Businesses that are burdened with heavy payroll taxes can get some immediate relief if they can prove their payroll expenses have declined this year.
San Francisco’s tax collector is allowing the 6,000 businesses that are strapped with payroll taxes owed to The City to get a reduction in payroll tax prepayments, as long as they can show evidence that their payroll has dropped.
Every year, businesses make prepayments to The City, up to four times a year. The tax collector uses the amount paid to determine how much each business will owe the next year.
But with The City’s unemployment rate up to 10.3 percent, it’s likely businesses will owe less in payroll taxes this year, said city Treasurer Jose Cisneros.
So instead of making businesses wait for refunds at the end of the year, the tax collector will adjust the amount owed to give struggling companies a small break, Cisneros said.
“If business is shrinking, the last thing you need is to pay more than you actually owe,” he said. “Why put that burden on them?”
The break would certainly help Flicka McGurrin, the owner of Pier 23 Cafe, who relies on seasonal workers and has plans to reduce her payroll expenses even more this year.
“Any kind of breaks at this point would be very useful,” McGurrin said. “Our customer base is compromised by layoffs.”
To qualify, a business has to provide details showing there was a decline, even if it is slight, in its payroll expenses, said David Augustine, policy and programs manager for the Office of the Treasurer and Tax Collector.
Putting more money into the pockets of businesses is important at a time when getting access to capital remains a hurdle, said Rob Black, vice president of public policy for the San Francisco Chamber of Commerce.
“One of the major things we hear from small businesses is the issue of liquidity,” Black said. “This is money they could use to meet payroll.”
Last year was the first time the tax collector allowed businesses to adjust prepaid taxes, and more than 700 — or nearly 10 percent — of San Francisco’s businesses that are required to pay The City’s 1.5 percent payroll tax petitioned for a reduction.
The City collected more than $378 million in payroll taxes in fiscal year 2008-09. Payroll taxes are projected to be $345 million for fiscal year 2009-10, according to the City Controller’s Office.
Doing business in The City
Some companies have to pay the payroll tax.
80,000 Businesses in San Francisco
6,000 Businesses that pay payroll tax
1.5 percent Payroll tax
$250,000 Businesses with payroll that falls below figure are exempt from tax