BOMA | Building Owners and Managers Association of San Francisco
Advocate: An Update on Legislative, Regulatory, and Political Issues Affecting Commercial Real Estate
July 19, 2018
How San Francisco’s New Commercial Rent Tax will Impact Property Owners and Tenants
By Manuel Fishman, Partner at Buchalter

Manuel Fishman is a Partner at Buchalter, a full business law firm with offices in Northern and Southern California. Mr. Fishman served as a member of the BOMA San Francisco Board of Directors and past chair of the BOMA Government Affairs Committee and the current BOMA liaison on the Gross Receipts and Commercial Rent Tax Ordinances.  Mr. Fishman can be reached at 415.227.3504 or

On July 17, 2018 I was honored to lead a panel discussion for BOMA members on the newly enacted San Francisco commercial rent tax – formally known as the “Early Care and Education Commercial Rents Tax,” because the large portion of the tax receipts (about 85% of tax revenues) are dedicated to fund early child care and education programs in San Francisco for children under age 6 in families that earn less than 85% of California median income. 

While none of us in the commercial real estate industry object, as a general matter, to the social goal that is trying to be achieved, our industry does object to being viewed as an open checkbook for funding social programs that benefit all San Franciscans – and a rent tax on commercial office space and certain retail space – a tax that is anticipated to raise over $145MM a year beginning in 2019, targets a specific industry and its tenants, to achieve a societal benefit.  To make matters worse, this law was not adopted by a vote of our Supervisors.  It was placed on the June 2018 ballot by just 10,000 voters and then passed by the slimmest of margins, 50.3% of the people who voted in the June election.

Here is a short summary of some of the questions we discussed.

Q:  Is the tax the same as the Gross Receipts Tax?

A:  No. This is a new tax, and property owners have to pay it in addition to the Gross Receipts Tax.  So, rents subject to the commercial rent tax are taxed twice – once as a gross receipt under the Gross Receipts Tax and second as rents under the commercial rents tax.

Q:  What is being taxed and is it different from what is being taxed under the Gross Receipts Tax?

A:  This commercial rents tax only tax “gross receipts from the lease of commercial space” in San Francisco– which, for the most part, means rents.  The San Francisco Gross Receipts Tax is a tax on a broader group of income – all gross receipts from all business activities in San Francisco. 

Q:  How much is the tax?

A:  The tax is 1% on “gross receipts from the lease” of warehouse space, and 3.5% on “gross receipts from the lease” of other “commercial space”, which includes office and retail unless the property class is excluded. 

Q:  What is a “gross receipt from the lease of commercial space”? 

A:  We don’t know.  The Ordinance uses the word “lease” in several places, as opposed to the Gross Receipts Tax, which also refers to licenses and other business activities.  Does it include parking management fees?  Does it include service fees in connection with management services/ administrative services/construction management services provided to tenants?  Are rooftop license agreements considered leases of commercial space?  What about “profits” shared with landlords by tenants who sublease space?  Property managers need to get specific advice on these questions. 

Q:  What property classes are excluded?

A:  Commercial space excludes space that is used for industrial uses, art uses (a use that refers to art studios and theatres, but not movie theatres) and for retail sales or service activities that are not formula retail. “Formula retail” is a retail establishment that has 11 or more establishments in operation located anywhere in the world and has certain standardized operations or decor.  In addition, rents received from non profits and from federal, state and local governments are excluded.

Q:  Are certain person exempt from the tax?

A:  Yes.  Non profits that own or lease property are exempt from the tax and nationally chartered banks and certain insurance and public pension funds that directly own real estate are exempt from the tax.  Small businesses with total gross receipts (not just rents) in San Francisco of less than $1MM per year are also exempt.

Q:   How are our tenants affected?

A:  Tenants are impacted two ways.  First, a tenant that subleases space in San Francisco has to pay the tax on the rents it is paid.  Second, landlords will most definitely pass along to tenants the cost of the commercial rent tax assessed on the rents paid by tenants.  This clearly makes it more expensive for tenants to do business in San Francisco, and certain start-up industries will find the tax burdensome.

