San Francisco Tax Update


Homelessness Gross Receipts Tax Upheld

On June 30, 2020, the First District of the California Court of Appeal upheld the legality of the City and County of San Francisco’s “Homelessness Gross Receipts Tax.” This tax ranges from 0.175% – 0.690% of taxable gross receipts (depending on the industry), and is 1.5% for administrative offices. This tax is imposed on companies that earn more than $50M per year in the City and County of San Francisco. In upholding the tax, the Court of Appeal found that the Constitutional right of California voters to pass laws by initiative and a majority vote, is superior to the limitations on new taxes or special taxes which require a supermajority, 2/3 vote. The Court agreed with the City that because the tax was initiated by the people, and not the government, then only a majority vote was required. The Howard Jarvis Taxpayers Association has filed a notice of appeal to the California Supreme Court, so this may not be the last word on the issue.

A copy of the court’s decision may be found here. Prop C Appellate Opinion

Commercial Rent Tax Appeal Remains in Process

The challenge to the San Francisco Commercial Rent Tax (funds for early childhood education) remains active in the First District of the California Court of Appeal. The Commercial Rent Tax is 3.5% for offices and 1.5% for Industrial space. Retail is generally excluded.

Appellants’ arguments include (1) that politicians cannot use the citizens’ initiative process as a loophole to avoid the 2/3 vote requirement, (2) voters cannot exercise power that the Board of Supervisors does not have (i.e., a majority vote standard), and (3) that the requirements of Propositions 13 and 218 should apply because the decision in the Cannabis case cited by the City related to a procedural requirement, not the actual approval of the tax at issue. The appellants’ reply brief is due July 23, 2020. Given the decision on the Homelessness Gross Receipts Tax, it seems likely that the Commercial Rent Tax will also be upheld, and there will be a showdown in the State Supreme Court. Stay tuned.

A copy of appellant’s brief may be found here. Appellant’s Opening Brief

Protective Refund Claims

In order to protect their rights to refunds, San Francisco taxpayers that are subject to the Homeless Gross Receipts Tax or the Commercial Rents Tax and wish to preserve their rights should file a protective request for refund with the San Francisco Tax Collector. Once the request is rejected, a Claim for Refund should be filed with the San Francisco Controller. Otherwise, refund claims may not be honored if the Supreme Court strikes down the tax.

The following is a link to the request for refund form and filing information. Refund Form

There may be other basis for challenging the taxes, including potential equitable arguments, that should be referenced when filing these requests/claims. You should consult with legal counsel or a tax representative to verify the process.



Authored by Reuben, Junius & Rose, LLP Attorney Kevin Rose.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.