Supervisors advance amended gross‑receipts tax plan; final measures continued for further review

The San Francisco Board of Supervisors advanced an amended proposal to replace the city's payroll tax with a gross‑receipts tax and to raise new local revenue, but deferred final approval for additional review. The board's action bundled technical changes, rate adjustments by sector and a revised revenue target into an “amendment of the whole,” and the measure was continued to a committee-of-the-whole hearing next week.

Supervisor John Avalos, who led one of the competing proposals earlier in the year, and Mayor Ed Lee's administration negotiated changes with the controller’s office and business stakeholders before bringing the amended text to the board. Controller Ben Rosenfield summarized the amendment as a package that adjusts sectoral rates (reductions for some retailers and wholesalers, rate increases for information, restaurants, manufacturing and finance), clarifies exclusions for certain financial-service receipts, tightens pass-through entity treatment and contains phase‑in/phase‑out language and reporting requirements.

The amendment also sets a revenue target (discussed in debate as $20.5 million of new revenue) and indexes certain exemption thresholds to the Consumer Price Index so that inflation will not erode the small‑business exemption. The amendment lowers registration fees for some retail and wholesale businesses and includes a schedule of sector-by-sector rates that were negotiated with business groups.

Supervisor Avalos described the package as a watershed reform that shifts the tax base away from payroll — which the board and business groups have long argued can disincentivize hiring — while generating revenue for city priorities, including a concurrent Housing Trust Fund measure. Supervisor David Campos and others urged more analysis and asked for a detailed budget and legislative analyst review before a final vote; Campos also reiterated concerns that a single combined measure should be large enough to meet multiple policy needs and not dilute funding for priorities such as housing.

The board approved an amendment of the whole and continued the item to a committee‑of‑the‑whole meeting scheduled for July 31 for further public review and detailed analysis. A companion item that would have placed a separate revenue variant on the ballot was tabled by the board (vote to table recorded as 9–1). Supervisors said the extra week will allow additional technical review and public outreach ahead of the November ballot deadline.

The controller’s office will provide annual reporting and an implementation update to the board over the first five years if the measure moves forward, and staff said clarifying language on taxable receipts and pass‑through entities was included to respond to industry concerns raised during negotiations.