Proposition M: Changes to Business Taxes
Digest by the Ballot Simplification Committee
The Way It Is Now:
The City collects various business taxes annually, including:
- A gross receipts tax that is a percentage of a business's San Francisco gross receipts. Depending on business type, the City calculates a business's San Francisco gross receipts based on sales in San Francisco, payroll expenses for employees working there, or both. Rates range from 0.053% to 1.008% and are scheduled to increase in coming years. Rates depend on business type, and higher rates apply as a business generates more gross receipts. For 2024, most small businesses with gross receipts up to $2.25 million are exempt.
- A homelessness gross receipts tax that is an additional tax on business activities with San Francisco gross receipts over $50 million. Rates range from 0.175% to 0.69%.
- An overpaid executive gross receipts tax that is an additional tax on businesses that pay their highest-paid managerial employee much higher than the median compensation they pay their San Francisco employees. Rates are between 0.1% and 0.6%.
- A business registration fee that is an additional tax. For most businesses, the fee is currently between $47 and $45,150, based on business type and amount of gross receipts.
- An administrative office tax that is a tax on payroll expenses paid by certain large businesses instead of these other business taxes. The combined rates in 2024 range from 3.04% to 5.44%, and in 2025 are scheduled to range from 3.11% to 5.51%. Business registration fees for these businesses currently range from $19,682 to $45,928.
State law limits the total revenue that the City may spend each year. The voters may approve increases to this spending limit for up to four years.
The Proposal:
The proposed measure would change the City's business taxes to:
- For the gross receipts tax:
- exempt most small businesses with gross receipts up to $5 million (increased by inflation).
- reduce the number of business types from 14 to seven;
- calculate San Francisco gross receipts based more on sales and less on payroll expenses, depending on the type of business;
- change rates to between 0.1% and 3.716%; and
- Apply the homelessness gross receipts tax on business activities with San Francisco gross receipts over $25 million, at rates between 0.162% and 1.64%.
- Modify how the City calculates the overpaid executive gross receipts tax, determine who pays that tax, and set the rates between 0.02% and 0.129%.
- Adjust business registration fees to between $55 and $60,000 (increased by inflation).
- Adjust the administrative office tax rates for certain large businesses to range from 2.97% to 3.694%, and adjust the business registration fees for these businesses to between $500 and $35,000 (increased by inflation).
- Make administrative changes to the City's business taxes.
The homelessness gross receipts tax would continue to fund homelessness prevention and services for people experiencing homelessness.
The City would use the other taxes mentioned above for general government purposes.
All these taxes would apply indefinitely until repealed.
This proposal would increase the City's spending limit for four years.
If Proposition ___ passes with more votes than Proposition ___, then Proposition __ would have no legal effect.
What Your Vote Means:
- A "YES" Vote: If you vote "yes," you want to change the following taxes the City collects from businesses: the gross receipts tax, the homelessness gross receipts tax, the overpaid executive gross receipts tax, the administrative office tax and business registration fees.
- A "NO" Vote: If you vote "no," you do not want to change the City's business taxes.