San Francisco Business Tax Nexus Issues & Filing Due Dates
One of the many effects of the COVID-19 pandemic has been a sharp increase in the number of employees of large businesses working remotely, usually from home. Depending on where employees are located while working remotely, companies could discover that income tax nexus could be triggered in jurisdictions where the business had not historically filed income tax returns.
One such jurisdiction is the City of San Francisco (City). The City requires businesses operating in its limits to register and pay a license fee. The deadline to register and pay the license fee is March 31, 2022. In addition to the license fee, the City levies three separate gross receipts taxes on businesses that record revenue inside city limits. The three taxes are the San Francisco Gross Receipts Tax, the Homelessness Gross Receipts Tax, and the Commercial Rents Tax.
The filing obligation and tax rates for all three taxes vary based on the industry the business is involved with. The deadline to file tax returns for all three taxes is February 28, 2022. Tax filings are required to be completed online in most cases.
Nexus for the taxes can be triggered in several ways including employing individuals who work remotely from within City limits, as well as regularly soliciting business in the City. The City offers a Voluntary Disclosure Program for businesses that have established nexus and have not filed returns or received communication from the City.
Businesses should consider what, if any, activity they have in San Francisco and the surrounding municipalities. If any activity has been sustained in the area, then careful consideration should be given to whether nexus exists and whether the company will file business tax returns. The City has made clear that it will strengthen detection and enforcement of the tax, partially as a result of budget shortfalls and revenue declines resulting from the COVID-19 pandemic.
If you or your client would like assistance filing and paying the business taxes or believe you may have established nexus with the City, please reach out to our State & Local Tax Services group. For additional guidance, contact your BKD Trusted Advisor™ or submit the Contact Us form below.