Real Estate Alert: San Francisco Gross Receipts Tax

In an attempt to promote hiring in San Francisco, in November 2012 San Francisco voters elected to implement a new gross receipts tax (“GRT”).  Beginning January 1, 2014, San Francisco will phase in the GRT on all business activities attributable to San Francisco, and will phase out, over a five-year period, San Francisco’s current 1.5% tax on payroll expense.  This means that for the next four years, businesses with gross receipts attributable to San Francisco must calculate their liability under both the gross receipts tax and the payroll tax and report and pay a percentage of each tax. “Gross Receipts” is broadly defined to include total amounts received or accrued from any source, such as sales, services, dealings in property, interest, rent, fees, and commissions.  Thus, the GRT will be applicable to receipts from rentals of San Francisco real estate and payments for services that are part of a lease, as well as sales of San Francisco real estate, but only if transfer tax is not paid on the sale.

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