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San Francisco Gross Receipts Tax

In November 2012, San Francisco voters passed Proposition E, The Gross Receipts Tax and Business Registration Fees Ordinance (the Gross Receipts Tax).  The changes went into effect on January 1, 2014, and it is important to be aware of the new tax and how it will affect your business.  The measure is intended to replace, over time, San Francisco’s 1.5% payroll expense tax.  In short, a phasing out of the current payroll tax will begin in 2014, and by 2018, businesses in the City of San Francisco (the City) will file Gross Receipts Tax returns and pay the annual Gross Receipts Tax, which will be measured by the business’s gross receipts from all taxable business activities attributable to the City. 

Impact on Financial Services, Funds, Investment Managers, etc.

In 2014, affected businesses will pay the Gross Receipts Tax at 10% of the rates approved by voters; this increases to 25% in 2015, 50% in 2016, 75% in 2017, and 100% in 2018.  For businesses in the financial services industry, the tax, once fully phased in, is expected to be imposed at rates between 0.40% (for gross receipts up to $1 million) and 0.56% (for gross receipts in excess of $25 million), as shown in the table below.

Gross Receipts


$0 - $1,000,000


$1,000,001 - $2,500,000


$2,500,001 - $25,000,000


$25,000,000 +


Taxpayers deriving gross receipts from business activities both from within the City and outside the City are required to allocate or apportion their taxable gross receipts in accordance with the new rules, which could be an onerous task.  This is particularly true, because for some taxpayers, this means filing as a unitary business in San Francisco and apportioning receipts on either a US or worldwide basis.

What are gross receipts?

  • Under the ordinance, “gross receipts” include, but are not limited to, “amounts derived from sales, services, dealings in property, interest, rent, royalties, dividends, licensing fees, other fees, commissions and distributed amounts from other business entities.”  S.F. Bus. & Tax Regs., § 952.3.

  • Furthermore, “gross receipts” include but are not limited to all amounts that constitute gross income for federal income tax purposes.  Id.  This means that federal gross income likely will be the starting point for the Gross Receipts Tax calculation purposes, but the entire universe of what constitutes “gross receipts” is likely to be the subject of debate. 

  • Gross receipts do not include certain “investment receipts,” which are defined to include interest, dividends, capital gains, other amounts from financial instruments, and distributions from business entities, but only to the extent that such receipts are derived exclusively from the investment of capital and not from the provision of services. 

  • Gross receipts also do not include allocations of income or gain, or distributions from an entity treated as a pass-through entity for federal income tax purposes, but only to the extent that such allocations or distributions are derived exclusively from an investment in such entity and are not from the provision of services to such entity.

  • Given that a manager’s fee income and certain special profit allocations are not derived from the investment of capital, they may be treated as taxable gross receipts.

  • Moreover, capital interests, profits interests and carried interests that were received in exchange for services (including in connection with the waiver of a management fee) may be caught by the Gross Receipts Tax. 

  • However, generally speaking, any gross receipts of a pass-through entity subject to the tax at the entity level are not again taxed at the owner level.

©2020 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume IV, Number 19


About this Author

G. Michelle Ferreira, Greenberg Traurig Law Firm, San Francisco, Silicon Valley, Tax And Private Fund Litigation Attorney

G. Michelle Ferreira is an attorney in the Silicon Valley Office and counsels individuals, partnerships, estates and corporations in tax disputes with the Internal Revenue Service and state and local tax agencies, including the California Franchise Tax Board, the State Board of Equalization, the Employment Development Department and county assessment appeals boards.

As a former tax litigator for the Internal Revenue Service, Michelle brings unique experience to clients who have complex and sensitive tax and penalty disputes. Michelle represents...

Marvin Kirsner, Greenberg Traurig Law Firm, Boca Raton, Tax Law Attorney

Marvin A. Kirsner is an attorney at the Boca Raton office where his primary areas of practice deal with corporate, transactional and industry specific tax issues. He serves as the co-chair of the State and Local Tax (SALT) Practice.


  • Internet tax and electronic commerce tax issues

  • Multistate tax issues

  • Federal, state and local tax controversies

  • Federal and state tax planning for business transactions, mergers, acquisitions and divestitures

  • Telecommunication tax matters

  • Bankruptcy tax matters

  • State tax incentives for corporate relocation

  • Entertainment industry tax issues

  • Energy tax incentives

  • Climate change

  • Blockchain/cryptocurrency

Bradley Marsh, Greenberg Traurig Law Firm, San Francisco, Tax Law Litigation Attorney

Bradley R. Marsh is an attorney at the San Francisco office and focuses his practice on tax controversy matters, including property, sales, payroll, business license, employment, franchise, parcel, district, documentary transfer, transient occupancy, utility user, income, parking, gift and estate taxes. He serves as a co-chair of the State and Local Tax (SALT) Practice. Brad represents clients in audits, litigation and administrative hearings, as well as analyzing transactions and business models, and providing legislative solutions.