21 September 2016 San Francisco Payroll Expense Tax is decreased for 2016 The Office of the Controller, City and County of San Francisco announced that for tax year 2016 the Payroll Expense Tax Rate is 0.829%, down from 1.162% for 2015. (City and County of San Francisco, Treasury and Tax Collector website) San Francisco is the only California locality that imposes a tax on payroll. The tax applies to payroll expenses attributable to services provided within the city limits. Payroll expense is defined as compensation paid to individuals including salaries, wages, bonuses, commissions, or property issued or transferred in exchange for the performance of services (including but not limited to stock options). Under Proposition Q, enacted in 2008, the term was expanded to include all pass-through compensation for services paid to, on behalf of, or for the benefit of owners of a pass through entity. (San Francisco Bus. & Tax Reg. Code Section 902.1(d)) The term "pass-through entity" generally includes a trust, partnership, corporation described in Subchapter S of the Internal Revenue Code , limited liability company, limited liability partnership, professional corporation, and other person or entity (other than a disregarded entity for federal income tax purposes). (San Francisco Bus. & Tax Reg. Code Section 902.21(d)) A taxpayer's first, second, and third quarter installment payments of payroll expense tax for tax year 2016 was computed by multiplying the taxpayer's taxable payroll expense for each quarter by 0.75%. The first, second, and third quarter 2016 installments are considered a credit against the taxpayer's total payroll expense tax for 2016. The fourth quarter 2016 installment, due by February 28, 2017, will be in an amount equal to the taxpayer's total payroll expense tax liability for the tax year at the 0.829% rate, less the amount of the payroll expense tax paid for the first, second, and third quarter installments. (San Francisco Bus. & Tax Reg. Code Section 6.9-3) Beginning January 1, 2014, a Gross Receipts Tax (GRT) is phased-in over five years and the Payroll Expense Tax is phased out in proportion to the GRT phase-in. According to the GRT website, most businesses with gross receipts of not more than $1 million annually are exempt from the GRT, but are required to pay a business registration fee. The GRT rates vary depending on the type of business and annual gross receipts from business activity in the City. After 2018, applicable businesses will be liable for 100% of the GRT, which will generally be imposed on "gross receipts" of "persons" engaged in business in the City. During the five-year phase-in period, taxpayers are expected to pay both the Payroll Expense Tax and GRT. A motion introduced on June 29, 2016 by San Francisco Supervisors Eric Mar, Aaron Peskin and David Campos would have placed an ordinance on the November 8, 2016 ballot calling for an amendment to the Business and Tax Regulations Code and Administrative Code to reduce the business registration fee on taxpayers with $1 million or less in gross receipts and to impose a new 1.5% special payroll expense tax rate on technology companies engaged in business in the City to fund affordable housing and homeless services. The proposed "tech tax" failed to pass the budget and finance committee of the board of San Francisco's supervisors on August 1, 2016, and as a result will not appear on the ballot.
Document ID: 2016-1595 | ||||||||||||||||||||
