All persons and their related entities must file Gross Receipts Tax and Payroll Expense Tax returns on a combined basis, reflecting the gross receipts, payroll expense, and other tax attributes (e.g., credits and exclusions, payroll for apportionment, etc.) of all related entities. A person is a related entity to a taxpayer if:
- That person and the taxpayer are permitted or required to have their income reflected on the same combined report for California Franchise or Income Tax purposes; or
- That person and one or more other persons (including the taxpayer) derive gross receipts solely from sources within California and their business activities are such that, if conducted both within and outside California, a combined report would be required for California Franchise or Income Tax purposes.
If an entity was a member of your combined group (taxpayer and all of its related entities) for only a portion of 2016, include that entity in your combined group’s Return for the portion of 2016 that it was a member. For the portion of 2016 that the entity was not a part of your combined group, that entity will have to file separately or as part of another combined group. Review the instructions for Non-Exempt Persons That May Not File Online and Must File By Mail or In Person above to verify if you must file on paper.
If you are currently a non-filing member of a combined group but were a separate entity for a portion of the year, you must file as a separate entity for that portion of 2016 that you were a separate entity engaged in business in San Francisco. Review the instructions for Non-Exempt Persons That May Not File Online and Must File By Mail or In Person above to verify if you must file on paper.
If your combined group for California Franchise or Income Tax purposes includes an entity that is exempt from the Payroll Expense Tax and/or Gross Receipts Tax (e.g., banks or financial corporations exempt from local taxation under Article XIII, Section 27 of the California Constitution and Revenue and Taxation Code section 23182), you should exclude the gross receipts, payroll expense, and other tax attributes of this exempt entity from your combined Return.
To file a Return on behalf of a combined group, you must have authorization to file on behalf of each taxpayer in the combined group. A form for this purpose, Authorization To Be Included In Combined Filings (Power of Attorney) - Form POA-2, is available on the website of the Office of the Treasurer and Tax Collector at http://sftreasurer.org/biz_additional. You do not need to submit this form with your Return.
NOTE: Pursuant to Tax Collector Regulation 2014-2, a single-member entity (including a single-member limited liability company) treated as a disregarded entity for federal income tax purposes will be disregarded for purposes of the Gross Receipts Tax, Payroll Expense Tax, and business registration requirements. Each such entity will be treated as a sole proprietorship, branch, or division of its owner. The owner of the disregarded entity will be the registrant and taxpayer for purposes of the Gross Receipts Tax, Payroll Expense Tax, and business registration requirements.
Combined Groups of Related Entities
Most combined groups of related entities may file online. In addition, the procedure for declaring that you are filing on behalf of a combined group of related entities has changed, and can be completed with the Annual Return, whether online or on paper.
You may not file your Return online and must file a paper Return if:
- You are filing on behalf of a combined group where one related entity in the combined group is filing for a tax credit, exclusion, or limit (such as the Enterprise Zone Tax Credit) and 100% of the combined group's San Francisco gross receipts are NOT attributable to the filing entity filing for the tax credit, exclusion, or limit.
- You are filing on behalf of a combined group where at least one of the related entities in the combined group was: only partially in the combined group or only was included in the combined group for part of the year; AND you are reporting payroll expense greater than zero but less than or equal to $280,000 for that entity; AND the entity’s payroll expense for portion of the entity or tax year you are filing for is not proportionally representative of the entire tax year. Under this scenario the online return may incorrectly apply the small business enterprise exemption.
|Need further assistance? Submit a service request and a representative will contact you on the SAME DAY of the request if submitted prior to 7pm. Requests received after 7pm will receive a response by the next business day.