New Study: San Francisco Business Taxes Far Surpass Other Bay Area Cities

Findings Highlight Significance of Business Taxes as Cities Ramp Up Competition for New Employers

Many businesses have choices in where they decide to locate, invest, create jobs and grow, and many factors play into those decisions. The amount of taxes cities levy on businesses is one of those factors. And it’s one that is taking on increasing significance as competition heats up among cities to attract and retain businesses that are looking to reduce costs in an uncertain economy and have been freed by a rise in remote work to locate their operations almost anywhere or nowhere.

A new study released today (Feb. 16) by the Bay Area Council Economic Institute found that San Francisco’s business tax burden for large corporations is more than double the next highest city, Oakland, and many times higher than cities with much lower business taxes, including San Jose, Sunnyvale, and Walnut Creek.

Read the full report on Bay Area business taxes>>

The study examined the business tax burdens among 15 Bay Area cities and highlights the sizeable disadvantage that high-tax cities like San Francisco have in competing to attract and retain businesses, particularly larger companies. The study used three hypothetical companies to illustrate the business tax burden across different industries and for different-size companies. To ensure an accurate comparison, the study also selected cities that have similar business tax vehicles and structures, including both gross receipts and so-called employee headcount taxes. The results are pronounced.

For a tech or information company with 250 employees and $750 million in taxable gross receipts, total business taxes in San Francisco exceed $10.4 million annually. For that same company, the tax burden reaches just over $4 million in Oakland, $17,000 in San Jose and $3,600 in Sunnyvale.

For a financial services company with 1,000 employees and $500 million in taxable gross receipts, total business taxes in San Francisco surpass $6.8 million annually, far more than double the almost $2.7 million for Oakland and multiples higher than the almost $12,000 Walnut Creek would collect.

And for a professional services company with 75 employees and $100 million in taxable gross receipts, the tax bill in San Francisco amounts to $1.1 million; again, more than twice the $493,000 Oakland would collect and many hundreds times what the same company would pay in business taxes in San Jose.

“The study offers stark insight into the considerable challenges high business tax cities like San Francisco face as they struggle to emerge from the economic doldrums of the pandemic and re-make central business districts and office towers left mostly empty by companies downsizing, relocating and shifting to remote work,” said Jeff Bellisario, Executive Director of the Bay Area Council Economic Institute.

The study comes just a few days after San Francisco Mayor London Breed announced a series of proposals to temporarily reduce or delay various business taxes to spur new companies to come to the city and encourage smaller, local businesses to remain. The proposals all require approval of the San Francisco Board of Supervisors.