Gross receipts tax worries array of business owners

A proposed new tax designed to target The City’s largest businesses has smaller-business owners worried about its ramifications.

The proposed tax on big businesses “can’t be helpful to the small businesses because [big businesses] won’t be able to buy as much, and it will cut down on their activity in The City,” said Florence Alberts, who sits on The City’s Small Business Commission.

Alberts’ also said the big businesses will “move out of The City” to places where it’s cheaper to do business.

Alberts comments come days after Board of Supervisors President Aaron Peskin introduced a ballot measure that would enact a 0.1 percent tax on businesses pulling in more than $2 million year. A gross receipts tax is based on the total revenue a business generates prior to subtracting any costs. The tax is expected to impact 12 percent of The City’s 85,000 businesses. The tax would be in addition to the current payroll tax, which assesses a 1.5 percent tax on the total amount of money paid to employees if it is more than $167,000 a year.

The measure would also enact a 1.4 percent tax on commercial leases when the rent is more than $2 million.

The tax would generate about $55 million a year for The City’s operating budget, which faces a budget deficit of more than $115 million for the budget year beginning July 1, 2007. If approved by the Board of Supervisors, the tax measure would come before voters in November.

The City’s top businesses are making large profits without having to pay back into The City’s infrastructure, which they rely on, Peskin said. He added that a gross receipts tax would not drive out big businesses that choose San Francisco for its prime location.

Stephen Cornell, owner of Brownie’s Hardware, maintains the tax would affect his business, saying the exemption threshold is low enough to impact small businesses such as his.

“Any tax on a business in San Francisco is bad because there are enough hurdles for all businesses in The City with this incredible minimum wage,” said Mike Puente, owner of House of Bagels on Geary Street. The City’s minimum wage is $8.82, while the state’s is $6.75.

He also said that increasing taxes for the large businesses in The City would likely result in them “passing it along to the consumers.”

Mayor Gavin Newsom opposes the tax, saying it would cause businesses to look elsewhere.

“If the proposed rate were higher, I might have gotten concerned about its business impact, but the small marginal rate seems reasonable,” said business owner David Chiu, who also sits on the City’s Small Business Commission.

jsabatini@examiner.com

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