Philadelphia Net Profits Tax (NPT): Who Owes It and How to File

Last updated August 12, 2026

·Independent Pennsylvania tax education

The Net Profits Tax (NPT) is Philadelphia's tax on the net profits of unincorporated businesses. It falls on Philadelphia residents who run a trade, business, or profession anywhere, and on non-residents for the business they conduct in the city. This guide explains who owes it, how it works alongside BIRT, and how to file correctly.

Key takeaways

NPT is a tax on the net profits of unincorporated businesses. Corporations are exempt and pay BIRT instead.
Philadelphia residents owe NPT on business conducted anywhere; non-residents owe it only on the portion conducted in Philadelphia.
NPT and BIRT are separate taxes, and most unincorporated Philadelphia businesses must file and pay both, softened by a credit of up to 60% of the BIRT net income tax paid.
You must file an NPT return every year, even in a loss year or when no tax is due.
Resident and non-resident rates change periodically, so confirm the current-year figures on the Department of Revenue's NPT page before you file.

What the Net Profits Tax is

The Net Profits Tax is imposed on the net profits from operating a trade, business, profession, enterprise, or other for-profit activity. It applies to Philadelphia residents even when the business is carried on outside the city, and to non-residents on the business they conduct within Philadelphia.

NPT falls only on non-corporate entities: individuals operating as sole proprietors, partnerships, associations, LLCs that are not taxed as corporations, and estates or trusts. Corporations are exempt from NPT.

Because it is tied to net profits, NPT is a tax on what your business actually earns after expenses. It is administered by the City of Philadelphia Department of Revenue, and the authoritative rules live on the Department's Net Profits Tax page.

Who has to file

NPT reaches most people running an unincorporated business connected to Philadelphia. If you are a Philadelphia resident, your business profits are subject to NPT no matter where the work happens. If you are a non-resident, only the portion of your net profits from business conducted in Philadelphia is taxed.

This commonly includes freelancers, consultants, and 1099 recipients operating as unincorporated businesses, as well as, in most cases, people renting out property, which is generally treated as operating a business.

Philadelphia residents who operate a trade, business, profession, or other for-profit activity, even if it is conducted outside the city.
Non-residents, on the portion of net profits from business conducted within Philadelphia.
Non-corporate entities only: sole proprietors, partnerships, associations, LLCs not electing corporate treatment, and estates or trusts.
Freelancers, consultants, and 1099 recipients operating as unincorporated businesses.
In most cases, those renting out property, which is treated as operating a business.
Not corporations. Corporations are exempt from NPT and pay BIRT instead.

NPT vs. BIRT and the 60% credit

NPT and BIRT are separate taxes. Most unincorporated Philadelphia businesses must file and pay both, and NPT does not replace the net income portion of BIRT. It is common for a sole proprietor or single-member LLC to owe both taxes on the same underlying activity.

To relieve the resulting double taxation, NPT filers may take a credit against the NPT of up to 60% of the tax paid on the net income portion of BIRT. The credit is important, but it softens rather than eliminates the overlap: it applies only to the net income portion of BIRT, not the gross receipts portion, and it is capped at 60%.

If you are already familiar with the Philadelphia BIRT, treat NPT as a parallel obligation rather than an alternative. Filing one does not satisfy the other.

Rates, deadlines, and estimated payments

Residents and non-residents pay NPT at different rates, and those rates change periodically. They have declined in recent years, so do not assume last year's figure still applies. Confirm the current resident and non-resident rates on the Department of Revenue's Net Profits Tax page before you calculate what you owe.

Low-income filers who qualify under Pennsylvania's Tax Forgiveness program, claimed on Schedule SP with the PA-40, may be eligible for a reduced NPT rate. Confirm the current reduced rate and the documentation required with the Department of Revenue.

How to file and pay

File and pay online through the Philadelphia Tax Center at tax-services.phila.gov. Paper returns are still accepted. File the annual return by April 15, and file even in a loss year or when no tax is due, because a return is required every year.

If estimated payments are required, make the two installments due April 15 and June 15, each generally 25% of the prior year's NPT. Compute the BIRT credit, up to 60% of the net income portion of BIRT paid, using the return's worksheets: Worksheet K for individuals and most entities, and Worksheet D for partnerships or associations that have corporate members.

Before calculating, confirm the current-year resident and non-resident rates and any income-based rate reduction on the official NPT page. Mailing a paper payment sends it with a coupon to the Philadelphia Department of Revenue, P.O. Box 1393, Philadelphia, PA 19105-1393; a paper return not requesting a refund goes to P.O. Box 1660, Philadelphia, PA 19105-1660.

File online at the Philadelphia Tax Center (tax-services.phila.gov); paper filing remains available.
File the annual return by April 15, even in a loss year or when no tax is due.
Make required estimates in two installments, April 15 and June 15, each generally 25% of the prior year's NPT.
Compute the BIRT credit with Worksheet K (individuals and most entities) or Worksheet D (partnerships/associations with corporate members).
For questions, contact the Department of Revenue at revenue@phila.gov or (215) 686-6600.

Common mistakes and exemptions

The most frequent NPT errors come from confusing it with BIRT or assuming a quiet year means no filing. Both taxes stand on their own, and the return is mandatory regardless of profit.

