Small Business Basics: Do I need a Philadelphia Business Privilege License?

The short answer is Yes. When my product was just an idea, I incorporated and opened a business bank account. As my company got closer to having a product, we obtained the Philadelphia Business Privilege License even though the company headquarters is located in Delaware County. It was a smart move because we obtained our very first contract with one of the largest employers in the city, The Hospital of the University of Pennsylvania. At the time, my company was just one person but we were selected because the paperwork was in order - Incorporation, bank account and license to do business in the city of Philadelphia.

This information was taken from the City of Philadelphia website, "A Business Privilege License is required for all businesses operating in Philadelphia. This includes businesses that are located outside the city limits but do some or all of their business activities in the City. Also, if you receive payment for work and an employer does not pay wage taxes on your behalf for that work, you are considered a Sole Proprietor and treated as a business by the City of Philadelphia. You are required to apply for a Business Privilege License to work as a Sole Proprietor in the City.

Prerequisites:

Federal Employer Identification Number or, if you do not have employees and are a sole proprietor, a Social Security Number.

A Business Privilege Tax Account Number.

In addition, the Pennsylvania State Sales and Use Tax Number is a prerequisite if your business collects sales tax from your customers. The lifetime license fee is $300, made payable to the City of Philadelphia. Some businesses may elect to pay a $50 annual fee. Starting in 2014, the fee for the Annual and Lifetime Business Privilege License will be eliminated for all businesses."

Marcum LLP reports that "On November 14, 2011 Mayor Nutter signed two bills into law. The first bill exempts new businesses from Philadelphia Business Privilege Tax and all business-related license fees for the first 2 years of operation. For purposes of this bill, a "New Business" is defined as a business that becomes subject to Philadelphia Business Privilege Tax in Tax Year 2012 or later, and was not subject to Philadelphia Business Privilege Tax during the five tax years preceding Tax Year 2012. Therefore, an existing business that is not subject to the Philadelphia Business Privilege Tax because it is not currently engaged in business within the City of Philadelphia would be eligible to qualify as a "New Business" for purposes of this exemption if it becomes subject to Business Privilege Tax in Tax Year 2012 or later by engaging in business in Philadelphia. There is an employment requirement included in the definition of "new business". From the 12 month anniversary of becoming subject to the BPT through the 18 month anniversary the business must have three full time employees working in the City who are not family members. From the 18 month anniversary to the 24 month anniversary the business must have six full time employees working in the City. Beginning in 2014, this bill also eliminates the Business Privilege License Fee for all businesses."

Now is the time to take advantage of the $50.00 Annual Business Privilege License Fee, instead of the lifetime renewal, (The state of Delawara has an annual fee of $75.00) for 2012 since the fees will be eliminated in 2014. This will show that your business plans for longevity and then your paper work will also be in order!

Happy filing!

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