Philadelphia Use & Occupancy (U&O) Tax: What Owners Owe
The tax on using commercial space in Philadelphia — and who is responsible for paying it.
What is the Philadelphia Use & Occupancy tax?
The Use & Occupancy (U&O) tax is a Philadelphia tax on the use of commercial or industrial space for business activity. It applies when a property — or part of it — is occupied for business, and it is separate from the ordinary real estate tax on the property itself.
Who owes the U&O tax?
The tax is tied to business use of the space. In a leased property, the landlord is generally responsible to the City, but commercial leases very often pass the U&O tax through to the tenant as an occupancy cost — which is why it should be addressed clearly in the lease. A portion of a property used purely as a residence is typically not subject to it.
How is it calculated?
The U&O tax is based on the assessed value of the portion of the property used for business, at a rate the City sets, with an exemption amount that shelters a base level of value. Because the rate and exemption are set locally and change, owners and tenants should confirm the current figures each year.
How Nochumson P.C. helps
Nochumson P.C. advises commercial owners and businesses on U&O exposure and on allocating it correctly in a lease. Contact us with a U&O question.
Related articles:
- Philadelphia Real Estate Transfer Tax, Explained
- Philadelphia's 10-Year Property Tax Abatement, Explained
- How to Appeal Your Philadelphia Property Tax Assessment
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