Business Tax Question (Pittsburgh, California, Oakland: 2010, income, income tax)

[skchi]

My fiance and I are considering moving to Pittsburgh. However, I've been looking at the taxes in the city, and I've very concerned. My fiance runs his own business as a sole proprietorship, and it appears that the City of Pittsburgh would tax him twice on his earnings - once with the Business Privilege tax, and once with the Earned Income tax. There's even a statement on the City of Pittsburgh website that claims that this is not double taxation, because the base is different. Whatever.

Anyway, does anyone have any insight into this? Am I correct that his earnings will be taxed once as a business and once as earned income?

Thanks!

[Tallysmom]

Originally Posted by skchi

My fiance and I are considering moving to Pittsburgh. However, I've been looking at the taxes in the city, and I've very concerned. My fiance runs his own business as a sole proprietorship, and it appears that the City of Pittsburgh would tax him twice on his earnings - once with the Business Privilege tax, and once with the Earned Income tax. There's even a statement on the City of Pittsburgh website that claims that this is not double taxation, because the base is different. Whatever.

Anyway, does anyone have any insight into this? Am I correct that his earnings will be taxed once as a business and once as earned income?

Thanks!

You need to contact a tax guy -- my information is pertinent to California, as that's where I am. But I will weigh in -- I'd bet that if he doesn't take a paycheck, which he doesn't have to do as a sole prop -- he *is* the business -- his earnings are taxed but once. If he does take a a literal paycheck, with FICA and FUTA and all that jazz taken out he would.

I'm also betting that he doesn't do that. I can think of reasons why he would but a lot of sole props are just one guy businesses. (or a hubby and wife team)

If they are taxed twice the Pittsburgh Business Tax could be a license fee tax. I pay that in Oakland CA, and it's a tiny little fee -- a percentage of my earnings in Oakland, and an even smaller % of the rest. Our net earnings are over 100K, and our Oakland Business Tax is 65 bucks. Once again -- I don't know about Pittsburgh specifically.

However -- please contact a tax guy or girl. Anyone owning a business making real money needs a good accountant -- the laws are ever changing and getting more complicated all the time.

[skchi]

Thanks for the advice. He does have a good accountant now, but we're not in Pittsburgh. I have told him that he should contact a tax accountant in Pittsburgh before we make a final decision to move.

[PeterRabbit]

Business taxes alone can cost you as much as 63% of your gross earnings. Then you pay personal income tax.

[Tallysmom]

Originally Posted by PeterRabbit

Business taxes alone can cost you as much as 63% of your gross earnings. Then you pay personal income tax.

Dude -- seriously. Are you high?

I just looked at the instructions of the Business Privlege tax form -- the rate is 1 mill. If the gross revenue ofthe business is 100K that tax is 100 bucks. No way that's 63%....

To the OP -- looking at the tax form for the business privelede tax, that's very similar (and WAY less complicated) than what I fill out yearly here for a business license...

[str8outtawexford]

I am a C.P.A. in the area and review a good deal of these returns.

The Pittsburgh business privledge tax is very minimal. It taxes a business on gross receipts, not net income or loss. There is also a $20,000 gross receipts exemption. So, if your business takes in less than $20,000 gross, you don't have to pay the tax.

Example: A baker sells a cake for $10, it costs him $2 to make, he has $8 in profit.

Here is how the city of pittsburgh taxes that:

He pays 3% on his net income, $8, as an earned income tax or $0.24

He pays 0.1% on the gross income as the B.P.T. or $0.008 (almost a penny).


You can take any amount you pay for B.P.T. as a deduction for your business when arriving at your earned income.

Or you could just become an S-Corp and avoid the earned income tax all together.....

[PeterRabbit]

Originally Posted by str8outtawexford

I am a C.P.A. in the area and review a good deal of these returns.

The Pittsburgh business privledge tax is very minimal. It taxes a business on gross receipts, not net income or loss. There is also a $20,000 gross receipts exemption. So, if your business takes in less than $20,000 gross, you don't have to pay the tax.

Example: A baker sells a cake for $10, it costs him $2 to make, he has $8 in profit.

Here is how the city of pittsburgh taxes that:

He pays 3% on his net income, $8, as an earned income tax or $0.24

He pays 0.1% on the gross income as the B.P.T. or $0.008 (almost a penny).


You can take any amount you pay for B.P.T. as a deduction for your business when arriving at your earned income.

Or you could just become an S-Corp and avoid the earned income tax all together.....

Yappity yap - no denying up to 63% taxes.

[PeterRabbit]

Originally Posted by Tallysmom

Dude -- seriously. Are you high?

I just looked at the instructions of the Business Privlege tax form -- the rate is 1 mill. If the gross revenue ofthe business is 100K that tax is 100 bucks. No way that's 63%....

To the OP -- looking at the tax form for the business privelede tax, that's very similar (and WAY less complicated) than what I fill out yearly here for a business license...

Can't help you have your janitor business in Oakland. If your computations are correct, why don't major corporations locate to P)gh?

[Tallysmom]

Originally Posted by PeterRabbit

Can't help you have your janitor business in Oakland. If your computations are correct, why don't major corporations locate to P)gh?

I don't know -- why don't you ask Alcoa, GlaxoSmithKline, PPG Industries, 84 Lumber, GNC... they'd know why they picked Pittsburgh.

And my janitorial business is going very well, thank you.

[pman]

is pittsburgh eliminating the BPT?

WHAT IS THE TAX RATE FOR 2007 THRU 2010?
1 Mill (.001) – the Business Privilege Tax will be phased out by 2010.
2 Mills (.002) – the Business Privilege Tax for 2005 and 2006.

FAQ - Business & Wage Tax