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Committee backs telecom reclassification in gross‑receipts tax; analysts estimate $6.6M general‑fund reduction
Summary
The Government Audit and Oversight Committee voted 3-0 to forward an ordinance that would reclassify telecommunications activity for the City’s gross receipts tax, moving telecom from a higher tax category to a lower one effective Jan. 1, 2026. The Budget Analyst estimated a $6.6 million hit to the general fund and $1.6 million to the Our City Our
The Government Audit and Oversight Committee on Sept. 4 forwarded to the full Board an ordinance to reclassify telecommunications business activity for purposes of San Francisco’s gross‑receipts tax and the homelessness gross‑receipts tax, moving telecommunications from category 5 to category 4 beginning Jan. 1, 2026.
Amanda Fried of the Office of the Treasurer and Tax Collector told the committee that consolidation of business activity categories under Proposition M grouped telecommunications with information and professional services, producing a higher tax rate for telecommunications than for other utilities. Fried said the proposed ordinance would “move telecommunications with utilities and manufacturing so that all utilities are treated consistently for tax purposes.” She noted the ordinance was scheduled alongside two settlements with telecommunications companies so the committee could consider the overall fiscal impact for the industry.
Nick Menard of the Budget and Legislative Analyst’s office presented the fiscal effects and said the change would affect about 60 taxpayers. He told the committee the reclassification “will result in a decrease in general fund revenues of $6,600,000 starting next fiscal year 2627, and then $1,600,000 in the Our City, Our Home fund,” reflecting the calendar‑year 2026 change and impact in fiscal year 2026–27. Menard said the revenue loss had not been budgeted and characterized the item as a “policy matter” for the Board rather than a recommendation from his office.
Supervisor Steven Sherrill asked clarifying questions about Prop M’s long‑term fiscal impacts; Menard said Prop M is still projected to increase general fund revenues over time but that the reclassification would reduce the long‑term gain by about $6.6 million annually beginning in fiscal year 2026–27. The committee voted 3-0 to forward the ordinance to the Board of Supervisors with a positive recommendation. The clerk said items acted on today are expected on the Board’s Sept. 16, 2025 agenda.
