If your business has a physical presence in the City of San Francisco or City of Los Angeles, you may have a filing requirement due Monday, February 28, 2022.
These local taxes are separate from California filed taxes. They can represent significant refund and reduction opportunities (particularly in San Francisco) for the current and prior year filings due to COVID-related shelter-in-place orders and remote work. They can also represent tax exposures. It is important to have a state and local tax professional examine your local returns to ensure that all revenue is properly apportioned to reflect amounts earned only while employees worked from home.
A significant number of California localities impose a tax on businesses, including Los Angeles, San Francisco, Oakland, San Mateo, Santa Monica, Napa and others. Many businesses remain unaware of these potentially material local tax filing obligations and/or their complexity. Additionally, many California localities are currently suffering significant budget shortfalls, resulting in an increase in the number of local tax auditors.
As COVID-19 work-from-home orders have shifted typical apportionment methodologies, which are no longer reflected by only office location payroll, the way you file is important, especially for SaaS, e-commerce, wholesalers and digital goods companies.
Additionally, if your company has created nexus, you’ll have a filing requirement simply because you have employees who live in these localities and work from their homes. San Francisco businesses specifically should be aware that there is an economic nexus threshold based on sales. There are also numerous other opportunities related to classification and apportionment to be aware of.
For assistance with California local tax filings, including gross receipts, payroll expenses, utility users (UUT), telephone users (TUT), communications users (CUT), and parking occupancy (POT), contact our experts: Alex Thacher and Brandee Tilman.