | Gross receipts | Net income | $100,000 exemption? |
|---|---|---|---|
2023 and 2024 | 1.415 mills | 5.81% | Yes |
2025 (due April 15, 2026) | 1.410 mills | 5.71% | No |
2026 (due April 15, 2027) | 1.395 mills ($1.395 per $1,000) | 5.65% | No |
2023 and 2024
- Gross receipts
1.415 mills
- Net income
5.81%
- $100,000 exemption?
Yes
2025 (due April 15, 2026)
- Gross receipts
1.410 mills
- Net income
5.71%
- $100,000 exemption?
No
2026 (due April 15, 2027)
- Gross receipts
1.395 mills ($1.395 per $1,000)
- Net income
5.65%
- $100,000 exemption?
No
The end of the $100,000 exemption
From tax year 2016 to tax year 2024, the first $100,000 of Philadelphia receipts was exempt from BIRT, which meant thousands of small businesses owed little or nothing. The City says that because of a legal challenge it can no longer offer that exemption, starting with tax year 2025. That's the single biggest change for small businesses: if your receipts are under $100,000, you may have filed a $0 BIRT return in the past and now owe real tax.
Don't confuse the old exemption with the nexus rule. A business located outside Philadelphia is subject to BIRT if it has at least $100,000 of Philadelphia gross receipts in a 12-month period, among other triggers. That rule is still in place. A business located in Philadelphia owes BIRT from its first dollar.
Estimated payments and first-time relief
New businesses don't make estimated BIRT payments for their first year. After that, BIRT estimates generally equal 100% of the prior year's tax and are due with the April 15 return, with quarterly installments available in the second year. Because so many small businesses were filing BIRT for the first time, the City says you don't have to pay estimated taxes in 2026 if you had no BIRT filing requirement in 2022, 2023 and 2024. Losses can be carried forward for up to 20 years.
Net Profits Tax and the 60% credit
The Net Profits Tax (NPT) applies to unincorporated businesses: sole proprietors, partnerships, associations, LLCs taxed as partnerships or disregarded entities, and estates and trusts. Philadelphia residents pay it on all their business profits, even from businesses outside the city; non-residents pay it on business conducted in Philadelphia. Corporations don't pay NPT.
For tax year 2026, the NPT rate is 3.735% for residents and 3.425% for non-residents, down from 3.74% and 3.43% in 2025. Returns are due April 15, and you must file even if the business made a loss. Estimated NPT is paid in two installments, April 15 and June 15, each equal to 25% of the prior year's NPT.
Because an unincorporated business pays both BIRT and NPT on the same profit, the City gives a credit: you can reduce your NPT by 60% of the BIRT you paid on the net income portion, up to the amount of the NPT. The City points out the silver lining of the lost exemption: if you pay more BIRT, your NPT credit grows too.
Wage Tax, Earnings Tax and School Income Tax
If you have employees, you must withhold Philadelphia's Wage Tax from their pay. From July 1, 2026, it's 3.735% for Philadelphia residents, wherever they work, and 3.425% for non-residents who work in the city. The rates were 3.74% and 3.43% from July 1, 2025, and the City plans small cuts each year for the next five years.
How often you file depends on how much you withhold: quarterly if it's less than $350 a month, monthly from $350 to $16,000 a month, and semi-monthly or weekly above that. Returns and payments go through the Philadelphia Tax Center.
Residents whose employers don't withhold, such as people working for an out-of-state company, pay the same rate themselves as the Earnings Tax. The School Income Tax, also 3.735% for 2026, applies to residents' unearned income such as dividends, some interest and royalties. Business owners don't pay Wage Tax on their own profits: a sole proprietor's profit goes through the NPT instead.
Philadelphia business taxes at a glance (2026)
free
Commercial Activity License
Never expires
5.65%
BIRT net income rate, tax year 2026
Plus 1.395 mills ($1.395 per $1,000) on receipts
3.735%
Net Profits Tax, residents
60% BIRT credit
3.425%
Wage Tax, non-residents
From July 1, 2026
Worked examples
These use the tax year 2026 rates and assume all receipts and income are from Philadelphia. They ignore federal and Pennsylvania income tax.
A freelance designer living in Fishtown. She's a sole proprietor with $80,000 of receipts and $50,000 of net profit. Her CAL is free. Her BIRT is $80,000 × 1.395 ÷ 1,000 = $111.60 on receipts, plus $50,000 × 5.65% = $2,825 on net income: $2,936.60. Her NPT is $50,000 × 3.735% = $1,867.50, but her credit is 60% of $2,825, or $1,695, so she pays $172.50. Her total city business tax is about $3,109. Before the exemption ended, with receipts under $100,000, she would have owed no BIRT and paid the full NPT, about $1,870 at 2025's rate, so the change costs her roughly $1,240 a year.
A contracting LLC based in Delaware County. It earns $300,000 of receipts from Philadelphia jobs and $60,000 of net income attributable to them. It's above the $100,000 nexus threshold, so it needs a CAL and files BIRT: $418.50 on receipts plus $3,390 on net income, $3,808.50 in total. Its owner, a non-resident, files NPT at 3.425% on the $60,000 ($2,055) and takes a credit of $2,034 (60% of $3,390), leaving $21. If its crew live outside the city but work in Philadelphia, the LLC withholds Wage Tax at 3.425%.
