It appears as though there are some conflicting responses as to WHAT these taxes actually consist of. Below Are the list of taxes and licenses you can and cannot deduct from the instructions for Schedule C. There is not a specific mention of the NPT nor the BIRT on the Schedule C instructions.
However, The BIRT tax is based on both gross receipts and Net income. The Gross receipts portion would fall under sales and services taxes.
The NPT tax is not assessed to corporations, only individuals and flow through companies which makes it appear as though it would be an individual tax. You cannot deduct individual taxes on your Schedule C.
The BIRT tax is paid by Every individual, partnership, association, limited liability company (LLC), and corporation enga... making this a true business tax that would be able to be deducted on your Schedule C.
Who pays the tax
The Net Profits Tax (NPT) is imposed on the net profits from the operation of a trade, business, profession, enterprise, or other activity by:
- Philadelphia residents, even if their business is conducted outside of Philadelphia.
- Non-residents who conduct business in Philadelphia.
Businesses must pay the Net Profits Tax if they are organized as:
- Individuals (sole proprietors)
- Partnerships
- Associations
- Limited liability companies (LLCs)
- Estates or trusts
The rental of property, in most cases, is considered the operation of a business.
A return must be filed even if a loss is incurred. If no return is filed, non-filer penalties are imposed.
The NPT does not take the place of the net income portion of the Business Income & Receipts Tax (BIRT). However, you may be able to take a credit on the NPT based on the amount of tax owed from your BIRT.
If you must amend an NPT return, complete a new tax return with the updated amount. Place an “X” in the box that indicates the form is an amended return.
You can deduct the following taxes and
licenses on this line.
• State and local sales taxes imposed
on you as the seller of goods or services.
If you collected this tax from the buyer,
you must also include the amount collected in gross receipts or sales on
line 1.
• Real estate and personal property
taxes on business assets.
• Licenses and regulatory fees for
your trade or business paid each year to
state or local governments. But some licenses, such as liquor licenses, may
have to be amortized. See the Instructions for Form 4562, Depreciation and
Amortization, for more information on
amortization.
• Social security and Medicare taxes
paid to match required withholding from
your employees’ wages. Reduce your
deduction by the amount shown on
Form 8846, line 4.
• Federal unemployment tax paid.
• Federal highway use tax.
• Contributions to a state unemployment insurance fund or disability benefit
fund if they are considered taxes under
state law.
Do not deduct the following.
• Federal income taxes, including
your self-employment tax. However,
you can deduct one-half of your self-employment tax on Schedule 1 (Form
1040), line 15 (but if filing Form
1040-NR, then only when covered under
the U.S. social security system due to an
international social security agreement).
• Estate and gift taxes.
• Taxes assessed to pay for improvements, such as paving and sewers.
• Taxes on your home or personal
use property.
• State and local sales taxes on property purchased for use in your business.
Instead, treat these taxes as part of the
cost of the property.
• State and local sales taxes imposed
on the buyer that you were required to
collect and pay over to state or local
governments. These taxes are not included in gross receipts or sales nor are
they a deductible expense. However, if
the state or local government allowed
you to retain any part of the sales tax
you collected, you must include that
amount as income on line 6.
• Other taxes and license fees not related to your business
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