Q:  Do my leases allow me as a property owner to pass along the commercial rent tax to tenants.

A:  It should – so please check with your attorney. This is very important as the tax goes into effect in January 2019, and if you have a base year lease you want to exclude the tax from the base year.

Q:  How is the City going to collect this tax?

A:  There is no formal guidance from the City.  The tax is administered by the Tax Collector.  Based on preliminary discussions with the Tax Collector’s office, the City intends to add a page to the current Gross Receipts Tax filing for the commercial rent tax, and estimated payments will be required to be made quarterly together with the Gross Receipts Tax.

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In This Issue
RESULTS: BOMA SF-PAC Voter Guide for the June 5, 2018 Election
•  BOMA San Francisco's Member Interests Were Well-Represented
•  Thank You to BOMA San Francisco Members For Your Support!
How San Francisco’s New Commercial Rent Tax will Impact Property Owners and Tenants
•  By Manuel Fishman, Partner at Buchalter
San Francisco's Tall Buildings Study - Seismic Effects and Geotechnical Considerations
•  Forthcoming Report on Seismic Effects on Tall Buildings in San Francisco
BOMA International's Political Action Committee (BOMAPAC) Needs Your Support
•  Jim Collins with Shorenstein is leading the effort for BOMA San Francisco
San Francisco Accessible Business Entrance Program
•  Changes to the Measure Effective as of June 1, 2018
BOMA California Advocacy Update
•  Mandatory Benchmarking Law; Two BOMA California Sponsored Bills Signed by the Governor
BOMA International Advocacy Update
•  ENERGY STAR® Preserved in Appropriations Bills

About Buchalter.  Buchalter is a full-service law firm that provides counsel to clients at all stages, and helps them navigate any legal challenges and decisions they may face. Our clients are engaged in a diverse global economy governed by complex laws and regulations, and trust us as advisers and business partners with in depth knowledge of the relevant business issues and market standards in over 30 diverse practice and industry groups. 

Real Estate:  Lawyers in the firm’s Real Estate Practice Group represent lenders, investors, and owners in  all types of real estate projects—office, hotel, shopping centers and urban retail, multifamily and industrial. The firm represents both purchasers and sellers in connection with real estate acquisitions and dispositions, including entitlements and land use/zoning matters, and landlords and tenants in connection with commercial leases. The firm has an active state and local tax practice relating to real estate, and is recognized as a leader in representing banks, opportunity funds and others in real estate financings, construction loans and equity investments.  Real Estate Practice Group clients include national and regional institutions as well as entrepreneurial and middle market clients who rely on the quality and cost-effectiveness of the firm’s legal services.

Premier Law Firm. In addition to being recognized as one of the largest regional firms, we are also consistently ranked among the leading law firms in Arizona and California by Chambers USA, The Legal 500 US, Who’s Who Legal, Best Lawyers, The Daily Journal, and the Orange County, Los Angeles, and Phoenix Business Journals.

Geographic Platform. The firm focuses primarily on the West Coast, with offices in Northern and Southern California, Seattle, Washington, and Scottsdale, Arizona.  Our attorneys are licensed to practice in more than 20 states across the U.S., and we have a national and international reach, servicing clients around the world.

Contact:  Manuel Fishman at 415-227-3504 or



•  Energy & Environment Committee 
August 7, 2018
11:30 a.m. to 1:00 p.m.
Ferry Building, Port Commission Hearing Room, San Francisco, CA
Please click here for more information.
•  Government Affairs Policy Advisory Committee (GAPAC) Meeting
August 8, 2018
12:00 p.m. to 1:00 p.m.
235 Montgomery Street (Russ Building), 7th Floor, San Francisco, CA
Please click here for more information.
Emergency Preparedness Committee (EPC)
August 14, 2018
12:00 p.m. to 1:00 p.m.
225 Bush Street, Suite 1810
Please click here for more information.
Codes and Regulations Committee 
August 29, 2018
12:00 p.m. to 1:00 p.m.
201 California Street, 2nd Floor Conference Room, San Francisco, CA
Please click here for more information.
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