Proposed New San Francisco Business Tax Scheme

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The City and County of San Francisco, like many jurisdictions throughout California and the U.S., is facing a huge budget shortfall. For fiscal year 2010-11, the City Controller’s Office projects that the shortfall will total nearly $483 million. For fiscal year 2011-12, the cumulative projected shortfall will reach $787 million. In the face of this budgetary crisis, San Francisco is exploring ways to raise additional revenue, including modifying the tax regime for businesses.

Currently, San Francisco imposes a payroll expense tax on every entity engaging in business in the City at the rate of 1.5% of the portion of the entity’s payroll expense attributable to the City. See S.F. Bus. & Tax Regs. Code Art. 12-A §§ 903, 903.1, 904.

According to a draft report from the Controller’s Office, the City is considering two alternative proposals to modify or replace the existing payroll expense tax.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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