Except as provided in this Section, notwithstanding any other provision of this Article and in lieu of the other taxes provided by this Article and Article 12-A for any person or combined group, commencing on the Operative Date of the Gross Receipts’ Tax Ordinance, every person engaging in business within the City as an administrative office, as defined below, shall pay an annual administrative office tax measured by its total payroll expense that is attributable to the City. If a person is a member of a combined group, then its tax shall be measured by the total payroll expense of the combined group attributable to the City. Such combined group shall pay only the administrative office tax. The administrative office tax rate for each tax year is 1.400 percent.
“Engaging in business within the City as an administrative office” means that:
a person is engaging in business within the City during the tax year and over 50 percent of the total combined payroll expense within the City of that person and its related entities for the preceding tax year was associated with providing administrative or management services exclusively to that person or related entities;
the total combined number of employees of that person and its related entities within the United States as of the last day of the preceding tax year exceeded 1,000; and
the total combined gross receipts of that person and its related entities reported on United States federal income tax return(s) for the preceding tax year exceeded $1,000,000,000.
For purposes of subsection (b) only, a related entity shall include any person who could be included in the same combined report under California Revenue and Taxation Code Section 25102 but for the existence of a water’s edge election under Section 25110 of that Code.
“Administrative or management services” comprises internal support services provided on an enterprise-wide basis, such as executive office oversight, company business strategy, recordkeeping, risk management, personnel administration, legal, accounting, market research and analysis, and training services; it does not include sales personnel or personnel actively engaged in marketing, research and development, direct customer service, and product support services. The Tax Collector is authorized to classify in its reasonable discretion which personnel employed by any person provide administrative or management services.
A person provides administrative office services exclusively for itself or a related entity only if the final recipient of those services is at a location where that person or a related entity conducts business activities.
“Payroll expense” for purposes of this Section shall have the meaning given to that term by Sections 902.1 et seq. of Article 12-A, except that Section 902.1(b) of Article 12-A shall not apply for purposes of determining whether a person is engaging in business within the City as an administrative office. Section 902.1(b) shall apply for all other purposes under this Section. The portion of the payroll expense of a person or combined group that is attributable to the City shall be determined as set forth in Section 904 of Article 12-A.
In addition to the administrative office tax provided in subsection (a), any person engaging in business within the City as an administrative office exclusively for itself or a related entity shall apply for a registration certificate and pay a registration fee, as provided in Article 12.
Except as provided in this Section, the provisions of Article 6 and Article 12 apply to the administrative office tax. In particular, and without limiting the applicability of the balance of Article 6, the provisions of Sections 6.9-1 through 6.9-3, inclusive, of Article 6, regarding due dates, returns and prepayments, apply to the administrative office tax.
(Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)