San Francisco County Municipal Code Art. 12-A 1

GROSS RECEIPTS TAX ORDINANCE Sec. 951. Short Title. Sec. 952. Definitions. Sec. 952.1. Advance Payment. Sec. 952.2. Cash Discount. Sec. 952.3. Gross Receipts. Sec. 952.4. NAICS Code. Sec. 952.5. Related Entity. Sec. 952.6. Sale and Sell. Sec. 953. Imposition of Gross Receipts Tax. Sec. 953.1. Gross Receipts Tax Applicable to Retail Trade; Wholesale Trade; and Certain Services. Sec. 953.2. Gross Receipts Tax Applicable to Manufacturing; Transportation and Warehousing; Information; Biotechnology; Clean Technology; and Food Services. Sec. 953.3. Gross Receipts Tax Applicable to Accommodations; Utilities; and Arts, Entertainment and Recreation. Sec. 953.4. Gross Receipts Tax Applicable to Private Education and Health Services; Administrative and Support Services; and Miscellaneous Business Activities. Sec. 953.5. Gross Receipts Tax Applicable to Construction. Sec. 953.6. Gross Receipts Tax Applicable to Financial Services; Insurance; and Professional, Scientific and Technical Services. Sec. 953.7. Gross Receipts Tax Applicable to Real Estate and Rental and Leasing Services. Sec. 953.8. Tax on Administrative Office Business Activities. Sec. 953.9. Persons or Combined Groups Engaged in Multiple Business Activities. Sec. 953.20. Gross Receipts Tax Applicable to Category 1 Business Activities. Sec. 953.21. Gross Receipts Tax Applicable to Category 2 Business Activities. Sec. 953.22. Gross Receipts Tax Applicable to Category 3 Business Activities. Sec. 953.23. Gross Receipts Tax Applicable to Category 4 Business Activities. Sec. 953.24. Gross Receipts Tax Applicable to Category 5 Business Activities.

Sec. 953.25. Gross Receipts Tax Applicable to Category 6 Business Activities. Sec. 953.26. Gross Receipts Tax Applicable to Category 7 Business Activities. Sec. 953.27. Persons or Combined Groups Engaged in Multiple Business Activity Categories. Sec. 954. Exemptions and Exclusions. Sec. 954.1. Small Business Exemption. Sec. 955. Persons Deriving No Gross Receipts from Business Activities Outside the City. Sec. 956. Allocation and Apportionment for All Persons Deriving Gross Receipts from Business Activities Both Within and Outside the City. Sec. 956.1. Allocation of Receipts from Real, Personal, Tangible and Intangible Property. Sec. 956.2. Apportionment of Receipts Based on Payroll. Sec. 956.3. Combined Returns. Sec. 957. Tax Collector Authorized to Determine Gross Receipts. Sec. 958. Administration of the Gross Receipts Tax Ordinance. Sec. 959. Election to Designate Tax to Small Business Rezoning Construction Relief Fund. Sec. 960. The "Payroll Expense Tax Exclusion" Credit. Sec. 960.1. Tax Credit for Opening a Physical Location in Designated Areas in the City. Sec. 960.2. Tax Credit for Stadium Operator Admission Taxes Paid. Sec. 960.3. Tax Credit for Supermarkets and Other Grocery Retailers. Sec. 960.4. Credit for First Lessees in Qualified Buildings. Sec. 962. Amendment of Ordinance. Sec. 963. Effect of State and Federal Authorization. Sec. 964. Severability. Sec. 965. Savings Clause. Sec. 966. Controller Reports.

(Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; repealed by Proposition M, 11/5/2024, Eff. 12/20/2024)

This Article shall be known as the "Gross Receipts Tax Ordinance" and the tax this Article imposes shall be known as the "Gross Receipts Tax." (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

Except where the context otherwise requires, the terms used in this Article 12-A-1 shall have the meanings given to them in Sections 6.2-1 et seq. of Article 6. For purposes of this Article 12-A-1, “pass-through entity” includes a trust, partnership, corporation described in Subchapter S of the Internal Revenue Code of 1986, as amended, limited liability company, limited liability partnership, professional corporation, and any other person or entity (other than a disregarded entity for federal income tax purposes) which is not subject to the income tax imposed by Subtitle A, Chapter 1 of the Internal Revenue Code of 1986, as amended, or which is allowed a deduction in computing such tax for distributions to the owners or beneficiaries of such person or entity. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; amended by Proposition F, 11/3/2020, Eff. 12/29/2020, Oper. 1/1/2021)

"Advance payment" means a nonrefundable payment for the purchase of property or services to be delivered or performed in the future. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

