Commercial property lessors in San Francisco should prepare for a sizable tax hike effective January 2019; the City’s voters passed Proposition C in June. The Commercial Rent Tax for Childcare and Early Education Tax imposes an additional 3.5% gross receipts tax (GRT) on rentals of commercial space within the city, while warehouse lessors can expect an additional increase of 1% GRT. Up until now, San Francisco has collected gross receipts tax from commercial property lessors in the range of 0.285% (for businesses with gross receipts of less than $5 million) to 0.3% (for businesses with more than $5 million in gross receipts).

“Warehouse space” is defined in the Proposition as it is in Section 102 of the Planning Code, as property used as commercial storage, volatile materials storage, wholesale storage, or as a storage yard. “Commercial space” is defined as any building or structure, or portion thereof, which is not residential real estate as defined in Section 954.1(e) of Article 12-A-1 of the Business and Tax Regulations Code. Commercial space that will be exempt from the tax include small businesses, some nonprofit organizations, government entities, and properties with the following uses:

  • Industrial Use, as defined in Section 102 of the Planning Code
  • Arts Activities, as defined in Section 102 of the Planning Code
  • Retail Sales or Activities or Retail Sales or Service Establishments, as defined in Section 303.1(c) of the Planning Code that do not have Formal Retail uses as defined in Section 303.1(b) of the Planning Code

The Proposition C tax will be codified as Article 21 of San Francisco Business and Tax Regulations Code; you can read the text of Article 21 here

Do you have questions about Article 21 and how it might impact your business? If so, we are here to help. Contact one of our tax experts at 925.271.8700 or at