current General Fund Budget. One of the City’s largest capital investments is the paved roadway system. The City owns and maintains approximately 152 centerline miles of paved roadways. In August 2021, City Council was presented with a Pavement Management Plan (PMP), which concluded that the City’s overall average Pavement Condition Index (PCI) is currently 55, which on a scale of 0-100, is a “Poor” condition rating. At that meeting, City Council approved staff’s proposal to achieve a Citywide PCI of 67 and maintain a backlog of 23%. To achieve this would require a $12 million annual capital infrastructure financial commitment. Of this, only about half, or $6 million can be funded through existing funding sources (Los Angeles County Metro’s Local Return Funds).
Discussion:
On February 22, 2022, the City Council adopted the City’s Five-Year Strategic Plan.
Through disciplined leadership and guidance, the City had positioned itself to be on a positive financial footing in the near term. The City is far better positioned than other neighboring cities to support our local businesses and residents through tough economic times. However, given the current economic instability, the City needs to continue its vigilance and self-reliance and be intentional and thoughtful about continuing to provide quality services which the community is accustomed to, while allocating resources to align with the City’s vision and goals to continue with the effective use of tax dollars. Doing so over the challenging times ahead will require more partnership and collaboration with local businesses and residents, with the local control and local self-reliance the City is committed to preserving.
One of the City’s Strategic Priorities outlined by the City Council for 2022 was Fiscal and Organizational Sustainability to maintain essential services the community relies on, such as public safety response, safe streets, and clean/healthy public places. Fiscal Sustainability is the ability of the City to provide ongoing services while maintaining its finances at a credible and serviceable position with a long-term balance of resources and the cost of doing business.
Included in the fiscal year (FY) 2021-23 goals for the City was to explore revenue enhancements to support the City’s ongoing financial stability. In January 2022, the City engaged HdL Companies to perform an analysis of our current Business License Tax structure and to identify methods of generating additional local funds and potential efficiencies from modernizing the City’s business license code. As the report notes, the City’s current business classifications are not reflective of the City’s economic makeup.
The City’s Business License Tax Municipal Code 5.04, as revised through Ordinance (Ord. 398) was last amended in December of 1967. This includes a fee structure set based on the business type, sets flat dollar thresholds on some businesses as low as $10 (bowling alleys, for example), and has not been indexed for inflation since. In other words, a bowling alley that was paying $10 per each alley (lane) in 1967, is still paying the same CITY COUNCIL AGENDA REPORT – MEETING OF JUNE 7, 2022
BUSINESS LICENSE TAX ORDINANCE UPDATE AND CONSIDERATION OF
BALLOT MEASURE
amount in 2022. As HdL’s report states, “the City’s current business license structure is not reflective of the businesses that comprise it. Large-scale light to semi-industrial businesses are grouped together with retailers, gardeners, and physicians. Such a broad category masks the different contributions to and [most importantly] impacts on the City that different types of businesses leave.”
To address the modernization of the current business license code, HdL created five (5) models, each with a different tax structure, with the goals of ensuring “tax simplification” and “equitability” or, to put it simply: an equitable and effective tax rate. Currently, as can be seen on Chart 4 (p.5) of the report (Enclosure 1), Small Businesses’ effective tax rate of .083% is more than double that of the Medium(.04%) and Large Businesses(.035%).
Model 1 – Flat fee increase of 20% to 40%. While this increases revenues slightly, it is a more regressive and thus less desirable to the City.
Model 2 – Single Gross Receipt Rate – Base Rate of $25 for the first $25,000 in gross receipts plus $.75 per thousand dollars of gross receipts. Here, most of the revenues are received from the highest-grossing businesses, yet the small businesses still pay a much higher effective tax rate, as is shown on Chart 10 (p.17) on Enclosure 1.
Model 3 – in this model, there are different rates for different business classifications.
While this is an improvement, it still does not address the inequities in the effective tax rate nor contributions from those businesses that have the most physical impact on the City.
