The Commercial Rents Tax (also referred to as the Early Care and Education Commercial Rents Tax) generally applies to businesses leasing commercial space in the City that have more than $2,325,000 in San Francisco gross receipts. The small business exemption amount was recently set with passage of Proposition M in November 2024. Learn more.
This tax is filed as part of the Annual Business Tax Return.
For 2025, persons are required to file if they lease, sublease, or otherwise rent out commercial space in San Francisco and had more than $2,325,000 in combined taxable San Francisco gross receipts.
In addition to the existing Gross Receipts Tax, this measure imposes an additional gross receipts tax of:
- 1% on the amounts a business receives from the lease or sublease of warehouse space in the City;
- 3.5% on the amounts a business receives from the lease or sublease of other commercial spaces in the City.
Commercial space is any building or structure, or portion of a building or structure, that is not residential real estate, as defined in section 954.1 of Article 12-A-1. For the purposes of this tax, commercial space does not include any building or structure, or portion of a building or structure, that is used for:
- Industrial Use, as defined in Section 102 of the Planning Code as of June 5, 2018.
- Arts Activities, as defined in Section 102 of the Planning Code as of June 5, 2018.
- Retail Sales or Service Activities or Retail Sales or Service Establishments that are not Formula Retail uses as defined in Sections 303.1(b) and 303.1(c) of the Planning Code
Estimated business tax payments are due April 30th, July 31st and October 31st.
- Article 21: Early Care and Education Commercial Rents Tax Ordinance
- Tax Collector Regulation 2019-2: Early Care and Education Commercial Rents Tax Regulation (Costs Passed On To Tenants Under Lease)
History of the Commercial Rents Tax
In June 2018, San Francisco voters approved Proposition C, an additional tax that generally applies to businesses leasing out commercial space in the City, to fund childcare and early education programs. In November 2024, San Francsico voters approved Proposition M, which updated the Tax by setting the Small Business Exemption at $2,325,000.
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Small Business Exemption Update
Proposition M set the Small Business Exemption for the Commercial Rents Tax at $2,325,000 for 2025. Businesses with gross receipts of $2,325,000 or less are exempt from this tax. This amount is lower than the $5,000,000 small business exemption that applies to most other Annual Business Taxes, such as the Gross Receipts Tax, Homelessness Gross Receipts Tax, and Overpaid Executive Tax.
Example:
If a business leases out commercial space in the City and has $4 million in San Francisco gross receipts, it will be required to file the Commercial Rents Tax, even though it may be exempt from filing the Gross Receipts Tax and other taxes with a $5 million small business exemption threshold.