New Early Care and Education Commercial
Rents Tax Ordinance in San Francisco
By John Hayashi and Stacy Kang
In addition to the existing Gross Receipts and Payroll
Expense taxes San Francisco businesses currently pay, a
new gross receipts tax specifically designed to fund Early
Care and Education (“ECE”) programs in San Francisco is
now due on receipts from leasing warehouse or commercial
space. San Francisco’s ECE Commercial Rents Tax (“ECE
Tax”) began on January 1, and businesses subject to this new
tax should have received their first bill from the City with their
first quarter installment of 2019 estimated tax due, together
with their estimate for Gross Receipts and Payroll Expense
taxes 1 . Warehouse lease gross receipts are taxed at 1%,
while commercial lease gross receipts are taxed at 3.5%.
1 B PM LLP’s Summary: San Francisco’s New Early Care and
Education Commercial Rents Tax Ordinance provides an
overview of the tax explaining the activities subject to the new
tax, applicable rates, exemptions, and credits, and the filing
deadlines.
14 BPM Real Estate Insights
On April 29, San Francisco’s Treasurer and Tax Collector
issued Regulation 2019-2 clarifying what costs passed on to
tenants are taxable gross receipts for ECE Tax purposes. In
the Regulation, lease receipts for warehouse and commercial
space in San Francisco are taxed to the extent they are not
excluded from the definition of Gross Receipts under Article
12-A-1 of SF’s Business and Tax Regulations Code. Thus,
ECE Tax receipts include, without limitation, rents, insurance
premiums, maintenance costs and some other charges
passed on to tenants.
Article 12-A-1 section 952.3(a) confirms taxable gross
receipts include the total amounts received or accrued
from whatever source derived, not otherwise excluded. For
example, amounts from sales, services, dealings in property,
rent, royalties, licensing fees, other fees, commissions and
distributed amounts from other unrelated business entities are
taxable gross receipts. Also under this section, all amounts
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