Feature
by José Cisneros
As your treasurer, I am proud to head an office that collects monies to provide the vital city services on which we all rely. I was elected as treasurer in November 2005, following my appointment by Mayor Gavin Newsom in September 2004. I am proud to represent this city in office and to build on the work of my predecessors. I am also glad to pass on information that has particular relevance to owners of residential properties in San Francisco.
Our Mission
The treasurer's office serves as the banker, tax collector, collection agent and investment officer for the City and County of San Francisco. The mission of the office is threefold:
- to facilitate voluntary compliance with the tax laws of the City and County of San Francisco;
- to collect all taxes and fees due to the city; and
- to provide safekeeping for all city funds, prudently investing the monies to achieve maximum yield with low risk and high liquidity.
As an office, we provide two core functions for the people of San Francisco. Our first function is the collection of taxes and other city revenue, including business taxes, property taxes and fees for various licenses and permits required by the municipal code. Our tax collection units collect over $2 billion annually. In addition, we investigate and collect unreported and delinquent tax obligations both for our office and for other city departments, such as water and hospital bills.
Of equal importance is our second function: the oversight of monies before disbursement. Basically, this means we manage all city funds in order to gain the maximum return with low risk and high liquidity, including investing the city's portfolio of pooled funds. I work with all city departments to ensure that funds are received, deposited and reconciled as quickly and accurately as possible. The department also administers and monitors the bank accounts and wire transactions used by all city agencies and contracts with banks for their services.
The core functions of the treasurer's office may not be glamorous, but they are absolutely vital to the livelihood of our city. The rigorous collection of existing city taxes and fees, and the prudent investment of our money means more services for the people of San Francisco and less pressure to increase taxes. Those are two things we can all agree are extremely important. Our goal is to ensure everyone owing money to the city pays their fair share. This way we can continue to pay for key services such as roads, parks and schools.
Working for You
Often referred to as one of the best run offices in city government, the treasurer's office is working continuously to make sure we reach our stated goals.
In 2005, we achieved the lowest-ever property tax delinquency rate in the history of San Francisco. We hope this is due in part to the efficient processes and procedures we have put in place that make sure property owners receive accurate and timely statements and have a variety of payment options available at their disposal. We've also been able to achieve high investment returns, outpacing other large California counties, while preserving the safety and liquidity of the city's money.
Delivering efficient service and useful advice to San Franciscans is one of my top priorities. I am extremely proud of our excellent customer service, which has consistently been rated "excellent" or "good" by more than 90% of those surveyed for over five years.
Residential Landlords and Business Registration
Among the most basic functions of the treasurer's office is to register all businesses. The purpose of business registration is to have a central registry of all businesses for tax and outreach purposes. The basic rule is that all persons engaging in business in San Francisco are required to register with our office. (By law, "business""includes any activity engaged in with the object of gain, benefit or advantage.) Fees for registration can be as little as $25 per year.
However, there are important exceptions to the business registration requirement that directly affect property owners. Specifically, the Business and Tax Regulations Code exempts any person who solely receives rental income from: a cooperative housing corporation (as defined by the IRS), a residential structure of less than four units or a
A person receiving rental income solely from one of these three sources is deemed by the law not to be engaging in business — and therefore is exempt from registration requirements. Of course, if the owner of a 3-unit building is also an independent Certified Public Accountant, then she would still be subject to registration for her CPA business.
For residential property owners who are subject to registration requirements, new business owners must register for their initial certificate within 15 days of conducting business. Existing business owners must renew their registration each year by the deadline of February 28 (or February 29 during leap years) for the upcoming fiscal year. Business Registration Certificates are issued on an annual basis and are valid for the city's fiscal year calendar, which begins on July 1 and ends June 30 of the following year.
The treasurer's office offers a variety of ways to register a business. I urge you to visit our website, located at www.sfgov.org/tax, contact our taxpayer assistance hotline at 415-554-4400, or visit our office in person (San Francisco City Hall Room 140, 1 Dr. Carlton B. Goodlett Place) to see if you need to register. Again, anyone doing business in the City and County of San Francisco who does not meet one of the exemption criteria listed above is required to have a valid business license.
Payroll Expense Tax
The treasurer's office also collects the payroll expense tax from businesses in San Francisco. Most businesses are required to file a Payroll Expense Tax Statement for their business annually by February 28 (or February 29 during leap years) for the prior calendar year. This happens at the same time they are renewing their Business Registration Certificate for the next fiscal year, if they plan to conduct business within the new fiscal year. While most businesses must file this statement, not all businesses must pay the tax. The payroll expense tax is assessed at 1.5% of total payroll, but there are numerous exemptions. For example, businesses with total payroll below $166,666.67 are exempt, as are nonprofit organizations and many other entities. This means that the majority of small businesses are exempt. Nonetheless, most registered businesses must file for the exemption and state that their payrolls do not exceed $166,666.66.
As required by Sections 902.1(a) and 904 of Business and Tax Regulations Code Article 12-A, compensation to an owner of a passthrough entity (such as a partnership) for work performed or services rendered in whole or in part in the city, that is not otherwise reported on a W-2 form, is subject to the payroll expense tax, and the entity must include all such compensation on its payroll expense tax return. If your business is a partnership, please go to www.sfgov.org/treasurer and click on the link under "Payroll Tax Statement" for information about how to calculate your payroll tax liability.
New Initiatives: Online Property Tax Auction
One of the benefits of being the "new kid on the block" is the opportunity to take a fresh look at current practices and try out new ideas. There is one initiative this year that I am particularly pleased to discuss here.
Each year we conduct an auction of tax-defaulted properties (including timeshare properties). This year, for the first time, we held this auction online. I am pleased to be able to offer online auctions as another example of our determination to make our procedures efficient and convenient for our customers.
The first online auction was held on April 26 through the online service bid4assets.com. The auctions were open from Monday through Thursday of the auction week, and bidders could view the properties online before making their bids. Nine timeshare properties were auctioned this year, and each property was sold for more than the minimum bid. The city received $13,561 in excess proceeds from the auction. In total, over 100 bids were made in the four-day period.
I hope I have managed to shed some light on the work of my office, and provide some useful information to residential landlords here in San Francisco. If you have any questions or comments about this article or any other related matter please do not hesitate to call. Our taxpayer assistance line is open from 8 a.m. to 5 p.m. at 415-554-4400. If you have a question for me, I can be reached by email at treasurer.taxcollector@sfgov.org.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. José Cisneros is the treasurer for the City and County of San Francisco. Copyright © 2006 by the San Francisco Apartment Magazine. All rights reserved.