The City and County of San Francisco has postponed for two years—until January 1, 2025—an increase to the gross receipts tax (“SFGRT”) rate that was set to go into effect on January 1, 2023. The Board of Supervisors approved amendments to its Business and Tax Regulations Code on July 28, 2023, without which would have increased the tax rate on business activities of retail trade, certain services, manufacturing, food services, accommodations, and arts, entertainment, and recreation (Article 12-A-1 §§ 953.1, 953.2, and 953.3).
These amendments also provide an annual tax credit for up to three years for businesses that open a physical location in certain zip codes in the city during 2023 through 2027. The affected zip codes include 94102, 94103, 94104, 94105, 94107, 94108, 94109, 94111, 94133, and 94158. The tax credit is available to businesses that did not have a physical location in the city for at least three years prior to the opening. The credit must be claimed on an original gross receipts tax return filed with the tax collector. The maximum annual tax credit is $1 million, calculated as follows:
- For a person or “combined group” not engaged in business within the city as an administrative office, as defined, 0.45% of the person’s or combined group’s taxable gross receipts during the tax year from one or more of the business activities of information, administrative and support services, financial services, insurance, and professional, scientific, and technical services, as defined, without regard to any application of Article 12-A-1 §953.9, relating to persons or combined groups engaged in multiple business activities; or
- For a person or “combined group” engaged in business within the city as an administrative office, as defined, 0.7% of the person’s or combined group’s taxable payroll expense during the tax year (Article 12-A-1 § 960.1 [new]).
For purposes of the SFGRT, “combined group” generally includes any taxpayer required or allowed by the California Franchise Tax Board to file a combined report (Article 12-A-1 §§ 952.5 and 956.3).
If you own or operate a business in San Francisco, contact a Ryan tax professional to confirm if you qualify for the new tax credit or to review how the SFGRT applies to your activities.
TECHNICAL INFORMATION CONTACTS:
Landon Julius
Principal
Ryan
913.338.2005
landon.julius@ryan.com
Gina Rodriquez
Principal
Ryan
916.414.0400
gina.rodriquez@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.