Companies engaging in business in San Francisco (the city) must register in the city and pay an annual registration fee. Additionally, businesses may be subject to San Francisco Gross Receipts, Homelessness Gross Receipts, Commercial Rents, and Payroll Expense taxes. The filing deadline for these taxes, regardless of a company’s fiscal year-end, is March 2, 2020.
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.
For a discussion of the Los Angeles City Business Tax, due on February 29, 2020, access PwC’s prior Insight here.
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 2019 tax year filing, the initial deadline for the payroll expense tax and gross receipts tax is March 2, 2020. A 60-day extension may be requested from the city.
The validity of the Homelessness Gross Receipts and Commercial Rents taxes are currently being challenged in court. Taxpayers subject to these taxes in 2019 should consider filing protective refund claims within one year of filing their returns pending the outcome of that litigation.