§ 954.1.

SMALL BUSINESS EXEMPTION

a.

Notwithstanding any other provision of this Article, a “small business enterprise,” as hereinafter defined for purposes of this Article 12-A-1, shall be exempt from payment of the gross receipts tax, nevertheless, a small business enterprise shall pay the annual registration fee pursuant to Section 855 of Article 12.

b.

For purposes of this Article 12-A-1, the term “small business enterprise” shall mean and include any person or combined group, except for a lessor of residential real estate:

1.

Whose gross receipts within the City for the preceding tax year did not exceed $1,000,000, adjusted annually in accordance with the increase in the Consumer Price Index: All Urban Consumers for the San Francisco/Oakland/San Jose Area for All Items as reported by the United States Bureau of Labor Statistics, or any successor to that index, as of December 31st of the preceding year, beginning with December 31, 2014; and

2.

Who filed a tax return by the last day of February for the preceding tax year, if that person or group had gross receipts in the City of over $500,000. If a person is required to file a tax return under this Section, and fails to file a return by that date, the taxpayer shall be subject to a penalty as specified in subsection (c).

c.

In lieu of the penalty specified in Section 6.17-3 of Article 6 for failing to file a return, any person who otherwise qualifies for the small business exemption set forth in this Section, and who had gross receipts in the City of over $500,000, who fails to file a return by the last date of February shall pay a penalty as follows:

1.

The penalty for the first month, or fraction thereof, that the return is delinquent, shall be 5 percent of the amount of the tax liability, calculated without regard to the small business exemption in this Section. The penalty shall increase by an additional 5 percent each month, or fraction thereof, that the return is delinquent, up to a maximum of 20 percent of the tax liability. Any penalties remaining unpaid for a period of 90 days or more shall be subject to an additional penalty of 20 percent of the amount of the tax liability excluding penalties and interest.

2.

Penalties are due and payable when assessed. Unpaid penalties, interest and fees shall accrue interest at the rate of 1 percent per month, or fraction thereof, from the date that they are assessed through the date of payment. The total amount of the penalties, interest and fees shall not exceed the amount of the person’s gross receipts tax liability for the period but for the small business exemption.

d.

The Tax Collector may, at his or her discretion, reduce the penalty set forth in subsection (c) to not less than $100 upon a showing that the late filing of the return was due to reasonable cause and not due to willful neglect.

e.

For purposes of this Article 12-A-1, and notwithstanding any other provision of this Section, a lessor of residential real estate is a “small business enterprise” if and only if the lessor leases fewer than 4 units in any individual building. “Residential real estate” means real property where the primary use of or right to use the property is for the purpose of dwelling, sleeping or lodging other than as part of the business activity of accommodations. For purposes of this Article 12-A-1, Article 12-A, and Article 12, a lessor of residential real estate is treated as a separate person with respect to each individual building in which it leases residential real estate units, notwithstanding Section 6.2-15 of Article 6, or Section 956.3 of this Article. The provisions of this subsection apply only to leasing residential real estate units within a building, and not to any business activity related to other space, either within the same building or other buildings, which is not residential real estate. The Tax Collector is authorized to determine what constitutes a separate building and the number of units in a building.

History

(Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014)

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