"Cash discount" means a deduction from the invoice price of goods or charge for services which is allowed if the bill is paid on or before a specified date, or paid in cash rather than by credit card. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

“NAICS code” means the numerical classification for business activities established in the North American Industry Classification System used by federal governmental agencies to classify business establishments. References in Sections 953.1 through 953.7 of this Article 12-A-1 to particular numerical NAICS codes are intended to apply the definitions and descriptions adopted in that system as of December 15, 2012. References in Sections 953.20 through 953.26, 960.1, and 960.3 of this Article to particular numerical NAICS codes are intended to apply the definitions and descriptions adopted in that system as of January 1, 2022. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; amended by Proposition M, 11/5/2024, Eff. 12/20/2024)

A person is a "related entity" to a taxpayer if that person and the taxpayer are permitted or required by the California Franchise Tax Board under Section 25102 et seq. of the California Revenue and Taxation Code, or any successor, to have their income reflected on the same combined report. For purposes of this Article, if two or more persons derive gross receipts solely from sources within California, and their business activities are such that, if conducted both within and outside California, a combined report would be required under the California Revenue and Taxation Code, or any successor, then those persons are related entities regardless of whether they file a combined report under the California Revenue and Taxation Code, or successor. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

"Sale" and "sell" mean the making of any transfer of title, in any manner or by any means whatsoever, to property for a price, and to the serving, supplying or furnishing, for a price, of any property fabricated or made at the special order of consumers who do or who do not furnish directly or indirectly the specifications or materials therefor. A transaction whereby the possession of property is transferred but the seller retains the title as a security for the payment of the price shall likewise be deemed a sale. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

(Added by Proposition F, 11/3/2020, Eff. 12/29/2020, Oper. 1/1/2021; Proposition M, 11/5/2024, Eff. 12/20/2024)

ACTIVITIES OUTSIDE THE CITY. Notwithstanding any other provision of this Article, any person subject to the gross receipts tax who derives non-exempt gross receipts from business activities within the City and derives no gross receipts from business activities outside the City is subject to tax on all non- exempt gross receipts. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

DERIVING GROSS RECEIPTS FROM BUSINESS ACTIVITIES BOTH WITHIN AND OUTSIDE THE CITY. All persons deriving gross receipts from business activities both within and outside the City shall allocate and/or apportion their gross receipts to the City as follows: (a) for taxable years ending on or before December 31, 2024, using the rules set forth in Sections 956.1 and 956.2, in the manner directed in Sections 953.1 through 953.7, inclusive, and in Section 953.9 of this Article 12-A-1; and (b) for taxable years beginning on or after January 1, 2025, in the manner directed in Sections 953.20 through 953.26, inclusive, and using the rules set forth in Sections 956.1 and 956.2, as applicable. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; amended by Proposition M, 11/5/2024, Eff. 12/20/2024)

A person engaging in business within the City must file gross receipts tax returns as provided in Article 6. Those returns must be filed on a combined basis with all of that person's related entities. That person, and all of that person's related entities, constitute a combined group. Every combined group must file a single return; the combined group must choose a single person to file the return on its behalf. Each person within the combined group engaging in business in the City must provide a power of attorney to the person filing the return, authorizing the person filing the return to file said return and to act on behalf of each person with respect to payments, refunds, audits, resolutions, and any other items related to the tax liability reflected in the return. The power of attorney shall be substantially in a form prescribed or approved by the Tax Collector. Each return filed by a combined group constitutes a combined return under this Article and Article 6. The person filing any combined return shall pay the tax liability reflected on the return and any liability determined on audit at the time and in the manner set forth for returns and liabilities in Article 6. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; amended by Ord. 271-13, File No. 131031, App. 11/27/2013, Eff. 12/27/2013, Oper. 1/1/2014)

RECEIPTS. The Tax Collector may, in his or her reasonable discretion, independently establish a person's gross receipts within the City and establish or reallocate gross receipts among related entities so as to fairly reflect the gross receipts within the City of all persons. This authority extends to determining whether any amount excluded from gross receipts by virtue of Section 952.3(f) is in whole or in part compensation or payment for services and thus included in gross receipts. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

ORDINANCE. Except as otherwise provided under this Article, the Gross Receipts Tax Ordinance shall be administered pursuant to Article 6 of the San Francisco Business and Tax Regulations Code. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

