The former Porto boss, who has been without a job for several months now, rejected the offer from the Brazilian outfit as he only wanted to start the job in January
The Morumbi outfit are currently on the lookout for a new coach following the dismissal of Emerson Leao after growing unhappy with the 62-year-old's work.
Baptista claims that Villas-Boas was attracted by the possibility of coaching Sao Paulo, but would only take the job if he could begin his tenure in January in order to fine-tune the squad.
"He said today that he would not accept our offer," Baptista told Globoesporte. "He wanted some time to plan things, and I do not have time to wait.
"It is hard to sign a foreign coach. By the time he gets things going, the ship has sunk already.
"In Brazil, you have to win the next match. Now, we are going to war, I am looking for a new coach.
"It was time for Leao to leave. Until we find a new coach, Milton Cruz will be a temporary solution."
Villas-Boas, 34, took charge of Chelsea last summer after guiding Porto to an impressive four-trophy haul, including the Europa League, in 2010-11.
However, he failed to make his mark at Stamford Bridge and was sacked nine months into his contract after a run of just three victories in 12 Premier League matches.
Sao Paulo lie in eighth position in the Brazilian league, with nine points from six matches.