The Gross Receipts Tax and Business Registration Fees Ordinance (2012 Proposition E) was approved by San Francisco voters on November 6, 2012 and implemented in 2014. Although 2014 has come and gone, there still seems to be some confusion among my clients about the gross receipts tax. So I wanted to take the opportunity to clarify some points before the 2015 tax season.
Most of my clients will not have to pay the Gross Receipts Tax as there is a small business exemption for businesses with no more than $1 million in gross receipts. Since a lessor of residential real estate is treated as a separate person with respect to each individual building, this means you are exempt if each of your buildings generates less than $1 million in gross receipts.
However, if you have a building with four or more units, you will still be required to obtain a business registration certificate. Buildings with less than four units are exempt from this requirement.
Again, each building is treated as a separate entity, so if you own two three-unit buildings, you do not need to get a business registration certificate because both buildings have less than four units. However, if you owed one two-unit building and an eight-unit building, you would be required to get a business registration certificate because the eight-unit building has more than four units.
The amount of the fee is based on your payroll expense (per building) for the preceding year.
Since most of my clients do not have any pay rolled employees, the fee will be $75 for the city and $1 for the state for a total of $76.00. This will be adjusted each year for inflation. However, if you have a payroll for the proceeding year of over $66.67 your fee will be based on a sliding schedule. You can view the schedule here: https://sftreasurer.org/business-registration#2
To summarize:
If you have buildings of less than four units, you do not need a business registration certificate.
If you have buildings of more than three units, but gross receipts of less than $1,000,000, you are required to get a business registration certificate, but do not have to pay a gross receipts tax. You still will need to fill out the required paperwork which you should receive in the mail from the city to show them that you are exempt from the tax.
For anyone with a payroll expense of over $66.67 or gross receipts of over $1,000,000 per property, I encourage them to seek the advice of a trained tax professional for assistance in filling out the required paperwork and paying the appropriate tax rate.
You should automatically receive the required paperwork from the county in the mail. If you do not, please contact the San Francisco Treasurer & Tax Collector at (415) 701-2311.
I wish you and yours a happy holiday season!