What Is a Business Tax Receipt?

A business tax receipt is a legal document issued by a city or local municipality that authorizes a business to conduct its operations from within its jurisdiction. It’s part of the business registration process, oftentimes, one of the first steps.

Getting a business tax receipt is a fairly straightforward process. Generally, it entails disclosing key identifying information about your business and paying a nominal fee. Read on to learn more.

Key Points:

• Getting your business off the ground takes a lot of energy and a meticulous approach when it comes to addressing regulatory matters.
• Weeding through regulatory matters isn’t very exciting or rewarding, but you can’t overlook this aspect of your business.
• If you cut corners, you could derail your business before it ever has a chance to gain any momentum. Even if things work out over the near-term, you’ll undoubtedly have major issues over the long-term.
• For small business owners, one of the most important regulatory hurdles you need to clear is obtaining a business tax receipt. Without it, you technically can’t operate your business.

Clarifying a Business Tax Receipt

Obtaining a business tax receipt is part of the process of registering your business with the city or local municipality in which it’s based. While the term sounds like a proof of payment record received from a taxing authority, it has nothing to do with substantiating sales or income taxes paid by your business (i.e. your small business taxes). 

It is a document issued by a local government body that authorizes you to legally conduct business within its jurisdiction. Securing the authorization is relatively easy, but it comes at a cost. Fortunately, the fee is fairly modest, ranging from $20 to $500 for most jurisdictions.

While the purpose of a business tax receipt is largely standard from one locality to the next, many different names are used to describe this document. Examples include local business tax receipt, business tax certificate and business tax license. The associated fee is often referred to as a gross receipts tax.

How Does a Business Tax Receipt Work?

Whether you’re starting a home-based sole proprietorship (see self employed tax deductions), launching a capital-intensive limited liability capital (LLC) or buying an established business, you will most likely need a business tax receipt to operate. Each jurisdiction has its own application process and fee requirements. Fortunately, both the administrative effort and the economic cost are generally minimal.

In many situations, a business tax receipt takes the form of a business license/permit, but this is not always the case. Some local governments require multiple regulatory documents (and multiple fees). In the most aggressively taxed areas, this includes distinct fees for a business tax receipt, a business license and a business permit.

How Do I Obtain a Business Tax Receipt?

In order to obtain a business tax receipt, follow the high-level steps outlined below. 

1. Officially register your business. Make sure to complete all pertinent forms and furnish the required documentation. For business’ that operate as sole proprietorships, this step is not necessary. For partnerships consider also looking into how are partnerships taxed.

2. Apply for a business tax receipt. Depending on your location, you may need to file an application with the city, county or both. An increasing number of local governments accept online applications, but some require hardcopy submission. Regardless, you’ll need to provide the following information:

Federal employer identification number, which is also referred to as a business tax identification number

State taxpayer identification number

Business owners names

Business name

Business address

Description of business

Contact information

3. Pay the applicable fee. Depending on the local government’s requirements, you’ll have to pay for the business tax receipt either at the time of application or following approval, which can take a few weeks. Once you’re approved and your fee has been paid, you have the green light to conduct business. Generally, the license must be renewed on an annual basis.

The aforementioned sequence of actions is fairly standard, but you may face unique protocols, depending on your location. Be sure to consult with the appropriate governing bodies to assess your specific circumstance. 

Examples of Business Tax Receipts

As noted previously, the process for obtaining a business tax receipt can vary from one jurisdiction to the next. The examples below provide some real-world context. 

Fairfax County, Virginia: This Virginia county requires businesses pay a business, professional and occupational license (BPOL) tax within their first 75 days of operation. Firms generating $100,000 or less annual revenue pay a flat BPOL fee; businesses with revenues in excess of $100,000 pay a percentage-based fee that varies across industries.

Lompoc, California: In the City of Lompoc, business tax receipts are referred to as business tax certificates (BTCs). Fees are based on a business’ annual gross revenue and range from $30 to $475. Obtaining a BTC does not authorize you to do business Lompoc. To do so, you must also demonstrate compliance with applicable regulatory codes and regulations of the building, health, fire, planning, police and wastewater departments. For comprehensive information, please refer to the following link: City of Lompoc Business Taxes and Permits.

Miami, Florida: For businesses established in Miami, Florida, a business tax receipt application must be submitted to the Miami-Dade County Tax Collector’s office. Fees are based on business type and can vary widely, depending on whether the business is located in a city or in unincorporated Miami-Dade County. The fee varies further, depending on the characteristics of the business, such as the number of employees, seats, units and square footage. Please refer to the following link for specific details: Miami-Dade County – Local Business Tax Categories.

• Orlando, Florida: The City of Orlando requires a business tax receipt that is referred to as a business tax and certificate of use. It costs about $20 and must be renewed on an annual basis. Additionally, business owners in the city must also obtain an Orange County business tax receipt.