San Francisco Tax Ballot Measures
The November ballot has 2 tax related proposals (Prop L and Prop M)
Prop L - Additional Business Tax on Transportation Network Companies and Autonomous Vehicle Businesses
The City imposes a per-ride tax on certain transportation businesses that provide prearranged rides that originate in San Francisco. This tax applies to transportation network companies, which connect drivers to passengers, and businesses providing rides in some types of autonomous vehicles. Transportation network companies do not include taxi or limousine services. The rates for that tax are between 1.5% and 3.25% of the fares attributable to passenger rides within San Francisco.
The Proposal: In addition to existing taxes, the Prop L would create a new gross receipts tax on transportation network companies and autonomous vehicle businesses. This new tax would be on passenger transportation service gross receipts in San Francisco above $500,000. The tax rates would be:
• 1% on taxable gross receipts between $500,000.01 and $1,000,000 (one million dollars);
• 2.5% on taxable gross receipts between $1,000,000.01 and $2,500,000 (two-and-a-half million dollars);
• 3.5% on taxable gross receipts between $2,500,000.01 and $25,000,000 (twenty-five million dollars); and
• 4.5% on taxable gross receipts over $25,000,000 (twenty-five million dollars).
The City would use the funds it collects from the new tax to:
• Preserve, maintain or increase Muni public transportation services;
• Improve or preserve Muni service to public schools, libraries and parks by increasing service frequency, expanding and adding new routes; and
• Maintain or expand discount fare or fare-free programs by Muni for people with disabilities, seniors, youth, students and low-income passengers.
The tax is a permanent tax.
Although the tax is imposed on the company (not the rider), expect companies to raise prices by 3.5-4.5% to pass on this tax to the riders.
Prop M – Change to Business Taxes
The City currently 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
The Proposal: Prop L 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). AN INCREASE TO THE EXEMPTION.
- 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% (WHICH RAISES THE RATE ON SOME INDUSTRIES); and
• Apply the homelessness gross receipts tax on business activities with San Francisco gross receipts over $25 million (A DECREASE TO THE EXEMPTION), at rates between 0.162% and 1.64% (THE LOWEST RATE IS DECREASED BUT THE HIGHEST RATE IS INCREASED.)
• 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% (THE LOWEST RATE AND HIGHEST RATES ARE BOTH INCREASED).
· Adjust business registration fees to between $55 and $60,000 (increased by inflation). (THE LOWEST FEE AND HIGHEST FEES ARE BOTH INCREASED).
· Adjust the administrative office tax rates for certain large businesses to range from 2.97% to 3.694% (THE LOWEST RATE AND HIGHEST RATES ARE BOTH DECREASED)., and adjust the business registration fees for these businesses to between $500 and $35,000 (increased by inflation). (THE LOWEST FEE AND HIGHEST FEES ARE BOTH DECREASED).