The most notable impact on the City, one we are attempting to address with this study, is the impact some of these businesses have on our roads, particularly those industries which utilize transportation with high tonnage and disproportionately impact the quality of the City’s roadways and public infrastructure. Focusing on this goal, HdL created Model 4 and Model 5, both of which separate these businesses into their own category – “Industrial”. This category combines ”Warehouse/Distribution, Manufacturing, Wholesale, and Mining” businesses.
Model 4 – In this model, HdL sets a rate of $5 per thousand dollars of taxable gross receipts.
Model 5 – In this model, the same structure is taken as in Model 4, plus adds in a layer based on estimated Business Square Feet.
CITY COUNCIL AGENDA REPORT – MEETING OF JUNE 7, 2022
BUSINESS LICENSE TAX ORDINANCE UPDATE AND CONSIDERATION OF
BALLOT MEASURE
Business Type Current Model 1 Model 2 Model 3 Model 4 Model 5 Contractor
86,336
103,603
124,055
136,830
136,830
General Commerce/Retail
996,427
1,195,712
2,741,892
2,166,120
2,763,467
Rental
(Commercial/Residential)
22,734
27,281
43,709
45,409
45,409
Service
56,122
67,346
64,762
71,512
71,512
Professional
58,101
69,721
304,865
308,415
309,415
Industrial
2,968,336
3,720,824
Total Revenue:
1,219,720
1,463,664
2,285,755
3,279,283
5,696,622
7,047,457
Increase from Current:
243,944
1,066,035
2,059,563
4,476,902
5,827,737
Based on the best information available to HdL Companies through sales tax receipts and their experience working with other cities with similar businesses throughout Southern California, HdL Companies estimates that the tax structures modeled in the report would generate between an additional $500,000 (Model 1) and $5.8 million (Model 5) annually. Pre-pandemic, the City was collecting about $1,200,000 annually in business license tax revenue.
During this study session, staff is seeking City Council feedback in the two (2) areas:
• Business Categories – Are the six (6) proposed business type categories outlined in Enclosure 1 appropriate for Pico Rivera and do they provide a more simple and modern assessment of business types?
• Business Tax Rates – Does the City Council believe that the recommended tax rates in Model 5 are reasonable and equitable, providing a similar effective tax rate across most business categories?
The purpose of this report is to discuss a long-term strategy to support City businesses and residents into the future, with one potential strategy being a local recovery/reinvestment measure on the November 2022 ballot. The City has been extremely well served in its careful fiscal stewardship, combined with strong local control over taxpayer dollars, ensuring that residents and voters maximize opportunities to invest in the City’s own community. The Council’s discussion and direction at this meeting will inform the City’s immediate next steps, should the Council wish to do so.
CITY COUNCIL AGENDA REPORT – MEETING OF JUNE 7, 2022
BUSINESS LICENSE TAX ORDINANCE UPDATE AND CONSIDERATION OF
BALLOT MEASURE
Conclusion:
Staff seeks City Council direction regarding the business license modernization and fairness project alternatives for redesign and recommended improvements to the Business License Tax (BLT) ordinance, and direct staff to proceed with implementation of a measure for the November 2022 election.
