Finances and Taxes

These Propositions Passed in California. Will They Affect Your Business?

Gusto Editors  
view of Los Angeles

While the country was paying rapt attention to the results of the presidential election, a number of important propositions were passed in California on November 3rd that may affect your business. 

We’ll walk you through them here. 

Prop 24: The California Privacy Rights Act (CCPA)

Prop 24 , also known as the California Privacy Rights Act (CCPA), provides additional privacy rights to consumers within the state. If you own and operate a business in California, this is what you need to know:

  • Service providers are prohibited from combining personal information they collect on customers and/or prospects with any personal information collected from other businesses.
  • Data security and storage regulations have been enhanced.
  • Consumers have the right to opt-out of the sale of their personal information. 
  • Consumers have the right to know about the personal information a business collects and how that information is shared and used. 

If a consumer believes your business has violated the CCPA, they can file a complaint with the Office of the Attorney General. 

While this will likely not have a significant impact on how you operate your business, be sure you understand the legislation and comply. 

Prop 22: Classifying app-based drivers as contractors

Passing with 58% of the vote, Prop 22 classifies drivers for gig companies like Uber and Lyft as independent contractors rather than employees

This means that drivers will not receive benefits like health care, unemployment, sick leave, and minimum wage protections. 

Proponents for Prop 22 say this legislation is crucial in empowering app-based gig companies to protect their business model and continue to grow; they also insist that classifying gig workers as independent contractors offers these workers more flexibility. 

Critics, on the other hand, have voiced concerns about the difficulty imposed by Prop 22 in protecting gig workers and ensuring they are provided with fair pay and benefits.

The passing of Prop 22 exempts app-based transportation and delivery companies from law AB5 (which was passed a year ago) and makes it harder for Californians to classify workers as contractors. Prop 22 effectively removes app-based drivers—and their employers—from being impacted by AB5. 

However, president-elect Biden has expressed interest in passing federal legislation that would, in turn, supersede Prop 22 and undo this legislation, so stay tuned for more changes to these laws. 

San Francisco Propositions

Fall in love with modern payroll

Prop F: Business tax changes in San Francisco

Big changes are coming to San Francisco businesses in 2021. Here’s how the new law may affect your business: 

  • The city payroll tax will be eliminated.
  • Business registration fees will change:
    • For businesses that make less than $1 million annually, registration fees will decrease.
    • For businesses that make between $1 – $2 million annually, registration fees will increase.
  • Taxes will be cut in 2021 and 2022 (before increasing again in 2023) for the food service industry, retail, entertainment, hospitality, and recreation.
  • Tech companies will see a tax increase in 2024; these companies are currently taxed between 0.125% – 0.445% of gross receipts; in 2024 they should expect to see that range rise to between 0.585% – 0.879% of gross. (Small businesses that make less than $2 million in gross receipts annually will be exempt from this increase.) 

Prop H: Streamlining small business openings in San Francisco

Another San Francisco-specific law, Prop H is intended to make opening a new business in SF easier and simpler. 

By expediting processes for obtaining permits, and doing away with public notification processes, Prop H removes many of the bureaucratic barriers that often plague new business owners. 

This legislation will be particularly impactful for retail spaces, bars, and restaurants: 

  • Restaurants will be allowed to rent our space for coworking
  • Temporary retail pop-ups will be allowed to operate
  • The validity of certain permits required by bars and entertainment venues will be extended for six years 

Prop I: Real estate transfer tax

The passing of Prop I increased the tax rate on real estate sales and leases of 35 years or more. 

Transactions of between $10 million – $25 million will be taxed at 5.5%, and any transaction that is over $25 million will be taxed at 6%.

Prop L: CEO Tax 

Dubbed the “CEO tax,” Proposition L places an additional tax on certain businesses in San Francisco. 

This tax applies to any company that operates in San Francisco in which:

  • The highest-paid employee makes at least $2.7 million per year, and 
  • The top executives earn more than 100 times the median compensation paid to the other employees.
Gusto Editors
Gusto Editors

Comments

*Required fields

Your email address will not be published.

Back to top