Replacing San Francisco’s payroll tax with a gross receipts tax is now up to voters.
On Tuesday, the Board of Supervisors voted 11-0 to send a business tax measure that took about seven months to craft to the November ballot and secure support to improve its chance of passing.
The 1.5 percent tax on payrolls in excess of $250,000 has been maligned as a job killer. In recent years, as the technology industry has grown in San Francisco, tech leaders have pushed for a tax change since their business models are more labor-intensive.
“Today, we took a historic step towards reforming our business tax system so we no longer punish companies for creating jobs in our city,” Lee said in a statement. “It’s time to end our city’s direct tax on jobs and unleash the full potential of our innovators, small businesses and entrepreneurs.”
Lee and board President David Chiu crafted the measure and then struck a compromise with Supervisor John Avalos, who was pushing for a proposal that generated more revenue.
If approved by voters, it would replace the current tax on payrolls with a levy on businesses’ gross receipts. The rates are narrowly tailored for different industries on seven different tax tables and are set to generate as much as the current payroll tax, about $410 million annually, while also increasing business registration fees to generate an additional $28.5 million.
The range of fees will increase to $75 to $35,000, with fees based on the amount of a business’s gross receipts. Fees currently range from $25 to $500. If the measure passes, the new fees would take effect in 2013 and increase annually based on the Consumer Price Index.
Businesses with gross receipts under $1 million would not pay the tax, just the new fee rates.