San Francisco voters recently approved Proposition M, bringing about significant changes to the city’s Business Tax scheme effective January 1, 2025. The proposition was primarily backed by a coalition of large businesses, including Google, Airbnb, Meta, and Uber, all of which stand to see significant tax savings with the Proposition’s passage this past November. The city hopes that the changes will lure in other large businesses while also providing relief to small businesses. The Proposition received widespread support, with 69% of voters approving its passage.
Key changes going into effect are as follows:
- Gross receipts tax small business exemption increased from $2.25 million to $5.0 million;
- Number of business activity categories for gross receipts tax and homelessness gross receipts tax simplified from 14 categories to 7 categories;
- Shifts calculation of gross receipts away from payroll expenses and towards sales;
- Creates new tax credits for businesses paying stadium operator admission taxes, grocery retailers, and new lessees in qualifying buildings;
- Adjusts tax rates for gross receipts tax, homelessness gross receipts tax, overpaid executive gross receipts tax, and the administrative office tax, as well as adjusting business registration fees, as indicated in the tables below.
San Francisco Business Tax Rates and Fees
| Tax or Fee | Current Law | Proposition M |
| Gross Receipts Tax | .053–1.008% | .1–3.716% |
| Homelessness Gross Receipts Tax | .175–.69% | .162–1.64% |
| Overpaid Executive Gross Receipts Tax | .1–.6% | .02–.129% |
| Business Registration Fee | $47–$45,150 | $55–$60,000 |
| Administrative Office Tax | 3.04–5.44% | 2.97–3.694% |
| Administrative Office Registration Fee | $19,682–$45,928 | $500–$35,000 |
The new rates will go into effect over the next several years. As a result, the Office of the Controller of the City and County of San Francisco expects revenue to decrease by approximately $40 million annually over the first three years that the new law is in effect. Beginning in 2027, revenue is expected to increase by approximately $50 million per year. By fiscal year 2029-30, positive revenue from the rate increases will offset the reduced revenue from the first three years, making the total amount of business tax revenue over that period comparable to current law. After that, revenue will continue to increase annually.
Landon Julius, principal in charge of local taxes at Ryan, believes that “with the recent changes and the increase in rates and fees, it is more important than ever for taxpayers to take a deeper dive into their current policies and procedures regarding taxes within San Francisco and determine if there are any tax planning strategies that should be deployed.”
If you have questions about how these changes will impact your tax obligations or wish to engage in tax planning, Ryan local tax experts are eager to assist you.
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
AUTHORS:
Mark L. Nachbar
Principal
Ryan
630.515.0477
mark.nachbar@ryan.com
Jonathan Geiger
Manager
Ryan
425.440.2333
jonathan.geiger@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.