§ 903.1.

RATE OF PAYROLL EXPENSE TAX

a.

Except as provided in subsection (b), the rate of the payroll expense tax shall be 1½ percent. The amount of a person’s liability for the payroll expense tax shall be the product of such person’s taxable payroll expense multiplied by the rate of the payroll expense tax expressed as a decimal (e.g., for a payroll expense tax rate of 1½ percent, 0.015). The amount of such tax for Associations shall be the sum of the payroll expense of such Association and the total distributions made by such Association by way of salary to those having an ownership interest in such Association, multiplied by the rate of the payroll expense tax expressed as a decimal (e.g., for a payroll expense tax rate of 1½ percent, 0.015). Amounts paid or credited to those having an ownership interest in such Association prior and in addition to the distribution of ownership profit or loss shall be presumed to be distributions “by way of salary” and for personal services rendered, unless the taxpayer proves otherwise by clear and convincing evidence.

b.

Commencing on the operative date of the Gross Receipts Tax Ordinance, the rate of the payroll expense tax shall be computed by the Controller in accordance with subsections (c) and (d). The Controller shall certify and publish such rate on or before September 1 of each year.

c.

Commencing on the operative date of the Gross Receipts Tax Ordinance:

1.

For any tax year in which the payroll expense tax rate, computed in accordance with subsection (d), is less than zero, then the payroll expense tax rate for that year and all subsequent years shall be zero. The Controller shall certify and publish such rate on or before September 1 of that year.

2.

Notwithstanding any other provision of this Article or Article 12-A-1, the payroll expense tax rate for 2019 and all future years shall be the rate in effect in tax year 2018. The Controller shall certify and publish such rate on or before September 1, 2019, at which time the Controller’s duty to compute, certify and publish the payroll expense tax rate shall cease.

3.

Notwithstanding any other provision of this Article or Article 12-A-1, in no event shall the payroll expense tax rate for any year exceed 1½ percent.

d.

Payroll Expense Tax Rate Computation. The Controller shall compute the payroll expense tax rate for each tax year according to the following table and formulas:

1.

Payroll Expense Tax Rate Computation Table



Tax Year Payroll Expense Tax Rate (PAYRATEyear)
2014 PAYRATE 14 = 1.350%
2015 PAYRATE 15 = 1.125% + PADJ 15
2016 PAYRATE 16 = 0.750% + PADJ 16
2017 PAYRATE 17 = 0.375% + PADJ 17
2018 PAYRATE 18 = 0% + PADJ 18

Where: “PADJyear” is the payroll expense tax rate adjustment factor expressed as a percentage and computed in accordance with subsection (d)(2).

2.

Payroll Expense Tax Rate Adjustment Factor Computation. Unless the prior year’s payroll expense tax rate is zero, in which case the payroll expense tax adjustment factor does not apply, the Controller shall compute the payroll expense tax rate adjustment factor (PADJyear) according to the following table and formulas:

Payroll Expense Tax Rate Adjustment Factor Computation Table



Tax Year Payroll Expense Tax Rate Adjustment (PADJyear)
2015 PADJ 15 = MR 15 /(PAYTAX 14 /PAYRATE 14 )
2016 PADJ 16 = MR 16 /(PAYTAX 15 /PAYRATE 15 )
2017 PADJ 17 = MR 17 /(PAYTAX 16 /PAYRATE 16 )
2018 PADJ 18 = MR 18 /(PAYTAX 17 /PAYRATE 17 )

Where:

A.

“PAYTAXyear” = is, for any year, the actual payroll expense tax revenue (not including penalties, interest, or administrative fees) due for that year and collected on or before June 30 of the following year;

B.

“PAYRATEyear” = is, for any year, the payroll expense tax rate in effect for that year; and

C.

“MRyear” is computed in accordance with subsection (d)(3).

3.

Missing Revenue Factor Computation. The Missing Revenue Factor (MRyear) is, for any year, the amount by which the combined revenue actually collected from the payroll expense tax, gross receipts tax, and business registration fee for the previous year differs from the sum of expected payroll tax revenue, business registration fees, and administrative costs for the previous year. Unless the prior year’s payroll expense tax rate is zero, in which case the missing revenue factor does not apply, the Controller shall compute the missing revenue factor (MRyear) according to the following table and formulas:

Missing Revenue Factor Computation Table



Tax Year Missing Revenue (MRyear)
2015 MR 15 = ADM 14 + $37,216,000 + ER 14 – (1.125%/1.350%) × PAYTAX 14 – (25%/10%) × GRTAX 14 – REG 14
2016 MR 16 = ADM 15 + $38,071,000 + ER 15 – (0.750%/PAYRATE 15 ) × PAYTAX 15 – (50%/25%) × GRTAX 15 – REG 15
2017 MR 17 = ADM 16 +$38,951,650+ ER 16 – (0.375%/PAYRATE 16 ) × PAYTAX 16 – (75%/50%) × GRTAX 16 – REG 16
2018 MR 18 = ADM 17 + $39,858,720 + ER 17 – (100%/75%) × GRTAX 17 – REG 17

Where: (A) “GRTAXyear” is, for any year, the actual gross receipts tax revenue (not including penalties, interest, or administrative fees) due for that year and collected on or before June 30 of the following year;

B.

“REGyear” is, for any year, the business registration fee revenue for the fiscal year beginning in that year and collected on or before June 30 of that year;

C.

“ERyear” is the computed in accordance with subsection (d)(4);

D.

“$37,216,000,” $38,071,000,” “38,951,650,” and “39,858,720″  are the amounts of total business registration fee revenue expected for the year prior to the year for which MRyear is being computed; and

E.

“ADMyear” is an estimate of the additional expense incurred by the Tax Collector in administering the tax. It shall be established annually by the Controller and shall not exceed 2 percent of the sum of the actual payroll expense tax revenue and gross receipts tax revenue for the prior year.

4.

Expected Revenue Factor Computation. The Expected Review Factor (ERyear) is, for any year, an estimate of the amount of payroll expense tax that would have been collected had a 1½ percent payroll expense tax rate been in effect based on the actual amount of payroll expense tax collected in the previous year, the previous year’s payroll expense tax rate, and an assumed growth of 3 percent in the tax base. Unless the prior year’s payroll expense tax rate is zero, the Controller shall compute the expected revenue factor (ERyear) according to the following table and formulas:

Expected Revenue Factor Computation Table



Tax Year Expected Revenue (ERyear)
2014 ER 14 = PAYTAX 13 × 1.03
2015 ER 15 = (1.500%/1.350%) × PAYTAX 14 × 1.03
2016 ER 16 = (1.500%/PAYRATE 15 ) × PAYTAX 15 × 1.03
2017 ER 17 = (1.500%/PAYRATE 16 ) × PAYTAX 16 × 1.03

History

(Added by Ord. 295-90, App. 8/1/90; amended by Ord. 273-93, App. 8/25/93; Ord. 179-94, App. 5/3/94; Ord. 24-98, App. 1/16/98; Ord. 26-04, File No. 031990, App. 2/19/2004; Proposition E, App. 11/6/2012, Oper. 1/1/2014)

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