SERVING SAN FRANCISCO REMOTELY · SINCE 2005
San Francisco, CA Bookkeeping Services — Prop M Raised the Exemption to $5 Million
Last Updated: October 6, 2026Proposition M changed San Francisco business tax more than anything in a decade, and most of the change is good news for small businesses. Passed in November 2024, it raised the Small Business Exemption ceiling for the Gross Receipts Tax and the Overpaid Executive Tax from $2.25 million to $5 million, effective from the 2025 tax year filed in 2026 — so most businesses under $5 million in San Francisco gross receipts are now exempt from both. It also lowered the Homelessness Gross Receipts Tax threshold so it reaches activity above $25 million, and shifted apportionment to 75% gross receipts in the city and 25% payroll. Every one of those tests runs off figures that live in your books.
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San Francisco owners and their CPAs come to us because Prop M moved every threshold at once, and knowing which side of $5 million you sit on requires receipts recorded and sourced accurately all year. Dedicated bookkeepers, monthly reconciliations, and tax-ready financials — plans from $75/month, extra hours at $15/hour, and wholesale $10/hour rates for CPA firms — backed by a 100% money-back guarantee on your 1st retainer, refundable on the unused balance.
On This Page
- Running the numbers in San Francisco
- San Francisco tax cheat sheet
- The $5 million line is now the number that matters
- A quarter of the formula is payroll
- Deferred revenue, usage billing and work in progress
- What we handle for San Francisco businesses
- San Francisco FAQs
Running the Numbers in San Francisco
San Francisco’s base is software, AI, biotech and the professional services that orbit them, with a hospitality and retail layer that has had a harder decade. What they have in common, for bookkeeping purposes, is revenue that is easy to misstate: subscription income billed ahead of delivery, usage-based billing settled in arrears, platform revenue arriving net of fees, and consulting work in progress at month end.
The Prop M changes make that precision newly valuable. The difference between $4.9 million and $5.1 million in San Francisco gross receipts is now the difference between exempt and not, and the apportionment formula puts a quarter of the weight on payroll — meaning where your people work matters as well as where your revenue comes from.
San Francisco Tax Cheat Sheet
| Item | Rate / Fee | Deadline |
|---|---|---|
| Small Business Exemption | Raised by Prop M from $2.25m to $5 million in San Francisco gross receipts, from tax year 2025 — exempting most small businesses from the Gross Receipts Tax and Overpaid Executive Tax | Annual business tax filing |
| Gross Receipts Tax | Charged on San Francisco gross receipts above the exemption, at rates by business activity | Annually, with quarterly instalments for larger filers |
| Homelessness Gross Receipts Tax | Reaches business activity generating over $25 million in San Francisco gross receipts, lowered from $50m | With the annual return |
| Overpaid Executive Tax | Rates from 0.020% to 0.120% by executive pay ratio for 2025 and 2026; subject to the same $5m exemption | With the annual return |
| Apportionment | Prop M moved to 75% gross receipts in the city, 25% payroll | With the annual return |
| California annual franchise tax | $800 minimum per entity, plus the LLC gross-receipts fee from $250,000 | 15th day of the 4th month |
San Francisco Office of the Treasurer & Tax Collector, checked 3 October 2026. Proposition M was approved by voters on 5 November 2024; the $5 million Small Business Exemption applies from the 2025 tax year. Thresholds and rates change — confirm your position with the Treasurer or your CPA.
The $5 Million Line Is Now the Number That Matters
Before Prop M, the Small Business Exemption ceiling was $2.25 million, which caught a lot of ordinary San Francisco businesses. From tax year 2025 it is $5 million of San Francisco gross receipts, and businesses under it are exempt from both the Gross Receipts Tax and the Overpaid Executive Tax.
That is a genuine simplification and we would rather say so than manufacture alarm. But it concentrates everything onto one figure: your San Francisco gross receipts. Not total revenue. Not profit. Receipts sourced to the city.
For a business with customers outside San Francisco, that sourcing is a bookkeeping decision made when revenue is recorded, and it is not reconstructable from a year-end total. If you are anywhere near $5 million, knowing the number monthly is the difference between a confident filing and an anxious one.
