Are you a Philly homeowner thinking about starting a short-term rental gig? If so, here’s what you must do to get started and keep your business in good standing with the City.
Register your business
You can rent your Philly home or part of it for less than 30 days at a time. This short-term rental activity is a great way to earn a few extra dollars to help you pay the mortgage and cover other household costs. But before you offer your property for rent, you must get the necessary permits and licenses. To be specific, you’ll need a:
- Philadelphia business tax account ID.
- Commercial Activity License,
- Zoning Permit for the use, and
- Limited Lodging Operator License OR a Rental License for a hotel use—in that order.
You can get the business tax account ID from the Department of Revenue. The permits and licenses listed above are issued by the Department of Licenses and Inspections. For a complete list of requirements, including licenses and registrations, please review these Short-Term Rental FAQs.
Understand your tax liability
In addition to licensing, you’ll need a business tax account to file and pay certain City taxes. That’s because the money you receive from your short-term rental activity is considered taxable income of a business under City tax rules. Here are the taxes you are liable for:
Hotel Tax – you must collect this tax from your guests and remit it to the City. The tax rate is 8.5% of the total amount a guest pays you, and it’s due on the 15th of each month for the rentals in the prior month. While many short-term rental platforms or booking agents may include local hotel taxes in their charges, you should ensure the tax is collected and remitted to the City on your behalf. If your agent or rental platform does not collect and remit the tax on your behalf, you must create an account on the Philadelphia Tax Center and pay the tax monthly.
Net Profits Tax (NPT) – you must file and pay this City tax regardless of whether your rental business is profitable or not. The NPT is based on the net profits you earn from your business activity in Philly. For rental activity in 2023, the NPT rate is 3.75% for residents and 3.44% for non-residents.
Business Income and Receipts Tax (BIRT) – you may also have a BIRT liability on your short-term rental activity. This tax is based on your Philadelphia gross receipts and also your net income from business activity in Philadelphia. Anyone conducting business in Philly must file and pay this tax regardless of profit. But if you have less than $100,000 in taxable gross receipts, you may file a No Tax Liability form instead. For rental activity in 2023, the net income tax rate of the BIRT is 5.81%. The gross receipts tax rate is .001415.
Both NPT and BIRT must be filed and paid before or on April 15 for the prior year’s business activities.
Wage Tax – If you plan on having employees, you must withhold this tax from their paychecks and remit it to the City. The current Wage Tax rates are 3.75% for residents and 3.44% for non-residents.
Be aware that the City updates its tax rates annually. It is important to use the correct tax rates for the correct tax year—check www.phila.gov/revenue for all tax types, their due dates, and rates. Also, remember to file and pay City taxes and fees on the Philadelphia Tax Center.
