$5,000 Small Retailer Property Tax Credit Relief RECAP
On November 1, Mr. Norman Evans of the DC Office of Tax and Revenue spoke to CHAMPS members about qualifications for the small retailer property tax credit and how to apply. The below notes summarize a few of the key points that merit emphasis and questions that were raised during the discussion. Mr. Evans was very open to answering questions if businesses contact him directly, so do not hesitate to reach out at firstname.lastname@example.org if you have questions.
PowerPoint: Download a copy of OTR’s PowerPoint presentation: Small Retailer Property Tax Relief Credit CHAMPS
Tax Filing Form: Here is the draft form for filing the credit.
This draft form for filing the credit against your franchise tax isn’t final. It’s likely one of the last drafts, but things can change. CHAMPS will continue to track implementation of this credit and will make the meeting attendees aware of any changes.
This is a credit against your franchise tax. You will apply for this credit when you file your franchise tax return in April, or in October if you seek an extension on your filing. It’s called the small retailer property tax relief credit because it is designed to give money back to businesses that are experiencing high property tax increases – but isn’t actually a credit against your property tax.
If your business is exempt from property tax or receives tax credits towards real property tax, OR your rental retail location is exempt from real property tax, you aren’t eligible.
Eligibility. The PowerPoint lists the criteria, but I’ll restate them here:
• The business must own or lease a building or part of a building in the District that:
• is classified, in whole or in part, as Class 2 Property as defined in DC Code § 47-813;
• is the primary place of the retail business of the corporation or unincorporated business;
• has a Certificate of Occupancy for commercial use; and
• is a retail establishment from which the business of selling tangible personal property is conducted, or in or from which any retail sales are made.
• A business, whether incorporated or unincorporated, is eligible to claim the credit if the business:
• files a sales tax return
• has less than $2.5 million in federal gross receipts or sales; and
• is current on all District tax filings and payments.
So what about restaurants and service providers like hair salons, nail salons, or fitness studios?
Restaurants are eligible, as DC’s definition of retail sales includes the sale of food. Restaurants should confirm they fit the other criteria – less than $2.5 million in federal gross receipts, files sales tax return, current on all DC tax payments and filings, etc.
Personal service providers. As long as the service provider charges sales tax and files a sales tax return (and fits the other criteria) you should be eligible, and you should apply for this credit. If you file sales tax on your services (manicures, pedicures, haircuts, alterations) and file a sales tax return, you should be eligible. If you charge sales tax on the tangible goods you sell, like nail polish, hair products, or shoe laces, lint brushes etc, and file a sales tax return, you should be eligible.
What if my business is exempt from sales tax? If your business is exempt from sales tax, you aren’t prohibited from claiming the credit. You should file a sales tax return and report your exempt sales. So if you are a QHTC or your sales tax is exempt, make sure you file a sales tax return to report those exempt sales. The requirement in the retailer credit legislation is that you file a sales tax return.
What if I’m the property owner? If you own the property and you are the retailer or one of the retailers in the property you own, and you meet all the eligibility criteria, you can file for the credit. If you are the property owner and you are NOT a retailer in the building, you aren’t eligible.
RE: being current on taxes/filings: Say you pay a DC license/fine/tax filing at the same time that you file for the credit. What if you are denied because the credit was processed before the fact that you paid for your license/fine/tax filing makes it through the DC bureaucracy? Don’t panic. Call OTR and let them know, and they can have someone help track it down. But it’s a good idea to keep track of your paperwork and when you filed/paid for anything through DC government if you’re worried it won’t be processed by the time you file for this credit.
Certificate of Occupancy: Most small retailers on Capitol Hill have a C of O, but if you don’t and aren’t required to have one, and you fit all the other eligibility requirements for this retailer credit, it’s worth applying for and getting a C of O. The value of the credit will likely outweigh the cost of the C of O.
Nuts and Bolts of Filing – Questions asked about filing out the form
You need to file a Schedule SR – that’s the new form, the draft of which is attached to this email.
You also need to file a Schedule UB – that’s the business credits form. It comes with the D-20 and D-30 Business Franchise Tax Forms. This isn’t a new form, but will have a new line on it for the Small Retailer Property Tax Relief Credit. Here’s the link for DC OTR where you can find the D-20 and D-30 and look at the Schedule UB. Please note these are for Tax Year 2017, OTR hasn’t put tax forms for 2018 up yet.
What’s the difference between federal gross receipts and federal gross sales? And which number should I look at? If you’re near $2.5 mil and you are trying to figure out if you are eligible, base your determination on federal gross receipts. That is the controlling number. A business can have more gross receipts than sales, but can’t have more sales than gross receipts.
What if I receive a rent bill from my landlord that doesn’t break out the rent vs BID taxes and property tax? How do I fill out line 2 on the Schedule SR? If the landlord doesn’t break it out, that’s fine. Just write the amount that you pay to your landlord on the line. If they do break it out in terms of rent vs BID vs property tax, then write in just the amount that you pay in rent. As a business on Capitol Hill, you are probably paying more than $5000 a year in rent, so if the taxes are included or aren’t included, it probably won’t make a difference as to whether you get the full credit.
Again, check with OTR if you have any questions, or contact email@example.com and we can help coordinate with OTR. CHAMPS will continue to track implementation of the credit and will make attendees aware of any changes or further information that OTR releases on this.