Proposition Q Information

Proposition Q Information

Proposition Q was approved by San Francisco voters on November 4, 2008, and took effect on January 1, 2009. (It does not apply to the 2008 tax year or prior years.)

Proposition Q updated the Payroll Expense Tax Ordinance (Article 12-A of the San Francisco Business & Tax Regulations Code) in two main ways (reflected in the amendment of Sections 902.1 and 905-A and the addition of Section 902.2):

Proposition Q allows more businesses to qualify for the Small Business Exemption (SBE) Proposition Q raised the threshold level at which a business qualifies for San Francisco’s Small Business Exemption (SBE). Starting with calendar year 2009, businesses whose total taxable San Francisco Payroll Expense for the year is $250,000.00 or less (as opposed to the previous level of $166,666.99) qualify for the SBE, meaning that they are exempt from paying the 1.5% Payroll Expense Tax (though they are still required to report their payroll expense by the annual deadline in order to avoid penalties and fees for late or non-filing).

Proposition Q extends the payroll expense tax to owners of partnerships, LLPs, LLCs, and S-Corporations
In addition to raising the exemption threshold for small businesses, Proposition Q extends the applicability of payroll expense tax to include compensation for personal services paid to owners of partnerships, LLPs, LLCs, and S-Corporations. Businesses must be certain to include this type of compensation on their 2009 Payroll Expense Tax Filing. For more detailed information, refer to the link to view the full text of Proposition Q.