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Friday, February 15, 2019

San Francisco and Los Angeles Tax Filing Deadline Reminder


San Francisco Gross Receipts Tax and Payroll Expense Tax

All entities engaging in business within San Francisco, including individuals, should be aware of the February 28, 2019, tax filing deadline for the San Francisco Gross Receipts Tax (SFGRT) and Payroll Expense Tax (PET). Additionally, the Homelessness Gross Receipts Tax (HGRT) is applicable to most entities with SFGRT of over $50 million. The first estimated payment, due April 30, 2019, should reflect additional tax due from HGRT. And the Early Care and Education Commercial Rents Tax (Universal Childcare for San Francisco) imposes an additional 3.5% tax on commercial rents.

SFGRT is fully phased in for 2018.

The PET is not phased out for 2018, and the 2018 rate is 0.38%. The tax is applicable for all compensation paid to individuals working in the city, including BOD fees, fringe benefits for employees, bonuses, fees paid to contractors on 1099s, etc.

Wayfair Nexus – San Francisco and Philadelphia

San Francisco’s Wayfair economic nexus is applicable to taxpayers with no physical presence in San Francisco that have a gross revenue that exceeds $500,000 from the sale of tangible personal property, any product transferred electronically, or services delivered into San Francisco. The filing deadline is February 28, 2019.

Philadelphia has drafted regulations creating a bright line economic nexus standard of $100K. Taxpayers may have increased compliance costs as well as increased tax liability as the Business Income & Receipts Tax (BIRT) is both a gross receipts tax and an income tax filing. Gross receipts are taxed at 0.01415% and taxable income at 6.35%. Philadelphia’s BIRT is due April 15, 2019.

Los Angeles City Business Tax

Entities doing business in Los Angeles should be aware that the Los Angeles City Business Tax is due February 28, 2019.

California Business License Taxes

Numerous cities throughout California impose business license taxes, similar to those imposed by San Francisco and Los Angeles. For example, San Jose, Oakland, Berkeley, Mountain View, Napa, Santa Monica, etc. Business license taxes are generally based on gross receipts, less city/industry specific exclusions, deemed earned within the city, usually taxed at a rate between 0.1% and 0.6%. Alternatively, some California localities impose tax based on payroll and/or headcount.

Cities with business license taxes are being more aggressive in identifying non-filers and auditing current filers due to budget gaps in many of these cities. Nexus thresholds are low and look-back periods for non-filers are unlimited. Companies may be deemed to be “doing business” in the city if they have a customer in the city or regularly solicit business within the city limits, regardless of whether or not there is a physical presence in the city.

Common Local Tax Issues

Many taxpayers are either not aware of their filing requirement or don’t know how to properly apply the ever-changing nexus rules. As a result, many taxpayers doing business in California localities such as San Francisco and Los Angeles either have refund opportunities or areas of exposure. Common concerns and questions include:

  • Does my business have a reporting requirement in a California locality such as San Francisco or Los Angeles?
  • Has the locality changed any of its rules or requirements since they were last reviewed?
  • Am I meeting the filing deadline?
  • What gross receipts/payroll should I report to the city?
  • Are my receipts being reported using the proper classification and rate?
  • Am I properly applying the city’s complex apportionment requirements applicable to my industry to both the gross receipts and payroll base?

To identify refund opportunities or areas of exposure in your specific tax situation, contact: Alex Thacher

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