Gross Receipts Tax (GR)

For 2023, persons other than lessors of residential real estate are required to file a return if in the tax year  you were engaged in business in San Francisco were not otherwise exempt and you had more than $2,190,000  in combined taxable San Francisco gross receipts.

Exemption provisions are listed in Section 954. The most common exemption is for certain non-profit organizations exempt from income tax.  

Gross receipts means the total amounts received or accrued by a person from whatever source derived, including, but not limited to, amounts derived from sales, services, dealings in property, interest, rent, royalties, dividends, licensing fees, other fees, commissions and distributed amounts from other business entities. Gross receipts include but is not limited to all amounts that constitute gross income for federal income tax purposes. Gross receipts, including advance payments, shall be included in a taxpayer's gross receipts at the time such receipts are recognized as gross income for federal income tax reporting purposes.

See examples of how the Gross Receipts Tax is applied. Gross Receipts Tax rates vary depending on a business' gross receipts and business activity. Use your San Francisco Business Activity, and the SF Gross Receipts Tax Computation Worksheet to determine your San Francisco Gross Receipts Tax obligation. 

2024 Rates

Taxpayers deriving gross receipts from business activities both within and outside San Francisco must generally allocate and/or apportion gross receipts to San Francisco using rules set forth in Business and Tax Regulations Code. This table indicates the applicable apportionment and/or allocation methodology for each business activity. The Code is based on the 2012 NAICS classifications. For more information on the 2012 NAICS codes, go to www.census.gov/eos/www/naics.

Estimated business tax payments are due April 30th, July 31st and October 31st. Residential Landlords with less than $2,190,000 in gross receipts are exempt from estimated quarterly business tax payments and will not receive an estimated business tax payment notice. 2024 estimated business tax amounts due will be payable on the business tax payment portal after March 1, 2024 for businesses that file their 2023 Annual Business Tax Return on or before February 29, 2024.  For business that file their 2023 Annual Business Tax Return after March 1, 2024, estimated business tax amounts due will be payable on the business tax payment portal 48 hours after the 2023 Annual Business Tax Return is submitted. Learn more about quarterly estimated payments. 

Proposition F was approved by San Francisco voters on November 2, 2020 and became effective January 1, 2021. Proposition F completed the City’s transition from a Payroll Expense Tax to a Gross Receipts Tax, a decision initially approved by the voters in 2012 (Proposition E). Proposition F fully repealed the Payroll Expense Tax and increased the Gross Receipts Tax rates across most industries while providing relief to certain industries and small businesses. 

Proposition E was approved by San Francisco voters on November 6, 2012. Voters approved a shift from the payroll expense tax to one based on gross receipts. The change was intended to promote economic growth, greater revenue stability, and better equity in the business tax system. The new gross receipts tax system introduced a progressive rate structure, and a larger, progressive business registration fee. 

Until the passage of Proposition E, San Francisco levied a 1.5% tax on the payroll expense of larger businesses in the city. San Francisco was the only city in California to base its business tax on payroll expense. Under the old system, businesses with more than $250,000 in payroll expense paid a flat 1.5% rate, and business registration fee revenue was comparatively small.

All persons and their related entities must file a Gross Receipts Tax return on a combined basis, reflecting the gross receipts, and other tax attributes (e.g., credits , payroll for apportionment, etc.) of all related entities.  A person is a related entity to a taxpayer if:

1.  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
2. 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 for only a portion of the tax year, include that entity in your combined group’s Return for the portion of the tax year that it was a member. For the portion of the tax year 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.

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 2021 that you were a separate entity engaged in business in San Francisco.

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.  The form for this purpose is the Authorization To Be Included In Combined Filings (Power of Attorney) - Form POA-2.  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 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 and business registration requirements.

For purposes of the Gross Receipts Tax and Business Registration Fee, a lessor of residential real estate is treated as a separate person with respect to each individual building in which it leases residential real estate units.

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Business and Tax Regulations Code Section 954 excludes from the definition of “gross receipts” any “receipts from business activities if, and only so long as and to the extent that, the City is prohibited from taxing such receipts under the Constitution or laws of the United States or under the Constitution or laws of the State of California.” Thus, to the extent that federal or state law prohibits the City from taxing certain of your gross receipts, you should exclude such receipts from your Gross Receipts Tax base and from the calculation of your Business Registration Fee. However, you are still subject to the Gross Receipts Tax and Business Registration Fee on your gross receipts that are not exempted from local taxation under federal or state law.

The Board of Supervisors passed legislation allowing certain office-based businesses to claim an annual tax credit against their Gross Receipts Tax liability.  Businesses can begin to claim the tax credit in the 2024 Annual Business Tax Returns filing, which will be filed in 2025. 

The gross receipts tax and business registration fee applies to businesses located in the Presidio (other than those engaged in business in the City as an administrative office, as defined in Business and Tax Regulations Code section 953.8(b) in the same manner as it applies to other businesses operating in San Francisco.

While owned by the City and County of San Francisco, the Airport property is physically located within unincorporated San Mateo County and other cities. Most of the Airport is located in unincorporated San Mateo County, but portions are within the boundaries of surrounding communities, including South San Francisco, San Bruno, Millbrae and Burlingame.

To the extent a Homeowners Association (HOA) is not engaged in business in San Francisco, it is not subject to business registration fees or the Gross Receipts Tax. An HOA will not be considered to be engaging in business in San Francisco if its activities are limited to collecting dues or other remittances from owners to be used for the benefit of those owners and expending those dues and remittances for the benefit of those owners. To the extent the HOA is otherwise engaged in business in San Francisco, the dues or other remittances received from owners for the benefit of those owners will not be considered gross receipts from business activities that are subject to the Gross Receipts Tax.

To the extent that your business is processing a credit card or debit card transaction between third parties, you should not include the full amount of the underlying transaction in your gross receipts, but may owe tax on a lesser amount depending on your specific facts as described in Article 12-A-1 of the Business and Tax Regulations Code.

As noted in section 40116(b) of title 49 of the United States Code (“Section 40016(b)”), the Gross Receipts Tax in Article 12-A-1 of the San Francisco Business and Tax Regulations Code shall not apply to “the gross receipts from that air commerce or transportation” as that phrase is used in Section 40016(b). However, the gross receipts of an airline or other person engaged in the business of air commerce or transportation that are derived from anything other than the specific activities subject to the exemption in Section 40016(b) remain taxable unless otherwise exempt.