REZONING CONSTRUCTION RELIEF FUND. (a) For tax years beginning on or after January 1, 2025, a person or combined group may elect to designate up to 4% of the gross receipts tax liability paid by that person or combined group for the tax year for deposit in the Small Business Rezoning Construction Relief Fund, established in Administrative Code Section 10.100-335. The designation under this Section 959 shall be irrevocable and shall be made on the person or combined group’s original gross receipts tax return filed for the tax year to which the designation applies. (b) If for any tax year persons or combined groups elect to designate amounts under subsection (a) of this Section 959 that collectively exceed $8 million, any excess above $8 million shall not be deposited in the Small Business Rezoning Construction Relief Fund and shall be deposited in the General Fund to be used for any purposes of the City. (Added by Ord. 236-25, File No. 250782, App. 12/5/2025, Eff. 1/5/2026, Retro. 1/1/2025)

(Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; repealed by Proposition F, 11/3/2020, Eff. 12/29/2020, Oper. 1/1/2021)

PAID. For tax years beginning on or after January 1, 2025, a person or combined group shall be allowed a credit against that person or combined group’s Gross Receipts Tax (including the administrative office tax imposed under Section 953.8) for 50% of Stadium Operator Admission Taxes under Article 11 of this Business and Tax Regulations Code paid to the City during the tax year and 50% of taxes paid to another local government during the tax year that are substantially similar to the Stadium Operator Admission Tax under Article 11 of this Code. In no event shall the credit under this Section 960.2 reduce a person or combined group’s Gross Receipts Tax liability to less than $0 for any tax year. The credit under this Section shall not be refundable and may not be carried forward to a subsequent year. (Added by Proposition M, 11/5/2024 Eff. 12/20/2024)

RETAILERS.

(a) For tax years beginning on or after January 1, 2025, a person or combined group shall be allowed a credit against that person or combined group’s Gross Receipts Tax equal to 0.5% of such person or combined group’s taxable gross receipts from business activities described in NAICS code 445110 (Supermarkets and Other Grocery Retailers (except Convenience Retailers)), up to a maximum annual credit of $4,000,000. (b) For purposes of this Section 960.3, “taxable gross receipts” means a person or combined group’s gross receipts, not excluded under Section 954 of this Article 12-A-1, attributable to the City. (c) In no event shall the credit under this Section 960.3 reduce a person or combined group’s Gross Receipts Tax liability to less than $0 for any tax year. The credit under this Section shall not be refundable and may not be carried forward to a subsequent year. (d) Notwithstanding subsection (a), the credit under this Section 960.3 shall not be allowed against the Administrative Office Tax imposed under Section 953.8. (Added by Proposition M, 11/5/2024, Eff. 12/20/2024)

(Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; repealed by Proposition F, 11/3/2020, Eff. 12/29/2020, Oper. 1/1/2021)

The Board of Supervisors may amend or repeal Article 12-A-1 of the Business and Tax Regulations Code without a vote of the people except as limited by Article XIIIC of the California Constitution. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

To the extent that the City's authorization to impose or collect any tax imposed under this Article 12-A-1 is expanded or limited as a result of changes in state or federal law, no amendment or modification of this Article 12-A-1 shall be required to conform the taxes to those changes, and the taxes are hereby imposed and the Tax Collector shall collect them to the full extent of the City's authorization up to the full amount and rate of the taxes imposed under this Article 12-A-1. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

Except as provided in Section 965(b) below, if any section, sentence, clause, phrase, or portion of Article 12-A-1 is for any reason held to be invalid or unenforceable by a court of competent jurisdiction, the remaining sections, sentences, clauses, phrases, or portions of this Article shall nonetheless remain in full force and effect. The people of the City and County of San Francisco hereby declare that, except as provided in Section 965(b), they would have adopted each section, sentence, clause, phrase, or portion of this Article, irrespective of the fact that any one or more sections, sentences, clauses, phrases, or portions of this Article be declared invalid or unenforceable and, to that end, the provisions of this Article are severable. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

(a) No section, clause, part or provision of this Article 12-A-1 shall be construed as requiring the payment of any tax that would be in violation of the Constitution or laws of the United States or of the Constitution or laws of the State of California. Except as provided in subsection (b) of this Section 965, if any section, clause, part or provision of this Article, or the application thereof to any person or circumstance, is held invalid or unconstitutional, the remainder of this Article, including the application of such part or provision to other persons or circumstances, shall not be affected thereby and shall continue in full force and effect. To this end, the provisions of this Article are severable. (b) If the imposition of the gross receipts tax in Section 953 is held in its entirety to be facially invalid or unconstitutional in a final court determination, the remainder of this Article 12-A-1 shall be void and of no force and effect, and the City Attorney shall cause it to be removed from the Business and Tax Regulations Code. (Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

The Controller shall prepare reports by September 1, 2026, and September 1, 2027, respectively, that discuss current economic conditions in the City and the performance of the tax system revised by the voters in the ordinance adding this Section 966. (Added by Proposition M, 11/5/2024, Eff. 12/20/2024)