Will DFW benefit from new San Francisco tax on its large corporate headquarters?
These companies move or are about to move their headquarters out of the Bay Area.
Retaining a corporate headquarters in the city of San Francisco became a pricier proposition after San Francisco voters last fall approved a gross receipts tax on large businesses to support homeless services.
McKesson’s recent decision to move its headquarters to North Texas raises the question of whether other major companies will decide to move their headquarters out of the city of San Francisco. Show Full Story
Retaining a corporate headquarters in the city recently became a pricier proposition after San Francisco voters last fall approved a gross receipts tax on large businesses to support homeless services.
The loss of Fortune 500 headquarters can mean lost prestige and potential revenue under San Francisco's new homeless services tax on big companies based in the city. Losing these headquarters to other states often means more jobs and philanthropic dollars go with them.
McKesson (NYSE: MCK) topped the the list of largest San Francisco-based companies, based on revenue.
McKesson ranks No. 6 on the Fortune 500. The second-largest San Francisco-based company, based on revenue, is Wells Fargo (NYSE: WFC), which is exempt from the city’s gross receipts taxes, as required by state law. The city declined to identify specific companies that get the exemption.
Third on the list of largest San Francisco-based companies is payments giant Visa (NYSE: V), which moved its headquarters officially to One Market St. several years ago. Visa did not respond to a question on whether it’s subject to the city’s gross receipts taxes.
But if Visa were to decide to move its headquarters, it could be one of the easiest corporate relocations in history. The company would essentially just have to call an Uber to take its C-suite to its huge campus in Foster City, California, which is actually the company’s former headquarters. It would also come as a surprise to some Visa employees, who think the HQ never left.
Visa, No. 161 on the Fortune 500, has 567 employees in San Francisco and 3,129 employees in San Mateo County, which includes Foster City, as of November 2018, according to Business Times research. Visa’s total workforce is 16,048.
This week, in response to a question, a Visa spokeswoman sent an email missive: “Confirming our global headquarters is located at One Market in San Francisco.”
Visa’s annual meeting this week at a hotel in San Francisco’s Financial District was an opportunity for the San Francisco Business Times to ask Visa CEO Alfred Kelly whether the company would be keeping its headquarters there. He was noncommittal.
“We’re continuing to focus on growing the company,” Kelly told the Business Times, in a brief interview after the meeting. “That’s going to include our base here and there’s been no decision. We have employees in San Francisco, we have employees in Foster City and we have employees in Palo Alto. We have no immediate plans to change any of that.”
Visa, like other big companies headquartered in San Francisco, could still continue to have a major employment center in San Francisco but avoid the city’s homeless services tax by moving the company’s headquarters elsewhere.
That’s why it comes as no surprise that PG&E (NYSE: PCG), which filed for bankruptcy protection this week, has said it may sell its San Francisco headquarters and move its functions elsewhere in the greater Bay Area.
PG&E is the fourth largest San Francisco-based company, based on revenue. It will move up a notch with McKesson’s move to Irving.
PG&E, No. 168 on the Fortune 500, has 3,800 employees in San Francisco, 5,100 in Alameda and Contra Costa counties, 220 in San Mateo County and 480 in Marin County, according to Business Times research. PG&E’s total workforce is 23,000, as of December 2018.
Another one to keep an eye on is payments company Square (NYSE: SQ).
Square has recently expanded its headquarters in San Francisco even as it leases all of Oakland’s Uptown Station, where it will start moving up to 2,000 employees at the end of the year.
Square CEO Jack Dorsey was a vocal opponent of San Francisco’s homeless services tax on large businesses, grabbing national headlines over his opposition to the measure. Square had revenue of $2.1 billion in 2017, the latest full-year figure available.
Square has taken issue with the city’s complicated tax structure that has the payments company paying double the $10 million annual tab that the much larger Salesforce.com (NYSE: CRM) expects to pay for San Francisco’s new homeless services tax. That’s because the city classifies Square as a financial services company rather than as an information services company for tax purposes. In calculating taxes due, the city also reportedly takes into account the share of the company’s payroll that works in San Francisco. Square’s tax tussle with San Francisco came to light last year in a filing with the Securities and Exchange Commission.
San Francisco may discover that companies, like wealthy individuals, have far greater mobility than some realize, especially when they feel too much of the tax burden is falling unfairly on their shoulders.