Steve Carmona
SC:AG:JM:ep
Enclosures: 1) HdL Companies Business License Analysis & Ordinance Review Report
SUBMITTED BY
HdL Companies
120 S. State College Blvd., Ste 200
Brea, CA 92821
hdlcompanies.com
CONTACT
Josh Davis
T: (714) 879-5000 Ext. 383
E: [email protected]
Final
June 2, 2022
Business License Analysis & Ordinance Review
Enclosure 1
2a
2 | Page
Table Of Contents
EXECUTIVE SUMMARY 3
SECTION 1 – CITY OF PICO RIVERA & COMPARATIVE JURISDICTIONS 4 BUSINESS TAX - ANALYSIS 4
BUSINESS TAX - EQUITY OF CONTRIBUTION 5
CITY OF PICO RIVERA: BUSINESS TAX – RATE AND CATEGORY CLASSIFICATION 6 CITY OF PICO RIVERA: BUSINESS TAX – BUSINESS TYPE SUMMARY 8 CITY OF PICO RIVERA: BUSINESS RETENTION AND EXPANSION 8 CITY OF PICO RIVERA: COMPARISON TO NEIGHBORING CITIES 9 COMPARISON CITIES SUMMARY TABLE (USING FY 18-19 DATA) 10 RATE COMPARISON - CITY OF PICO RIVERA VS. NEIGHBORS 13
SECTION 2 – CATEGORY & TAX ANALYSIS 14
LICENSE CLASSIFICATION AND RATE TYPES 14
MODEL 1: EXISTING CATEGORIES WITH SIMPLE INCREASES 15
GROSS RECEIPTS TAX – REPLACE ALL CATEGORIES WITH GROSS RECEIPTS TAX 15 GROSS RECEIPTS TAX – ESTIMATES 15
MODEL 2: GROSS RECEIPTS TAX – SINGLE GROSS RECEIPTS RATE 16 CHART 10: ESTIMATED EFFECTIVE TAX RATES UNDER A SIMPLE GROSS RECEIPT MODEL 17 MODEL 3: GROSS RECEIPTS TAX – CLASSIFICATION-BASED RATES 18 MODEL 4: GROSS RECEIPTS TAX – CLASSIFICATION-BASED RATES-EXPANDED 19 MODEL 5: COMBINATION APPROACH 20
PROPOSED RATES COMPARISON 22
CHART 12: EQUITY OF MODELS 24
APPENDICES 25
CITY DETAIL RATES 25
3 | Page
Executive Summary
Background
The City of Pico Rivera (City) requires all businesses operating within the City to obtain a business license and pay business license fees per section 5.12.010 of the City's Municipal Code (Code). This revenue is locally controlled and funds essential services. The City commissioned the HdL Companies ("HdL" or "we," "us," "our," or similar terms) to prepare this tax study to identify methods of generating additional local funds and potential efficiencies from modernizing the City's business license code.
This study provides a guided exploration of different tax structures in light of the City's goals and values. Two of the most fundamental goals of a modernization project are "tax simplification" and "equitability." To put it another way, the proposed changes should not only modernize the code and increase revenue but, ideally, also move a city's business license structure up and to the right in the four quadrants presented below in Chart 1.
Chart 1: Key attributes of modern business tax structures
Recommendation
We typically recommend that a city consider adopting a gross receipt tax structure similar to Model 3 on page 19. Model 3's gross receipts tax structure allows a city to charge different rates based on business activity while improving equitability and increasing business tax revenue. Model 3 categorizes businesses into five easily identifiable business types, allowing for rate flexibility without too much complexity. Another model that has similar benefits is the hybrid model, Model 5. By using a square-footage basis for industrial/warehousing uses it may simplify and make more predictable the calculation of those business tax. Given the relatively low rate of the City’s current general business classification, neither of the recommended models shows a significant tax savings for smaller businesses. The model’s do, however, show an increase in equity as seen in the effective tax rate being more equal regardless of business size.
Report Structure & Key Findings
We have divided this report into two major sections.
Section 1 - Pages: 4 to 13
In the first section, we review the City's current revenue and tax structures to describe the City's current situation. We also show how the City's tax structure compares to other cities of interest and conclude that the City might capture additional business tax revenue on a per business basis, particularly from larger businesses benefiting from their access to the City's markets.
Section 2 - Pages: 14 – 24
In this section, we review five alternative tax structures. Models 2, 3, and 4 are based on gross receipts, with Model 5 being based on square footage and each show potentially significant revenue increases. Ultimately, we recommend model 3 because of its ability to impose variable rates without too much additional complexity while potentially yielding between $3.01 - $3.32 million a year in business license tax revenue. on next page.) Unequal Effective Tax Rate Equitable Effective Tax Rate
Tax Structure Simplification
Complex Tax Implementation
4 | Page
SECTION 1 – City of Pico Rivera & Comparative Jurisdictions Business Tax - Analysis
The City currently issues approximately 1,894 business licenses annually and, over the last five fiscal years, has generated an average of $1,245,792 in business license tax revenues per fiscal year.
In the current tax structure, major sectors of industry, that employee hundreds of people, and generate thousands of gross receipts, are grouped together into one generic category.
