Philadelphia's free trash-collection service for small businesses will come to an abrupt end July 1, when merchants will be forced to pay $500 a year for the privilege or else hire private garbage-haulers.

Letters notifying business owners of the fee began arriving this week, taking many by surprise.

"It came like a slap to the face. Businesses are scratching and clawing to stay open, and you're putting another $500 on top of that?" said Rita deVecchis, owner of a South Street framing shop.

Although the fee was mentioned in Mayor Nutter's March budget address and passed by City Council as part of last month's budget accord, the $500 fee was largely overshadowed by the budget debate over property and sales taxes.

The fee will be levied on about 15,000 small businesses, and could raise more than $7 million a year for the city, said Deputy Streets Commissioner Carlton Williams.

Any commercial building - including first-floor shops topped by apartments - now eligible for weekly city trash collection will have to pay the fee. The city said business owners would likely receive their first bills in August.

In theory, the $500 simply reimburses the city for the labor and landfill costs associated with hauling away small-business garbage, Williams said.

Residential-property owners with less than six units will not be subject to the new fee. Neither will larger commercial properties, as they are already required to use private trash collectors.

"We understand that small-business owners are very concerned. It's unfortunate that this financial crisis has forced us to look at all our costs," Williams said. "The fact is, merchants put out an average of 100 pounds of trash per week, where residents put out an average of 40 pounds."

Perhaps so, merchants said, but doing business in Philadelphia is already an expensive proposition. Consider, they said, the business-privilege tax, the use-and-occupancy tax, a sales tax that may soon increase to 8 percent, and other assorted fees.

Free trash collection for merchants is all but unheard of in other cities. It was one of Philadelphia's rare small-business perks, they said.

"Everybody feels defeated. There are a lot of empty storefronts already, and this just chases more people out. It sends the wrong message," said George Pasquarella, owner of the Shoe Barrel on the 1800 block of East Passyunk Avenue.

The uniform nature of the new fee worries Rick Snyderman, who owns the Snyderman Gallery on the 300 block of Cherry Street. "I don't know that a $500 fee will put all that many people out of business, but it is a big chunk of money for a lot of mom-and-pop stores," said Snyderman, who said he would like the city to consider a more progressive fee structure, perhaps charging less for those businesses with smaller bottom lines.

Deputy Streets Commissioner Williams said it was not practical to charge different businesses different rates.

Although the $500 fee will no doubt pinch many business owners, the city believes the figure is far less than what private trash collectors would charge for the same service. The budget assumes that virtually all of the 15,000 business owners will pay the fee instead of hiring private haulers.

Contact staff writer Patrick Kerkstra at 215-854-2827 or pkerkstra@phillynews.com.