ATTENTION Philly Property Owners – Beware the Use & Occupancy Tax

Posted on Thu, Nov 15, 2018 ©2021 Drucker & Scaccetti

Irina EricBy: Irina Moyseyenko, CPA, MT

 

If you own a Philadelphia property, which is used for business purposes, you are subject to the Philadelphia Use & Occupancy Tax (“U&O Tax”).  This tax is charged to the owner of the property and is 1.21% of the assessed value of the property. Surprised? Read on for more information, including exemptions and the process for appeals.

 

The U&O Tax is in addition to the City’s real estate, net income and gross receipts taxes you may already pay. However, it is only for properties used for business purposes.  The U&O Tax is based on the assessed value of your property, not its income.  The value is determined by the Philadelphia Office of Property Assessment, but you can appeal the value through the Board of Revision of Taxes.  Through an appeal, you may receive a reduction in assessed value of up to $165,300, which translates to a maximum reduction of $2,000 in tax per year.  A U&O Tax return is due on the 25th of each month.

 

For some lucky property owners, there are a few exclusions not subject to U&O Tax:

  • Personal and residential use real estate
  • Owners already paying Pennsylvania Sales, Use, and Hotel Occupancy taxes
  • Real estate used for non-profit business purposes
  • Real estate used for port-related activities like piers, wharves, and marine terminal facilities
  • Vacant commercial properties and portions of commercial properties that are not currently being used for business

Even if you qualify for any of the above exemptions, they are not automatic.  You must apply and be approved for the exclusion(s).  And, after approval, you are still required to file a monthly U&O Tax return and report your exemption. 

 

If you don’t qualify for any of the exclusions, there is a discount of 1% available if you remit payment on or before the 25th of the month the tax is due.  However, if you are an owner and a tenant, you are not eligible for this discount.  It’s only available for third-party tenants occupying the property.    

 

The U&O Tax gets complicated when a property is used by multiple tenants, for multiple purposes (i.e., residential, non-profit, personal, etc.). Leave a comment below if you’d like to see a follow-up blog addressing these more complex situations.  In the meantime, if you are not certain whether you are subject to the U&O Tax, call on The Tax Warriors® at Drucker & Scaccetti.  We are always prepared to help.

 

Topics: Rental property, Use & Occupancy, Real estate tax, Philadelphia, Property Owner

Read & Submit A Comment