The DC Council on May 15 voted to pass the DC budget, and included a $5,000 tax credit for qualified small businesses. Called the Small Retailer Property Tax Credit, it is estimated to allow 4,400 small retail business to lower or eliminate their minimum franchise tax bill or receive a tax rebate.
How it works:
- Business will receive a refundable credit on business tax liability that is worth EITHER the small retailer’s property tax bill, or 10 percent of the annual lease cost, up to $5,000 per year.
- To be eligible, businesses must have active business operations in DC have less than $2,500,000 in gross revenue. Any revenue that a business earns outside of the District would be included in this gross revenue total.
- Retail businesses can qualify for the credit regardless of whether they are property owners, renters or parties to a triple-net lease.
The Small Retailer Property Tax Credit is an effort to provide relief to small retail businesses, as the budget does propose to increase property and other taxes to help pay for Metro and other programs. The budget eliminates the tiered property tax rate for buildings with an assessed value of $3 million or greater. Instead, buildings up to $5 million will be assessed at what had previously been the lower tier – $1.65/$100 (for the entire assessed value). Buildings with an assessed value of more than $5 million will see a property tax rate increase to $1.89/$100 for the entire assessed value of the building (an increase from the previous top tier of $1.85). So building owners with buildings valued at $3 mil or less should not see a change; building owners with buildings valued between $3 mil and $4 mil should see a decrease in property tax; and buildings at $5 mil or greater will see an increase.
Other tax decisions in the budget that could affect small businesses and their customers:
- raising the general sales tax rates from 5.75% to 6%;
- raising the rate of general sales tax for car rental or leasing from 9% to 10.25%;
- raising the rate of general sales tax for liquor, beers, and wine sold for off-premises consumption from 9% to 10.25%;
- raising the hotel sales tax and corresponding use tax rates from 10.05% to 10.20%;
- raising the gross receipts tax on for-hire vehicles, which does not include taxis, from 1% to 6%.