San Francisco Wants to Tax Your Stock Options– All of Them.
18th February 2011
Few people are aware the San Francisco has had a tax provision in its municipal code since 2004 that requires companies to pay a payroll tax on gains from employee stock options. No one pays it, and San Francisco hasn’t enforced it to date, but companies are becoming increasingly agitated that the city may change that policy at any time. The number of high profile and high value startups based in San Francisco – like Twitter and Zynga – may be too big of a temptation for the city to ignore.
We’re hearing that some of the city’s biggest startups are increasingly concerned that the city will start applying its local payroll tax to employee stock options– something even the Federal government doesn’t do. This would create potentially huge costs for startups that they can sidestep simply by moving a few miles to the North, East or South. If enforced, expect an exodus of San Francisco jobs to surrounding areas.
And rightly so. Like the Mafia, governments can’t stand to see other people making money without thinking that they deserve a cut.