The Office of Tax and Revenue (OTR) recognizes the many hardships that businesses are currently facing and would like to remind business owners of the tax relief programs offered through DC law, such as the Small Retailer Property Tax Relief Credit.
DC law allows qualified corporations and unincorporated businesses engaged in the business of making sales at retail to claim a refundable franchise tax credit of up to $5,000 based on the amount of real property taxes or rent that is paid for a qualified retail location in the District.
Below you will find some of the basic requirements:
- What is the Small Retailer Property Tax Relief Credit?
The Small Retailer Property Tax Relief Credit ( SR Credit) is a refundable franchise tax credit that was enacted in the Fiscal Year 2019 Budget Support Act, effective October 30, 2018 (D.C. Law 22-0168) and is codified in D.C. Official Code §§ 47-1807.14 and 47-1808.14. The SR Credit is available to qualified businesses based on either the amount of real property taxes or a percentage of rent paid on a qualified retail location. The amount of the SR Credit is the lesser of $5,000 or (a) the real property taxes paid by the qualified business or (b) 10% of the rent or paid by the qualified business.
- What businesses are qualified to receive the SR Credit?
A qualified business can either be a corporation or an unincorporated business. The federal gross receipts of the qualified business cannot exceed $2.5 million per year. The qualified business must be engaged in making sales at retail, must have a sales tax account with the Office of Tax and Revenue (OTR) and must file District sales tax returns reflecting its retail sales. The qualified business also must be current on all District tax filings and payments for all tax types.
- What does it mean for my business to be “engaged in the business of making sales at retail”?
Your business is engaged in the business of making sales at retail if your sales are “retail sales” as defined under D.C. Official Code § 47-2001(n1). Those sales include, but are not limited to, sales or charges for following:
- All tangible personal property.
- Food, drink and alcoholic beverages.
- Digital goods.
- Hotel room or any other transient lodgings or accommodations.
- Admission to public events (except live performances of ballet, dance, or choral performances, concerts (instrumental and vocal), plays (with and without music), operas and readings and exhibitions of paintings, sculpture, photography, graphic and craft arts).
- Parking and motor vehicle storage services.
- Real property maintenance services.
- Landscaping services.
- Health club services.
- Tanning studio services.
- Data processing and information services.
- Newspapers or publications.
- Job seeking services.
- Armored car, private investigation and security services.
- Bottled water delivery services.
- The storage of household goods.
- Carpet and upholstery cleaning services.
- Car washing services.
- Bowling alley or billiard parlor services.
- What types of business are not eligible to claim the SR Credit?
Businesses that are not engaged in making sales at retail are not eligible to claim the SR Credit. Examples of businesses that are not engaged in making sales at retail are medical offices, law firms, accounting firms, insurance agents, tax preparation, engineering firms, architects, tattoo parlors, dry cleaners, consultants and other service providers.
- The gross receipts of my business are not subject to District sales tax. Can my business claim the SR Credit?
No. In order to qualify for the SR Credit, your business must be engaged in the business of making sales at retail and file District sales tax returns.
- What is a qualified retail location?
A qualified retail location can either be a building or part of building in the District of Columbia that is either leased or owned by the business. The qualified retail location must be classified as Class 2 Property and must have obtained a Certificate of Occupancy for commercial use and must be the primary place of the retail business of the qualified business. If the qualified retail location is rented by the qualified business, it also must be where the qualified business is engaged in selling tangible personal property or a service subject to District sales and use tax.
Learn more about the Small Retailer Property Tax Relief Credit by clicking here.