Were the City to modernize its business license system, it could establish a more secure funding source for the City's budgetary needs. By reforming the license structure into more than one business category, license rates could be specifically tailored to businesses in relation to their role in the local economy. As you can see in Chart 2, the City's business tax revenue peaked in Fiscal Year (FY) 2020. Business license revenue experienced a decrease in 2021, with the COVID-19 pandemic contributing to the decline in revenue. The potential revenues for Fiscal Year (FY) 2022 appear to resemble the revenue figures from FY 2018 and 2019, reaffirming the need for revenue reform to establish long-term funding sustainability.
Chart 2: 4-year revenue trend
$1,109,199
$1,219,720
$1,328,431 $1,324,120
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
FY2018 FY2019 FY2020 FY2021
City of Pico Rivera Business Tax Revenue
Recent Trend
5 | Page
Chart 3, which compares the percentage change year-over-year in business tax revenue to the percentage change in sales tax, is also telling. The stalled business license growth in FY 2021, can be primarily attributed to the impacts of COVID-19.
Reforming the business license fee structure and increasing the revenue yield will further solidify a revenue source that is historically reliable for long-term budgetary planning.
Chart 3: Comparing revenue growth against the broader economy *FY 2021 is based on an estimate for sales tax since reporting may not yet have been completed.
Business Tax - Equity of Contribution
By their nature, annual fees impose a higher effective tax rate on small businesses than on larger businesses. Given that the City's rates range from $50 - $300, the impact on smaller businesses may be tempered. Chart 4 below illustrates current revenue share generation based on the size of the business (gross receipt total determines small, medium, and large business). As chart four shows, small businesses are currently paying a higher effective tax rate.
Chart 4: Current Revenue Generation Share According to Business Size -5.00%
0.00%
5.00%
10.00%
15.00%
FY2018 FY2019 FY2020 FY2021
Business Tax and Sales Tax Percent Change
Year to Year (YTY)
Bus Tax % Change YTY
Sales Tax % Change YTY
0.083333%
0.083333%
0.083333%
0.083333%
0.083333%
0.039998%
0.039998%
0.039998%
0.039998%
0.039998%
0.035000%
0.035000%
0.035000%
0.035000%
0.035000%
0.00% 0.01% 0.02% 0.03% 0.04% 0.05% 0.06% 0.07% 0.08% 0.09% Contractor
General Commerce/Retail
Rental (Com & Res)
Service
Professional
Large Business
Medium Business
Small Business
6 | Page
City of Pico Rivera: Business Tax – Rate and Category Classification The City's current business Classifications are not reflective of the city’s economic makeup. By reforming the business license structure to be reflective of the various sectors of industry that currently comprise the City’s economy, a more efficient and flexible system can be implemented.
Business Type Tax Rate
Principal Solicitors $250 + $5 each solicitor to whom permit is issued Amusement Games, Rides, and Booths $50 per game or booth + $15 per ride Business Type Tax Rate
$50 + $0.50 per thousand of gross receipts up to $500,000 $0.30 per thousand of gross receipts of $500,001 to
$100,000,000
Businesses, Professions, Trades, and Occupations $0.26 per thousand of gross receipts of $100,000,001 to $1,000,000,000
$0.15 per thousand of gross receipts of $1,000,000,001 to $5,000,000,000
$0.13 per thousand of gross receipts over $5,000,000,000 Business Type Tax Rate
Antique Dealers
$50 + $0.50 per thousand of gross receipts up to $500,000.
Gross receipts over $500,000 will be taxed according to the same structured scale as “Businesses, Professions, Trades, and Occupations”
Stamp Dealers
$50 + $0.50 per thousand of gross receipts up to $500,000.
Gross receipts over $500,000 will be taxed according to the same structured scale as “Businesses, Professions, Trades, and Occupations”
Coin Dealers
$50 + $0.50 per thousand of gross receipts up to $500,000.
