Originally posted to Unfamiliar Terrain
San Francisco voters will confront a number of tax measures on the November ballot. These measures are summarized below.
San Francisco imposes a number of taxes under the Business and Tax Regulations Code (the “SF Tax Code”) on businesses engaged in business within the City. Three general taxes—so called because the revenues from which go to the City’s General Fund—imposed by the City are (1) the Business Registration Fee, (2) the Payroll Expense Tax, and (3) the Gross Receipts Tax. Currently, the SF Tax Code includes a small business exemption from the Gross Receipts Tax for businesses with less than $1 million in gross receipts attributable to the City.
The City also imposes special taxes on certain businesses, the revenues from which are dedicated to specific purposes. Two such special taxes are (1) the Early Care and Education Commercial Rents Tax and (2) the Homelessness Gross Receipts Tax.
Business Registration Fee. Effective beginning in the 2021-2022 fiscal year, Proposition F would amend the SF Tax Code to reduce the annual Business Registration Fee for businesses with $1 million or less in San Francisco gross receipts. The amendment would also provide for an increase in the Business Registration Fee for businesses benefiting from the increased ceiling for the small business exemption from the Gross Receipts Tax (discussed below). For most businesses with over $1 million to $1.5 million in gross receipts attributable to the City, the increase would be $230 to $245, depending on the activities of the subject business. For most businesses with over $1.5 million to $2 million in gross receipts attributable to the City, the increase would be $435 to $460, depending on the activities of the business.
Payroll Expense Tax. Proposition F would repeal the Payroll Expense Tax, effective as of January 2021.
Gross Receipts Tax. Under Article 12-A-1 of the SF Tax Code (the provisions governing the Gross Receipts Tax), Proposition F would make the following changes:
San Francisco currently imposes a transfer tax on each commercial and residential property transferred, which includes transactions involving leases with a term of 35 years or more and certain transfers involving legal entities that own real property in San Francisco. Under the current provisions of San Francisco’s Real Property Transfer Tax Ordinance (the “Transfer Tax”), the Transfer Tax rate is variable, depending on the purchase price or the fair market value of the property transferred.
Currently, the Transfer Tax imposed on applicable transfers of property with a purchase price or value between $10 million and $25 million is approximately 2.75 percent. The current Transfer Tax rate for transfers involving property with a purchase price or value equal to or in excess of $25 million is approximately 3 percent. Proposition I would amend the SF Tax Code to double the Transfer Tax applicable to transfers within these two tiers of consideration or value. For transfers within the $10 million to $25 million tier, Proposition I would increase the Transfer Tax to $27.50 per $500 of value or consideration, or 5.5 percent. For transfers in the $25 million or above range, the measure would increase the Transfer Tax to $30.00 per $500, or 6 percent.
In June 2018, voters passed a measure very similar to Proposition J, but the funding to schools and education that the June 2018 measure proposed to provide has been indefinitely postponed due to pending litigation. Proposition J would change the City’s existing Parcel Tax from the current rate of $320 per parcel to $288 per parcel and make the revenues generated from the tax more specifically targeted toward educators’ compensation and educational improvements.
 The incremental increases in the Gross Receipts Tax rates vary across business activities, but the increased rate each year remains steady within each category of business activity. For example, businesses within the category of Real Estate, Rental and Leasing Services would be subject to an increase of .014 percent to .015 percent each year.
 For example, some businesses within the Retail Trade business activity category would initially experience a reduction in Gross Receipts Tax rate by .022 percent.
 The Transfer Tax for this value tier imposes a tax of $13.75 for “each $500 or fractional part thereof” for the entire value or consideration, so the actual tax paid may not be exactly 2.75 percent of the value or consideration.