Administrative Office Tax (AOT)

 

The Administrative Office Tax (AOT) is a 1.4% tax on the San Francisco payroll expense of a person or combined group engaging in business within San Francisco as an administrative office if:

• Over 50% of the total combined San Francisco payroll expense of that person and its related entities for the preceding tax year was associated with providing administrative or management services exclusively to that person and its related entities.

• That person and its related entities had over 1,000 U.S. employees as of the most recent December 31st, and over $1 billion in combined gross receipts reported (or that will be reported) on United States federal income tax return(s) for the person or combined group’s most recently completed federal income tax year.

The AOT is filed as part of the Annual Business Tax Return. Beginning in tax year 2019, there is an additional 1.5% homelessness gross receipts tax on administrative offices, for a combined rate of 2.9%.

About the AOT

A 1.4% tax on the San Francisco payroll expense of a person or combined group engaging in business within San Francisco as an administrative office in lieu of other taxes provided in Article 12-A-1 and Article 12-A. Beginning in tax year 2019, there is an additional 1.5% homelessness gross receipts tax on administrative offices, for a combined rate of 2.9%.

A person or combined group is engaging in business within San Francisco as an administrative office only if over 50% of the total combined San Francisco payroll expense of that person and its related entities for the preceding tax year was associated with providing administrative or management services exclusively to that person and its related entities. In addition, that person and its related entities must have had over 1,000 U.S. employees as of the most recent December 31st, and over $1 billion in combined gross receipts reported (or that will be reported) on United States federal income tax return(s) for the person or combined group’s most recently completed federal income tax year. See Code section 953.8 for more information.

 

What are administrative or management services?

Administrative or management services comprises internal support services provided on an enterprise-wide basis, such as executive office oversight, company business strategy, record keeping, risk management, personnel administration, legal, accounting, market research and analysis, and training services; it does not include sales personnel or personnel actively engaged in marketing, research and development, direct customer service, and product support services.

 

What documentation might the Tax Collector use to determine compliance?

In an audit, the Tax Collector would request documents to support the entity’s classification of employees. This may include reviewing a cost center analysis and the job functions of individual employees, among other things.

 

Estimated Quarterly Tax Payments

Estimated business tax payments are due April 30th, July 31st and October 31st. Residential Landlords with less than $2,090,000 in gross receipts are exempt from estimated quarterly business tax payments and will not receive an estimated business tax payment notice. 2023 estimated business tax amounts due will be payable on the business tax payment portal after March 1, 2023 for businesses that file their 2022 Annual Business Tax Return on or before February 28, 2023.  For business that file their 2022 Annual Business Tax Return after March 1, 2023, estimated business tax amounts due will be payable on the business tax payment portal 48 hours after the 2022 Annual Business Tax Return is submitted.

 

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