SEC. 954.1. SMALL BUSINESS EXEMPTION.

   (a)   Notwithstanding any other provision of this Article 12-A-1, a “small business enterprise,” as hereinafter defined for purposes of this Article, 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:

      (1)   For tax years beginning on or after January 1, 2014 and ending on or before December 31, 2020, any person or combined group, except for a lessor of residential real estate, whose gross receipts within the City 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 31 of the preceding year, beginning with December 31, 2014.

      (2)   For tax years beginning on or after January 1, 2021 and ending on or before December 31, 2024, any person or combined group, except for a lessor of residential real estate, whose gross receipts within the City did not exceed $2,000,000, 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 31 of the preceding year, beginning with December 31, 2021.

      (3)   For tax years beginning on or after January 1, 2025, any person or combined group, except for a lessor of residential real estate, whose gross receipts within the City did not exceed $5,000,000, adjusted annually in accordance with the increase in the Consumer Price Index: All Urban Consumers for the San Francisco/Oakland/Hayward Area for All Items as reported by the United States Bureau of Labor Statistics, or any successor to that index, as of December 31 of the calendar year two years prior to the tax year, beginning with tax year 2026, and rounded to the nearest $10,000.

   (c)   For purposes of this Article 12-A-1, and notwithstanding any other provision of this Section 954.1, 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 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 12-A-1. The provisions of this subsection (c) 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.

(Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; amended by Ord. 222-14 , File No. 140798, App. 11/7/2014, Eff. 12/7/2014; Ord. 10-18, File No. 171133, App. 2/1/2018, Eff. 3/4/2018; amended by Proposition F, 11/3/2020, Eff. 12/29/2020, Oper. 1/1/2021; Proposition M, 11/5/2024, Eff. 12/20/2024)

SEC. 955. PERSONS DERIVING NO GROSS RECEIPTS FROM BUSINESS ACTIVITIES OUTSIDE THE CITY.

   Notwithstanding any other provision of this Article, any person subject to the gross receipts tax who derives non-exempt gross receipts from business activities within the City and derives no gross receipts from business activities outside the City is subject to tax on all non-exempt gross receipts.

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

SEC. 956. ALLOCATION AND APPORTIONMENT FOR ALL PERSONS DERIVING GROSS RECEIPTS FROM BUSINESS ACTIVITIES BOTH WITHIN AND OUTSIDE THE CITY.

   All persons deriving gross receipts from business activities both within and outside the City shall allocate and/or apportion their gross receipts to the City as follows:

   (a)   for taxable years ending on or before December 31, 2024, using the rules set forth in Sections 956.1 and 956.2, in the manner directed in Sections 953.1 through 953.7, inclusive, and in Section 953.9 of this Article 12-A-1; and

   (b)   for taxable years beginning on or after January 1, 2025, in the manner directed in Sections 953.20 through 953.26, inclusive, and using the rules set forth in Sections 956.1 and 956.2, as applicable.

(Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; amended by Proposition M, 11/5/2024, Eff. 12/20/2024)

SEC. 956.1. ALLOCATION OF RECEIPTS FROM REAL, PERSONAL, TANGIBLE AND INTANGIBLE PROPERTY.

   (a)   For all persons required to determine an amount of gross receipts pursuant to this Section 956.1, that amount shall be all non-exempt gross receipts within the City as determined hereunder.

   (b)   Gross receipts from the sale, lease, rental, or licensing of real property are in the City if the real property is located in the City.

   (c)   Gross receipts from sales of tangible personal property are in the City if the property is delivered or shipped to a purchaser within the City regardless of the f.o.b. point or other conditions of the sale.

   (d)   Gross receipts from the rental, lease, or licensing of tangible personal property are in the City if the property is located in the City.

   (e)   Gross receipts from services are in the City to the extent the purchaser of the services received the benefit of the services in the City. The Tax Collector shall promulgate regulations interpreting whether the purchaser of services received the benefit of services in the City for purposes of this Section 956.1(e). In promulgating such regulations, the Tax Collector shall comply with the requirements of Section 6.16-1 of Article 6 of this Business and Tax Regulations Code, including but not limited to the requirement that the Tax Collector hold a public hearing and allow public comment prior to the adoption of the regulations. Further, in promulgating such regulations, the Tax Collector shall review and consider sourcing rules and safe harbor provisions adopted by the State of California and other jurisdictions.

   (f)   Gross receipts from intangible property are in the City to the extent the property is used in the City. In the case of financial instruments, sales are in the City if the customer is located in the City. The Tax Collector shall promulgate regulations interpreting whether intangible property is used in the City for purposes of this Section 956.1(f) and whether, in the case of financial instruments, the customer is located in the City. In promulgating such regulations, the Tax Collector shall comply with the requirements of Section 6.16-1 of Article 6 of this Business and Tax Regulations Code, including but not limited to the requirement that the Tax Collector hold a public hearing and allow public comment prior to the adoption of the regulations. Further, in promulgating such regulations, the Tax Collector shall review and consider sourcing rules and safe harbor provisions adopted by the State of California and other jurisdictions.

(Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; amended by Proposition M, 11/5/2024, Eff. 12/20/2024)

SEC. 956.2. APPORTIONMENT OF RECEIPTS BASED ON PAYROLL.

   (a)   For all persons required to determine an amount of gross receipts pursuant to this Section 956.2, that amount shall be all non-exempt combined gross receipts of the person multiplied by a fraction, the numerator of which is payroll in the City and the denominator of which is combined payroll.

   (b)   Combined gross receipts are the total worldwide gross receipts of the person and all related entities to the person, unless the election provided for in California Revenue and Taxation Code Section 25110 is in effect for the person, in which case combined gross receipts shall be computed consistently with the water's edge election, as set forth therein.

   (c)   Combined payroll is the total worldwide compensation paid by the person and all related entities to the person, unless the election provided for in California Revenue and Taxation Code Section 25110 is in effect for the person, in which case combined payroll shall be computed consistently with the water's edge election, as set forth therein. A person who has no combined payroll in a tax year shall have no gross receipts under this Section for that tax year.

   (d)   Payroll in the City is the total amount paid for compensation in the City by the person and by all related entities to the person.

   (e)   Compensation paid in the City shall be determined as follows:

      (1)   Where compensation is paid by reason of work performed or services rendered by an individual wholly within the City, all of the compensation for such individual shall be attributable to the City.

      (2)   Where compensation is paid by reason of work performed or services rendered by an individual partly within and partly without the City, the portion of such compensation attributable to the City shall be determined as follows:

         (A)   Except as otherwise provided in this Section 956.2(e), the portion of such compensation attributable to the City shall be the portion of such compensation which the total number of working hours employed within the City bears to the total number of working hours within and without the City.

         (B)   If the amount of such compensation depends on the volume of business transacted by such individual, then the portion of such compensation attributable to the City shall be the portion of such compensation which the volume of business transacted by such individual in the City bears to the volume of business transacted by such individual within and without the City.

         (C)   If it is impracticable, unreasonable, or improper to apportion such compensation as aforesaid either because of the particular nature of the services of such individual, or on account of the unusual basis of compensation, or for any other reason, then the amount of such compensation reasonably attributable to work performed or services rendered in the City shall be determined on the basis of all relevant facts and circumstances of the particular case, in accordance with any rulings or regulations issued or promulgated by the Tax Collector for the purpose.

         (D)   If the Tax Collector determines that the percentage of compensation attributable to the City, for any one or more persons, is a relatively stable percentage, the Tax Collector may establish that percentage as a prima facie evidence of compensation attributable to the City; provided, that the Tax Collector shall condition the establishment of such fixed percentage upon the obligation of the taxpayer to report immediately to the Tax Collector any significant change in the taxpayer’s mode of business which may impact the portion of the person’s compensation which is attributable to the City; and, provided further, that the Tax Collector may rescind any such fixed percentage at any time by providing written notice to the taxpayer of such rescission.

   (f)   "Compensation" means wages, salaries, commissions and any other form of remuneration paid to employees for services. In the case of any person who has no employees, compensation shall also include all taxable income for federal income tax purposes of the owners or proprietors of such person who are individuals. Those owners or proprietors shall be treated as individuals to whom compensation is paid for purposes of subsection (e).

   (g)    The apportionment provided by this Section 956.2 shall not include in either the numerator or the denominator any payroll of persons exempt from tax under subsections (a) or (e) of Section 954.

(Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; amended by Proposition F, 11/3/2020, Eff. 12/29/2020, Oper. 1/1/2021; Proposition M, 11/5/2024, Eff. 12/20/2024)

SEC. 956.3. COMBINED RETURNS.

   A person engaging in business within the City must file gross receipts tax returns as provided in Article 6. Those returns must be filed on a combined basis with all of that person's related entities. That person, and all of that person's related entities, constitute a combined group. Every combined group must file a single return; the combined group must choose a single person to file the return on its behalf. Each person within the combined group engaging in business in the City must provide a power of attorney to the person filing the return, authorizing the person filing the return to file said return and to act on behalf of each person with respect to payments, refunds, audits, resolutions, and any other items related to the tax liability reflected in the return. The power of attorney shall be substantially in a form prescribed or approved by the Tax Collector. Each return filed by a combined group constitutes a combined return under this Article and Article 6. The person filing any combined return shall pay the tax liability reflected on the return and any liability determined on audit at the time and in the manner set forth for returns and liabilities in Article 6.

(Added by Proposition E, App. 11/6/2012, Oper. 1/1/2014; amended by Ord. 271-13, File No. 131031, App. 11/27/2013, Eff. 12/27/2013, Oper. 1/1/2014)

SEC. 957. TAX COLLECTOR AUTHORIZED TO DETERMINE GROSS RECEIPTS.

   The Tax Collector may, in his or her reasonable discretion, independently establish a person's gross receipts within the City and establish or reallocate gross receipts among related entities so as to fairly reflect the gross receipts within the City of all persons. This authority extends to determining whether any amount excluded from gross receipts by virtue of Section 952.3(f) is in whole or in part compensation or payment for services and thus included in gross receipts.

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