Lingering Questions About the San Francisco Gross Receipts Tax

Today, Pillsbury attorney Paul Casas published his advisory titled Lingering Questions About the San Francisco Gross Receipts Tax. The Advisory discusses the San Francisco Board of Supervisors’ November 26, 2013 approved amendments to the San Francisco Business and Tax Regulations Code (Code), providing for penalty relief for delinquent Gross Receipts Tax (GRT) installment payments, mandatory combined reporting for Payroll Expense Tax purposes, and the imposition of a new penalty for failure to file returns on a combined basis or failure to provide worldwide payroll or gross receipts information. The first installment payment for the new GRT is due April 30, 2014. While the City has provided some relief from installment underpayment penalties, many questions about the new tax remain as this deadline approaches.

The GRT rate for the construction industry starts at 0.300% and gradually increases to 0.450% for gross receipts over $25,000,000. The GRT provides a special provision allowing taxpayers in the construction industry to reduce taxable gross receipts for amounts paid to subcontractors that possess valid San Francisco business registration certificates during the tax year. In order to claim this reduction, a person must maintain an itemized schedule of payments to subcontractors and sufficient information to verify the subcontractor possessed a valid San Francisco business registration certificate. Reductions for any other costs, including without limitation, costs for materials, fees, equipment, or other services are not permitted.

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Additional Sources: San Francisco Ordinance No. 271-13