What Does the New Prop C Tax Mean for Your Business?
What is Proposition C?
As announced in early October, the City and County of San Francisco passed Proposition C, the Commercial Rent Tax for Childcare and Early Education. It is expected to take effect January 1, 2019, and will increase the Gross Receipts Tax (“GRT”) on Commercial Rents.
The new Gross Receipts Tax will increase the tax to 3.5% of amounts received from rentals of commercial space in the City. This will be a passthrough to many tenants. Commercial landlords in San Francisco who already pay tax on the lease of their space will find the process familiar, as returns for the new tax will be filed in the same manner and on the same schedule as the current gross receipts tax. Gross Receipts Tax would not apply to businesses exempt from the existing Gross Receipts Tax, including businesses with less than $1 million total in gross receipts, leases of most retail spaces, leases for industrial use, leases for arts activities, most residential real estate leases, nonprofit organizations that are leasing spaces as commercial landlords, and leases to nonprofit organizations or local, state, or federal governments.