If you have partners, corporate members, or a possible low-income rate reduction, the interactions between NPT, BIRT, the credit, and the rate rules get complex. Those are good moments to consult a PA-licensed tax professional before filing.

Corporations do not owe NPT. They are exempt and pay BIRT instead; NPT is only for unincorporated businesses.
You must file even with a loss or zero tax; skipping a return can trigger non-filing penalties.
NPT and BIRT are separate taxes, and most unincorporated businesses owe both; the 60% BIRT credit reduces but does not eliminate the overlap.
The BIRT credit applies only to the net income portion of BIRT paid, not the gross receipts portion, and is capped at 60%.
Non-residents are taxed only on the Philadelphia-conducted portion of business; residents are taxed on business conducted anywhere.
Estimated payments are generally not required when the tax is at or below a small threshold; the return's instructions state $100 or less on the relevant line. Confirm the current threshold on the official NPT page.
Taxpayers owing $5,000 or more must pay electronically. Confirm the current electronic-payment threshold with the Department of Revenue.
An extension of time to file, up to 60 days, does not extend the time to pay; tax owed is still due April 15.

Best practices

File the annual NPT return by April 15 every year, even in a loss year or when no tax is due.
File and pay online at the Philadelphia Tax Center (tax-services.phila.gov); use paper only if you prefer it.
If you are unincorporated, file both NPT and BIRT and claim the credit of up to 60% of the BIRT net income tax paid.
Compute the credit with the correct worksheet: Worksheet K for individuals and most entities, Worksheet D for partnerships or associations with corporate members.
Confirm the current-year resident and non-resident rates and any income-based rate reduction on the official NPT page before you calculate.
When you have partners, corporate members, or possible low-income rate eligibility, consult a PA-licensed CPA or tax professional before filing.

Common mistakes

Assuming corporations owe NPT; corporations are exempt and pay BIRT instead.
Skipping the return in a loss or zero-tax year, which can trigger non-filing penalties.
Treating NPT and BIRT as the same tax; most unincorporated businesses owe both and must file both returns.
Missing or overstating the BIRT credit, which applies only to the net income portion of BIRT paid and is capped at 60%.
Assuming a filing extension also extends the time to pay; tax owed is still due April 15.
Relying on last year's rate instead of verifying the current resident and non-resident figures at phila.gov.

Official Pennsylvania sources

Philadelphia Net Profits Tax (NPT)
Net Profits Tax rules for non-corporate Philadelphia businesses and the BIRT credit.
Philadelphia Business Income & Receipts Tax (BIRT)
BIRT rules, rates, thresholds, forms, and filing instructions.
Philadelphia Tax Center
File and pay Philadelphia taxes online — Wage/Earnings, BIRT, NPT, and realty transfer.
City of Philadelphia Department of Revenue
Philadelphia-specific taxes (wage, BIRT, NPT, real estate).

Frequently asked questions

Who has to pay Philadelphia's Net Profits Tax?

Philadelphia residents who operate a trade, business, or profession, even outside the city, and non-residents on the portion of business they conduct in Philadelphia. It applies only to non-corporate entities: sole proprietors, partnerships, associations, LLCs not taxed as corporations, and estates or trusts. Corporations are exempt.

Do I owe both NPT and BIRT?

Usually yes. NPT and BIRT are separate taxes, and most unincorporated Philadelphia businesses must file and pay both on the same activity. To ease the double taxation, NPT filers may claim a credit of up to 60% of the tax paid on the net income portion of BIRT. Confirm the current credit rules at phila.gov.

Do I have to file if my business lost money?

Yes. A Net Profits Tax return must be filed every year, even if the business had a loss or owes no tax. Skipping a return can trigger non-filing penalties.

What are the current NPT rates?

Residents and non-residents pay at different rates, and those rates change periodically and have declined in recent years. This guide does not state a current rate; confirm the current resident and non-resident rates on the Department of Revenue's Net Profits Tax page at phila.gov before filing.

When is the Net Profits Tax due?

The annual return is due April 15. When estimated payments are required, they are made in two installments, due April 15 and June 15, each generally 25% of the prior year's NPT. An extension to file, up to 60 days, does not extend the time to pay. Confirm current dates at phila.gov.

How do I file and pay?

File and pay online through the Philadelphia Tax Center at tax-services.phila.gov; paper filing remains available. Compute the BIRT credit using Worksheet K, or Worksheet D for partnerships and associations with corporate members. If you have partners, corporate members, or low-income rate eligibility, consider a PA-licensed tax professional.

Next read

Philadelphia BIRT

NPT's twin. Most unincorporated Philadelphia businesses owe both — here's the BIRT side in full.

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Explanation

Covers the non-corporate scope, resident vs non-resident treatment, the BIRT overlap and 60% credit, the mandatory-even-in-a-loss-year rule, and the two-installment estimate schedule, with rates deferred to phila.gov. Lacks a signed CPA review byline.

Suggested improvements

Add an expert review byline from a PA-licensed CPA.
Add a worked BIRT-credit example on Worksheet K.
Add a combined BIRT + NPT first-year filing checklist.

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