A Quarter of the Formula Is Payroll
Prop M also changed how receipts are apportioned to San Francisco: broadly 75% on gross receipts in the city and 25% on relative payroll.
That second quarter is the part businesses forget, and remote and hybrid working has made it unstable. Where your employees actually work now affects your San Francisco apportionment, which means payroll records need a location dimension rather than being a single aggregate figure.
We are bookkeepers and the apportionment calculation belongs to your CPA. What we provide is payroll recorded by work location and revenue recorded with enough detail to be sourced — the two inputs the formula runs on. Without those, any apportionment is an estimate dressed up as a calculation.
Deferred Revenue, Usage Billing and Work in Progress
San Francisco is full of businesses whose revenue does not match their cash. Annual subscriptions billed up front create deferred revenue. Usage-based products bill in arrears, creating accrued revenue. Agencies and consultancies carry unbilled work in progress at month end.
Cash-basis books show none of it, which matters for more than tax. A company that counts an annual prepayment as revenue in month one looks profitable and then looks terrible for eleven months, and no investor or acquirer takes that set of numbers seriously.
We maintain all three as real, reconciled balances on the balance sheet. Accrual-basis bookkeeping is included at the same rate as cash — unlike several providers in this market who gate accrual behind a plan upgrade or a custom quote.
What We Handle for San Francisco Businesses
- San Francisco gross receipts tracked and sourced monthly, so the $5 million exemption test is answerable at any point in the year
- Payroll recorded by work location, since Prop M apportionment puts 25% weight on relative payroll
- Deferred revenue, accrued revenue and unbilled work in progress maintained as real balances — accrual basis at no extra charge
- Platform and processor revenue booked gross, with fees recorded separately rather than netted
- The $800 California franchise tax and LLC gross-receipts fee tracked alongside the city position
- Catch-up bookkeeping at $75 per month behind, no limit on how far back
San Francisco Bookkeeping FAQs
Is my San Francisco business exempt from the Gross Receipts Tax?
If your San Francisco gross receipts are $5 million or less, generally yes from the 2025 tax year — Proposition M raised the Small Business Exemption ceiling from $2.25 million to $5 million, and it applies to the Overpaid Executive Tax as well. The test is on San Francisco gross receipts rather than total revenue or profit. Confirm your own position with the Treasurer & Tax Collector or your CPA.
What did Proposition M change?
It was approved on 5 November 2024 and restructured San Francisco business tax. The headline changes: the Small Business Exemption rose to $5 million from tax year 2025, the Homelessness Gross Receipts Tax threshold moved so it reaches activity above $25 million, Overpaid Executive Tax rates run from 0.020% to 0.120% by pay ratio for 2025 and 2026, and apportionment shifted to roughly 75% gross receipts in the city and 25% payroll.
Does where my remote employees work affect San Francisco tax?
It can, because apportionment under Prop M puts about a quarter of its weight on relative payroll. That makes work location a figure worth recording rather than assuming. The apportionment itself is a calculation for your CPA; our job is making sure the payroll and revenue inputs are real.
Do you handle deferred revenue for an SF SaaS company?
Yes, and at no extra charge — accrual-basis bookkeeping is included at the same rate as cash basis on every plan. Subscription revenue is recognised over the term, usage billing is accrued, and unbilled work in progress is carried as a real balance, so the monthly statements mean something to a board or an investor.
Do you have a San Francisco office?
No. We are a fully virtual bookkeeping company — founded in Vienna, Virginia on May 25, 2005 and headquartered in San Juan, Puerto Rico today, US-registered with delivery centers in India, which we disclose on our About page. We are not going to imply a San Francisco storefront we do not have. What we do have is San Francisco clients served remotely since 2005, a dedicated bookkeeper on plans from $75/month, and a 100% money-back guarantee on your 1st retainer, refundable on the unused balance.
Related Resources
SF Ambition, Ledger-Clean Books
Dedicated San Francisco bookkeeping from $75/month — with a 100% money-back guarantee on your 1st retainer, refundable on the unused balance.