that constitute gross income for federal income tax purposes are taxable except as provided in Article 12. However,
Gross Receipts does not include any federal, state or local tax reimbursed by means of a separately stated charge to a
purchaser, lessee, licensee or customer. The accompanying example in Regulation 2019-2 confirms a person annually
charging a tenant separately-stated real property taxes, insurance premiums and maintenance costs under a triple-net
lease would treat all rent received, and the reimbursements for insurance and maintenance, as taxable gross receipts.
However, amounts charged for real property taxes are a reimbursement that is not a taxable gross receipt.
Although currently in effect, the new ECE Tax is already subject to litigation because San Francisco passed the tax with
less than the two-thirds voter majority required for new tax ordinances. The ECE ballot proposition was technically a
taxpayer initiative that only required a majority vote to pass. As a result, the City is setting aside all ECE taxes and will
not spend the tax collected until the litigation is completed, which is expected to take years. n
John Hayashi is a Managing Director in BPM’s SALT group. Contact John at [email protected] or
415-677-3338.
Stacy Kang is a Supervisor in BPM's Corporate Tax team. Contact Stacy at [email protected] or 925-296-1086.
BPM Real Estate Insights 15