Passed by San Francisco voters in November 2012, Proposition E imposed a new gross receipts tax on persons and companies engaging in business within the city of San Francisco. During the five-year period beginning January 1, 2014, the new tax is phasing in while the city's existing tax (based on payroll) is phasing out. Businesses will pay the payroll tax for the last time in 2017 and begin paying only the gross receipts tax in its place in 2018.
Due Dates for Quarterly Installment Payments
The due dates for the City of San Francisco Payroll Expense Tax and Gross Receipts Tax statement are the last days in April, July, and October, respectively. Interest and penalty (if any) will be levied by the city of San Francisco if the statement and payment aren’t submitted by midnight on the due date. Businesses with taxable payroll expenses under $260,000 and taxable gross receipts under $1,000,000 for the year aren’t required to make quarterly installments for current calendar year gross receipts and payroll expense tax.
Who Is Required to Pay?
The legislation contains provisions for apportioning receipts to San Francisco as well as new rules relating to combined groups and international businesses. Though activities other than those listed here could also trigger a filing requirement, a person is considered to be engaging in business within San Francisco if that person (or any employee, representative, or agent of that person) performs any of the following in San Francisco:
- Maintains a fixed place of business (including any residence from which business is conducted)
- Owns or rents any real or personal property for a business purpose
- Maintains tangible personal property for sale in the ordinary course of business
- Employs or loans capital on property
- Solicits business for all or part of any seven days during a tax year
- Performs any work or renders any services for all or part of any seven days during a tax year
- Utilizes streets for business purposes for all or part of any seven days during the tax year
Qualifying activities also include exercising any corporate or franchise powers or liquidating any business within the city. The applicable gross receipts tax rate depends on the business activity associated with the gross receipts earned. See this Insight for details.
Deadlines and Details
Registration Fees
The due date for registration and associated annual fees—a one-time fee for doing business in San Francisco in the year ahead—for the upcoming fiscal year (which begins on July 1) is May 31. Here are a few things to keep in mind as you prepare to register:
- Registration fees range from $90 to $35,000.
- Registration fees will be determined according to a taxpayer’s San Francisco gross receipts for the immediately preceding tax year.
- Business taxpayers with multiple affiliated corporate entities will need to register as either a water’s-edge or worldwide combined group, depending on how the group files its California corporate income tax return.
Tax Statement Fee
The remaining balance due for the previous year is remitted with the annual statement, due on the last day of February of the current year. Businesses with taxable payroll expense of $150,000 or more, or taxable gross receipts of $500,000 or more in a given tax year are required to file the annual statement even if no tax is due. A 60-day extension may also be available to you.
We're Here to Help
For more information about the San Francisco gross receipts tax or for assistance complying with and navigating its registration, filing, and payment requirements, contact your Moss Adams tax professional or email statetax@mossadams.com.