Yes on Proposition M
Cut small business taxes, other business tax reforms
What is it?
Proposition M will simplify business taxes in San Francisco, lowering some taxes while raising others, with the intention of helping existing small businesses, attracting new businesses and startups, and stabilizing tax revenues against economic shocks.
Currently, businesses operating in San Francisco face three major taxes: the Gross Receipts Tax, the Homeless Gross Receipts Tax, and annual business registration fees. The Gross Receipts Taxes are calculated, in part, using a combination of a business's revenue and payroll costs in the City.
Proposition M updates San Francisco's tax structure by focusing more on revenue from sales and less on payroll. It reduces the number of business types for the Gross Receipts tax and Homeless Gross Receipts tax, and increases the threshold for businesses that are exempt from the Gross Receipts Tax from $2.1M to $5M. It also provides tax credits for in-person work and venues.
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Fiscal impacts
This measure is projected to reduce revenues by approximately $40M annually for the first three years after its implementation. Beginning in 2027, rate increases would generate positive revenues of approximately $50M annually in fiscal year 2028-29 and the years thereafter. By fiscal year 2029-30, the total gain in revenue resulting from the rate increases would offset the reduced revenue in the first three years.
Over a twenty-year period, we forecast that the proposal would have a positive impact on the city's economy, leading to an average increase of over 1,900 jobs over twenty years, and a $338 million increase to GDP.
Economic Impact ReportSan Francisco Office of Economic Analysis
| Tax or Tax Classification | The Way it is Now | What Changes if Prop M passes | Why this Change |
|---|---|---|---|
| Gross Receipts Tax | 0.053% to 1.008% based on sales in SF, payroll expenses, or both. | 0.1% to 3.716% based more on sales, less on payroll. | Given the rise in remote work, focusing on sales more than payroll is better for the city's fiscal stability. |
| Number of business types for gross receipts and homeless gross receipts | 14 | 7 | Consolidates the number of business types for greater simplicity. |
| Businesses Exempt from Gross Receipts Tax | Up to $2.19M | Up to $5M | Reduces the tax burden on small businesses. |
| Homelessness Gross Receipts Tax | 0.175% to 0.69% for SF businesses with gross receipts of $50M+ | 0.162% to 1.64% for SF businesses with gross receipts of $25M+ | Ensures most stable funding for SF's homeless initiatives by broadening the base of payers. |
| Overpaid Executive Gross Receipts Tax | 0.1% to 0.6% | 0.02% to 0.129% | Stabilizes funding for city services by incorporating the majority of these tax collections in the broader business tax base. |
| Business Registration Fees | $47 to $45,150 based on business type and gross receipts. | $55 to $60,000 | Increases business registration fees to partially offset tax decreases elsewhere. |
| Tax Credits | Tax credit for opening a physical location in designated areas of the city. | Creates new tax credits for businesses paying stadium operator taxes, grocery retailers, and new lessees in newly constructed buildings. | Incentivizes occupying new construction, promotes stadium use and grocery retail. |
Why is this on the ballot?
This was placed on the ballot by collecting signatures from voters. It needs simple majority of 50% + 1 to pass.
- Sponsor: RevitalizeSF
- Placed on ballot by: Signature collection
Why vote Yes?
The rise of remote work has fundamentally changed how businesses operate in San Francisco, and our tax code has not kept up. We need to ensure fully remote companies pay their fair share, small businesses get the help they need, and downtown is revitalized with new tenants in high rise office buildings, all while shoring up San Francisco's budget deficit. Prop M is an important step on the journey there.
Prop M will significantly reduce the tax burden on small businesses. Any small business that makes less than $5 million won't pay any business taxes — effectively removing taxes on 90% of SF's restaurant industry, affecting over 2,500 businesses. And it will eliminate permitting and licensing costs, making it far more affordable to start a small business in San Francisco.
Companies currently pay lower taxes when their workers are remote, and Prop M will ensure that those companies are paying their fair share. By focusing on sales revenue, Prop M taxes businesses in San Francisco according to their economic impact, not on how many people come to the office.
Proposition M is a common sense ballot measure that adjusts the tax structure to better reflect the current fiscal situation of the city. Vote yes.