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September 22, 2020

San Francisco gross-receipts tax updates

On September 9, 2020, the California Supreme Court declined to review the California Court of Appeal's decision in City and Cnty. of San Francisco v. All Persons Interested in re: Prop. C, which upheld the validity of a gross-receipts tax to fund homelessness services.1 As a result, this tax will likely not face any further court challenges.

The California Court of Appeal had held that San Francisco's Proposition C initiative, "Additional Business Taxes to Fund Homeless Services," was validly enacted through the people's initiative power because a majority (61%) of San Francisco voters who cast ballots in November 2018 approved it. In so holding, the appellate court determined that the supermajority vote requirements added to the California Constitution by Proposition 13 in 1978 (Art. XIII A, Section 4) and Proposition 218 in 1996 (Art. XIII C, Section 2) did not apply to the people's power to enact initiatives by majority vote.

In other news, the San Francisco Director of Elections has assigned labels to two propositions that will appear on the November 2020 ballot related to the San Francisco's gross-receipts tax on businesses operating in the city (see Tax Alert 2020-2107).

The "Business Tax Overhaul" proposal, which seeks to reform the city's current business tax regime, will appear on the ballot as Proposition F. This proposition will require a 50% +1 affirmative vote for approval and would be effective in calendar tax years starting in 2021.

The "Business Tax Based on Comparison of Top Executive's Pay to Employee's Pay," more commonly known as the CEO tax or the Overpaid Executive Pay Ratio Tax, will appear on the ballot as Proposition L. Like Proposition F, Proposition L will require a 50% +1 affirmative vote for approval and would be effective in calendar tax years starting in 2022. Proposition L would impose an additional progressively increasing tax rate on gross receipts for city taxpayers based upon a ratio of the amount paid to the taxpayer's highest paid employee compared to the median amount paid to its employees.


Contact Information
For additional information concerning this Alert, please contact:
State and Local Taxation Group
   • Allan Holzer (
   • Tyler Caldwell (
   • Charles Horn (


1 No. A158645 (Cal. Ct. App., 1st App. Dist., Div. 4, June 30, 2020), pet. for rev. den., No. S263753 (Cal. S.Ct. Sept. 9, 2020).