Voters in San Francisco approved Proposition M (measure), causing significant changes to San Francisco Gross Receipts Taxes (Gross Receipts). A notable change that the measure will make on Gross Receipts is the tax calculation. Currently, depending on the business classification, the Gross Receipts calculation is heavily based on payroll expenses, with a 100% payroll factor (utilizing payroll for employees physically located within the city) or a 50/50 payroll and sales factor. Thanks to the approved measure, the new Gross Receipts calculation with be at 75% sales and 25% payroll factors for most businesses.
Additionally, the measure will increase the San Francisco Gross Receipts Tax from between .053% – 1.008% to between 0.1% – 3.716%. However, the measure will also increase the Gross Receipts filing requirement threshold from two and a quarter million to five million in annual revenue, saving small businesses time and money. Lastly, another change to note is that the measure will also recategorize businesses, going from fourteen business types to only seven, making it easier for businesses to stay compliant. If a business operates under more than one category, a separate calculation of the gross receipts tax must be completed for each Business Activity Category.
San Francisco business owners should consider all the changes that the measure brings and assess the impact these will have on their business. You can read more about these and all the other changes approved on Proposition M directly on the San Francisco Government page . (Proposition M: Changes to Business Taxes, September 03, 2024).