Companies engaging in business in San Francisco (the city) are required to register in the city and pay an annual registration fee. Additionally, businesses may be subject to San Francisco payroll expense and gross receipts taxes. The filing deadline for these taxes, regardless of a company’s fiscal year-end, is February 28, 2019.
Due to the passage of Proposition D by voters on the November 2018 ballot, companies that previously did not have nexus now may be subject to these taxes due to nexus standards that include maintaining a fixed place of business within the city, soliciting business in the city, or performing any work within the city for all or part of any seven days during the calendar year and, possibly, the new $500,000 nexus threshold enacted as part of Proposition D. Except in certain limited circumstances, the tax filing must be made online, through the city’s website.
Starting in tax year 2019, companies also may become subject to two new San Francisco taxes on their gross receipts or commercial rental income.
The rules surrounding the San Francisco payroll expense and gross receipts taxes, as well as its new economic nexus standard, are unique and complex. Careful consideration should be given as to whether a filing obligation exists and how payroll expenses and gross receipts should be apportioned to the city. Additionally, when flow-through entities potentially are includible in a corporate group return, complexities arise. For the 2018 tax year filing, the initial deadline for the payroll expense tax and gross receipts tax is February 28, 2019. A 60-day extension may be requested from the city.