A café corporation in Center City. An S or C corporation with $1.2 million of receipts and $150,000 of taxable net income pays BIRT of $1,674 on receipts plus $8,475 on net income: $10,149. Corporations don't pay NPT. It withholds Wage Tax from every employee, collects 8% sales tax on taxable food and drink, and needs a food license on top of its CAL.
Try it: Philadelphia sales tax on a $1,200 sale
Use and Occupancy Tax and other changes
If you rent or own space for your business, the Use and Occupancy (U&O) Tax applies to the assessed value of the space you use. Landlords usually collect it from tenants. The School District's $2,000 annual U&O exemption ended on January 1, 2026, for the same legal reason as the BIRT exemption, so commercial tenants who never saw a U&O charge may now see one. The City also announced a separate U&O calculation for cell towers starting January 1, 2027.
Other recent changes include the city portion of the Realty Transfer Tax rising to 3.578% from July 1, 2025, for a total of 4.578% with the state's 1%. That matters if your business buys property.
Common mistakes
Filing a $0 BIRT return out of habit. If you used the $100,000 exemption before, check your tax year 2025 and 2026 returns carefully. The exemption is gone and penalties apply to underpayments.
Thinking the CAL is optional for out-of-town businesses. If you work in Philadelphia, the City expects a CAL and, above the nexus threshold, a BIRT return.
Keeping a CAL you don't use. The City says CAL holders must file BIRT even if they aren't actively doing business. If you've closed, close your license and tax accounts.
Skipping the NPT credit. Sole proprietors who don't claim the 60% credit pay tax twice on the same profit.
Applying with a name mismatch. The legal name on your CAL application must match your Philadelphia tax account exactly. Add trade names to the tax account first.
Forgetting Wage Tax for remote staff. Philadelphia residents owe 3.735% wherever they work. If you employ a Philadelphia resident, withhold it even if your office is elsewhere.
Official links
What to do next
Register your Philadelphia tax account, then get your free Commercial Activity License in eCLIPSE before applying for anything else. If you sell goods or taxable services, set up your Pennsylvania sales tax license using our Pennsylvania sales tax guide and price with the sales tax calculator at 8%. Budget for BIRT and NPT from your first year using the startup cost calculator, and if you're forming an entity, start with our LLC registration guide.
This is general information, not legal or tax advice — confirm on the official source or with a professional.
Frequently asked questions
The basic Philadelphia business license, the Commercial Activity License, is free. You apply online through eCLIPSE after registering for a Philadelphia tax account, and it doesn't expire. Trade-specific licenses from Licenses and Inspections or the Health Department, such as food or contractor licenses, have their own fees. The real cost of doing business in Philadelphia is the city's business taxes, not the license.
For tax year 2026, the Business Income and Receipts Tax is 1.395 mills ($1.395 per $1,000) on gross receipts plus 5.65% on taxable net income. The 2026 return is filed and paid by April 15, 2027. For tax year 2025, due April 15, 2026, the rates were 1.410 mills and 5.71%.
No. The City says that because of a legal challenge it can no longer offer the exemption for the first $100,000 of Philadelphia receipts, starting with tax year 2025. Tax year 2024 was the last year it applied. Many small businesses that never paid BIRT before now owe it, but unincorporated businesses get a larger Net Profits Tax credit in return.
If you're a sole proprietor, partnership or LLC, yes, you file both. But you can take a credit against the Net Profits Tax equal to 60% of the BIRT you paid on the net income portion, which removes much of the overlap. Corporations don't pay the Net Profits Tax; they pay BIRT only.
From July 1, 2026, the Wage Tax is 3.735% for Philadelphia residents and 3.425% for non-residents who work in the city, down from 3.74% and 3.43%. Employers withhold it from pay. Self-employed people pay the Net Profits Tax at the same rates instead.
No. The City says the Commercial Activity License doesn't expire and doesn't need renewal. But holding one creates a filing duty: the City says businesses with a Commercial Activity License must file BIRT returns even if they aren't actively doing business. If you close, close your license and tax accounts so the City stops expecting returns.
Sources & verification
Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify
- 1.Get a Commercial Activity License — City of Philadelphia · accessed 9 October 2026
- 2.Business Income & Receipts Tax (BIRT) — City of Philadelphia Department of Revenue · accessed 9 October 2026
- 3.What you need to know about changes to Philly's tax rates (June 11, 2026) — City of Philadelphia · accessed 9 October 2026
- 4.Philadelphia business taxes are changing (tax year 2025 flyer) — City of Philadelphia Department of Revenue and Department of Commerce · accessed 9 October 2026
- 5.Net Profits Tax — City of Philadelphia Department of Revenue · accessed 9 October 2026
- 6.Wage Tax (employers) — City of Philadelphia Department of Revenue · accessed 9 October 2026
- 7.Use eCLIPSE to apply for licenses — City of Philadelphia Department of Licenses and Inspections · accessed 9 October 2026
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