Common misconception
Why do people think SF has a payroll tax on workers?
The confusion stems from the name "Payroll Expense Tax," which San Francisco used for years as a business tax calculated based on total payroll. People assumed "payroll tax" meant a deduction from employee paychecks, similar to Philadelphia's wage tax. It did not. The Payroll Expense Tax was always an employer-side obligation.
In 2014, San Francisco began phasing out the Payroll Expense Tax and replacing it with the Gross Receipts Tax (GRT), which taxes businesses on their total receipts rather than payroll. The transition is largely complete, though some businesses may still pay a portion under the old payroll methodology. Regardless of which business tax applies, none of them are deducted from employee paychecks.
What taxes ARE deducted from a San Francisco worker's paycheck?
When you look at a San Francisco paycheck, you will see deductions for:
- Federal income tax — graduated brackets, 10%–37%
- California state income tax — graduated brackets, 1%–13.3% (the highest top rate in the US)
- FICA — 7.65% (Social Security + Medicare)
- CA SDI — State Disability Insurance, approximately 1.1%
Notice what is not on this list: any San Francisco city tax. This is a genuine advantage of working in SF compared to NYC (where workers pay 3%+ city tax) or Philadelphia (3.7%+ wage tax). California's high state tax rates offset this somewhat, but the absence of a city-level tax is real.
What business taxes does San Francisco charge instead?
San Francisco funds its operations through a suite of business-side taxes:
- Gross Receipts Tax: Levied on total receipts of businesses operating in SF. Rates vary by industry from about 0.16% to 0.65% of gross receipts.
- Homelessness Gross Receipts Tax: An additional surcharge on businesses with SF gross receipts above $50 million, funding homelessness services.
- Overpaid Executive Tax: Applies to businesses where the highest-paid managerial employee earns more than 100 times the median worker's pay.
- Commercial Rents Tax: On landlords leasing commercial space in SF.
All of these are paid by the business entity, not deducted from individual workers' paychecks.
How does this compare to other major cities?
Among the largest US cities, San Francisco stands out for having no employee-side local income tax. Compare this to NYC (3%+ on residents), Philadelphia (3.7% on everyone), Chicago (no city tax, similar to SF), Houston/Dallas/Miami (no state or local income tax). Workers in SF face California's high state rates but no additional city layer, which makes SF's effective local tax burden lighter than NYC or Philadelphia for high earners.
What about California State Disability Insurance (SDI) on your SF paycheck?
California SDI is a state-mandated payroll deduction that funds short-term disability and paid family leave benefits. It applies to all California employees, not just those in San Francisco. The rate is set annually by the Employment Development Department (EDD) and has been approximately 1.1% of wages in recent years, though it can change from year to year. SDI appears on your paycheck as a separate line item alongside federal and state income tax withholding.
SDI is sometimes confused with a local tax because it is an additional deduction beyond the standard federal and state taxes. It is not a San Francisco city tax and it is not unique to SF. Workers in every California city, from Los Angeles to Sacramento, pay the same SDI rate. For the current year's exact rate, check the EDD website at edd.ca.gov. If your employer is based in another state but you physically work in California, SDI still applies to your California wages.
Is there any scenario where an SF worker owes a local tax?
No. San Francisco does not impose any direct tax on individual employees. There is no income tax, wage tax, transit assessment, head tax or occupational privilege tax levied on workers. All of the city's employment-related revenue comes from business-side taxes. Even the legacy Payroll Expense Tax (largely replaced by the Gross Receipts Tax) was always an employer obligation. This is a genuine structural advantage for SF workers, particularly high earners who would face city-level taxes of 3% or more in New York City or Philadelphia.
What does a San Francisco worker's paycheck actually look like?
Worked example: $120,000 salary, single filer, SF resident
| Tax layer | Approximate amount |
|---|---|
| Federal income tax | ~$18,600 |
| FICA (employee share) | ~$9,180 |
| California state income tax | ~$7,200 |
| CA SDI (~1.1%) | ~$1,320 |
| San Francisco city tax | $0 |
| Estimated take-home | ~$83,700 |
Illustrative example. California's state rates are high but no SF city tax is deducted. Use our California take-home calculator for a personalized estimate.
The $0 in the San Francisco city tax line is notable. Compare this to a $120,000 earner in NYC, who would pay approximately $3,600 to $4,200 in city income tax alone. California's state tax rates are higher than New York's at many income levels, but the absence of a city tax partially offsets that. For workers weighing SF vs. NYC, the local tax difference is a real factor in take-home pay calculations.
Questions
San Francisco payroll tax FAQ
Does San Francisco deduct a city tax from my paycheck?
No. San Francisco has no city income tax, wage tax or earnings tax on individual employees. Nothing is deducted from your paycheck for city taxes. The only deductions you will see are federal tax, California state tax, FICA and CA SDI.
What is the San Francisco Gross Receipts Tax?
The GRT is a business tax on total receipts of companies operating in San Francisco. It replaced the old Payroll Expense Tax. It is paid by the business, not deducted from employees. Rates vary by industry, typically ranging from 0.16% to 0.65% of gross receipts.
Is there any hidden city tax that affects my take-home pay?
No. There is no direct or indirect San Francisco city tax that reduces your take-home pay as an employee. The business taxes the city charges are employer obligations. Your paycheck deductions are limited to federal, California state and FICA/SDI.
Does California have any local income taxes?
California generally does not allow cities to levy local income taxes. The state's high state income tax (up to 13.3%) is the primary income tax burden. There is no local income tax layer in California comparable to what exists in New York, Ohio or Pennsylvania.
How does SF compare to NYC for take-home pay?
San Francisco workers pay zero city tax. NYC residents pay 3%+ city income tax on top of NY state tax. However, California's state income tax rates (up to 13.3%) are higher than New York's (up to 10.9%). The net effect depends on your income level, but the absence of a city tax is a meaningful advantage for SF workers compared to NYC workers.
What is CA SDI and why does it appear on my San Francisco paycheck?
CA SDI is California State Disability Insurance, a state-level payroll deduction that funds short-term disability and paid family leave benefits. It is not a San Francisco city tax. SDI applies to all California workers at a rate set annually by the Employment Development Department (EDD). You will see SDI on your paycheck alongside federal tax, California state income tax and FICA. Check the current year's rate at edd.ca.gov.
Does working in San Francisco trigger any mandatory employee-paid local fees?
No. San Francisco does not impose any employee-paid local income tax, wage tax, transit fee or occupational privilege tax. All of the city's employment-related taxes (Gross Receipts Tax, Homelessness GRT, Overpaid Executive Tax) are paid by the employer. The only taxes deducted from your SF paycheck are federal, California state, FICA and CA SDI, all of which are state or federal obligations rather than city ones.
- Sources: SF Treasurer & Tax Collector · CA Franchise Tax Board · SF Business & Tax Regulations Code Art. 12-A-1.
- Last updated July 31, 2026
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