Companies with Over $5 Million in San Francisco Gross Receipts Could be in for a Rude Awakening on Their 2025 Tax Bill
It is important to note that when a company is engaging in business within the City and County of San Francisco, it is generally required to register for a San Francisco business license. Once registered, the City requires an annual renewal payment to maintain that registration and this payment is separate from the Gross Receipts Tax (GRT) itself.
This article outlines both the new GRT exemption threshold and the increased tax rates effective for 2025. Even if a taxpayer qualifies for the exemption, they must still renew their registration each year, which includes paying the renewal fee based on their reported San Francisco gross receipts
Increased Exemption Threshold
Prior to 2025, taxpayers with San Francisco gross receipts under approximately $2 million were generally exempt from the GRT.
As part of the City’s tax reform effective in 2025, the exemption threshold has been increased to $5 million. After applying the City’s often complex sourcing rules to determine San Francisco gross receipts, taxpayers under this $5 million threshold will generally not be subject to the GRT.
However, even if exempt from the GRT, businesses may still be subject to other City taxes such as the Commercial Rents Tax or other industry-specific levies.
Increased Gross Receipts Tax Rates
While the higher exemption threshold benefits smaller businesses, taxpayers in many industries that exceed $5 million in San Francisco gross receipts will experience significant rate increases compared to 2024.
Below is a summary of how rates have changed for several common industry categories:
Software, Professional, Scientific, Technical Services, Educational Services, Health Care, and Social Assistance (Partial rate table)
2025 Rates (based on SF gross receipts):
$0 – $2.5M → 1.00%
$2.5M – $25M → 1.50%
2024 Rates (Software example):
$0 – $1M → 0.579%
$1M – $2.5M → 0.675%
$2.5M – $25M → 0.770%
2024 Rates (Private Education and Health Services example):
$0 – $1M → 0.788%
$1M – $2.5M → 0.825%
$2.5M – $25M → 0.900%
Securities, Commodity Contracts, and Other Financial Investments and Related Activities (Partial rate table)
2025 Rates:
$0 – $2.5M → 1.50%
$2.5M – $25M → 3.00%
2024 Rates:
$0 – $1M → 0.620%
$1M – $2.5M → 0.713%
$2.5M – $25M → 0.791%
Summary
While the $5 million exemption offers meaningful relief to many small businesses, many larger taxpayers will face substantially higher GRT rates beginning in 2025. This article does not discuss how the gross receipts sourcing formula has changed for most industry types. Companies should review how the sourcing rule changes for 2025 will impact their calculated San Francisco gross receipts compared to 2024.