Gross receipts over $500,000 will be taxed according to the same structured scale as “Businesses, Professions, Trades, and Occupations”
Billiard or Pool Halls $150 first table + $5 for each additional table Bingo Games $50 per organization authorized to conduct bingo games Boardinghouses, Apartments, and Hotels $75: 3 – 10 rental units + $5 for each rental unit over 10 Bowling Alleys $50 for first alley + $12 each additional alley 7 | Page
Carnivals, Circuses, and Rodeos $150 per day
Adult Entertainment $150 + $150 per employee
Deliveries and Limousines $45 per vehicle
Drive-In and Take-Out Restaurants, Beer Bars $100 + $0.50 per thousand of gross receipts over $24,000 Business Type Tax Rate
Handbill Distribution $5 per applicant
Rubbish, Waste, or Garbage $400 + $50 per vehicle
Secondhand Businesses
$300 for gross receipts up to $500,000. There is an
additional tax for gross receipts over $500,000 according to the same structured scale as “Businesses, Professions,
Trades, and Occupations”
Street Vendors and Solicitors
Daily fee: $20
Yearly fee: $60
Theaters
Walk-In: $500
Drive-In: $700
Trailer Parks $75 for first 5 spaces + $8 for each additional space Vending Machines
$1 per year per machine + 1% of gross receipts derived
within the city, directly attributable to the vending machines located within the city
8 | Page
City of Pico Rivera: Business Tax – Business Type Summary The City's largest tax contributor is the General Commerce/Retail category. The General Commerce/Retail category has such a large share of current revenue generation due to the large number of manufacturers, wholesalers, and food/beverage related businesses, that comprise this category. These industries create the largest economic impact within the City and a business license structure should be reflective of this category’s presence.
Pico Rivera’s current business license structure is not reflective of the businesses that comprise it. Large-scale light to semiindustrial businesses are grouped together with retailers, gardeners, and physicians. Such a broad category masks the different contributions to and impacts on the City that different types of business have.
Pie Chart 1:
City of Pico Rivera: Business Retention and Expansion
Retaining existing businesses is pivotal for future development. Recent economic development research indicates that eighty percent of new jobs and capital investment come from companies that already exist within the community. The City has a 7%
82%
2%
4%
5%
Total Share of Tax Revenue Generated by Business Type
CONTRACTORS
GENERAL
COMMERCE/RETAIL
RENTAL (COMMERCIAL &
RESIDENTIAL
SERVICE
PROFESSIONAL
9 | Page
1,810
1,894 1,990 1,997
0 500
1,000
1,500
2,000
2,500
FY2018 FY2019 FY2020 FY2021
City of Pico Rivera Number of Businesses
very consistent level of business retention, indicating the business community’s long-term investment within the City. Table 1, as detailed below, illustrates the consistent number of businesses the City has been able to retain.
Table 1: Business Count
City of Pico Rivera: Comparison to Neighboring Cities
The City is already doing well on a per business basis but could increase revenues, if so desired.
Below is a summary table of the comparisons, which highlights population, the estimated number of licensed businesses, and estimated annual revenue. Below the table are some key graphics showing how the City compares to other jurisdictions of interest regionally. (The Comparison Details for the neighboring jurisdictions can all be found in the Appendices.) For purposes of comparison, we use the fiscal year 18-19 data. We do so for two key reasons. First, that is the year with publicly available data for comparison. Second, it is pre-COVID and so avoids the ‘noise’ in the data caused by the impact of the pandemic on the City.
10 | Page
Comparison Cities Summary Table (Using FY 18-19 data)
Table 2: Comparison Data
Jurisdiction
Name
Est.
Square
Miles
Est.
Population
Est.
Businesses
in FY 18-19
Tax Type Annual Rate
Fee
Est. Revenue FY
18-19
Whittier 14.65 87,306 6,689 Employee &
Gross $25 - $510 $ 3,581,018
West Covina 16.04 108,000 4,161 Employee $18 - $442 $ 2,248,062 San Bruno 5.48 42,807 4,060 Gross Receipts $27 - $124.50 $ 2,176,473 Gardena 5.83
61,027 6,794Gross Receipts $75 $ 1,735,711
Montebello 8.33
61,954 5,486 Gross Receipts $110 $ 1,550,379
Downey 12.41 111,126 10,812 Employee &
Gross $25 - $400 $ 1,275,000
Pico Rivera 8.3 63,001 1,894 Gross Receipts $45 - $700 $ 1,219,718 Santa Fe Springs 8.87 17,810 3,546 Employee $50 - $200 $ 831,717 La Mirada 7.84 48,008 3,776 Gross Receipts $50 - $75 $ 320,000 11 | Page
Chart 6: Population Comparison
Chart 7: License Count Comparison
10,812
6,947
6,794
6,689
4,161
4,060
3,776
3,546
1,894
0 4,000 8,000 12,000 16,000 20,000 24,000
Downey
Montebello
Gardena
Whittier
West Covina
San Bruno
La Mirada
Santa Fe Springs
Pico Rivera
Est. Count of Businesses
FY18/19 by Jurisdiction
111,126
108,000
87,306
63,001
61,027
56,150
48,008
42,807
17,810
0 20,000 40,000 60,000 80,000 100,000 120,000
Downey
West Covina
Whittier
Pico Rivera
Gardena
Montebello
La Mirada
San Bruno
Sante Fe Springs
Est. Population During
FY18/19 by Jurisdiction
12 | Page
Chart 8: Business Tax Per Capita Comparison
Chart 9: Business Tax per Business Comparison
$51
$45
$41
$28
$28
$21
$19
$11
$7
$- $10 $20 $30 $40 $50 $60
San Bruno
Santa Fe Springs
Whittier
Montebello
Gardena
West Covina
Pico Rivera
Downey
La Mirada
Est. FY 18/19 Business Tax Revenue
Per Capita
$644
$540
$536
$535
$255
$227
$223
$118
$85
$0 $200 $400 $600 $800
Pico Rivera
West Covina
San Bruno
Whittier
Gardena
Santa Fe…
Montebello
Downey
La Mirada
Est. FY 18/19 Business Tax Revenue
Per Business
Rate Comparison - City of Pico Rivera vs. Neighbors
Current Rate Comparison (Table 3)
Sample Business Pico Rivera Downey Gardena La Mirada Montebello Small Craft Business: 1 employee / <$20K in gross receipts $ 58.00 $30.00 $75.00 $50.00 $133.25 Restaurant: 8 Employees / $350K in gross receipts $ 263.00 $81.00 $225.00 $120.00 $414.54 Hair Salon: 15 Employees / $600K in gross receipts $ 380.00 $132.00 $700.00 $110.00 $520.15 Repair Service Business: 2 Employees / $150K in gross receipts $ 125.00 $48.00 $250.00 $80.00 $260.57 Doctors Office: 20 Employees (4 doctors) / $2 million in gross receipts $ 750.00 $399.40 $2,100.00 $250.00 $1,380.82 Professional Firm: 15 employees (8 professional) / $1.1 million in gross receipts $ 480.00 $347.85 $1,200.00 $160.00 $1,380.82 Small Contractor: 1 Employee and $75K in gross receipts $ 87.50 $159.72 $225.00 $65.00 $502.40 Technology Research Firm: 5 Employees / $800K in gross receipts $ 390.00 $64.40 $900.00 $130.00 $691.89 Commercial Rental: 1 Employee, 2 units, / $1.5 million in gross receipts $ 600.00 $348.00 $50.00 $290.00 $1,380.82 Car Dealership: 10 employees / $10 million in gross receipts $ 3,150.00 $2,558.00 $5,050.00 $1,050.00 $1,380.82 Sample Business Pico Rivera
San
Bruno
Sante Fe
Springs
West
Covina Whittier
Small Craft Business: 1 employee / <$20K in gross receipts $ 58.00 $75.00 $100.00 $117.67 $50.00 Restaurant: 8 Employees / $350K in gross receipts $ 263.00 $477.50 $132.00 $257.60 $360.00 Hair Salon: 15 Employees / $600K in gross receipts $ 380.00 $1,010.00 $160.00 $397.53 $300.00 Repair Service Business: 2 Employees / $150K in gross receipts $ 125.00 $267.50 $100.00 $137.66 $185.00 Doctors Office: 20 Employees (4 doctors) / $2 million in gross receipts $ 750.00 $2,030.00 $180.00 $497.48 $525.00 Professional Firm: 15 employees (8 professional) / $1.1 million in gross receipts $ 480.00 $1,535.00 $160.00 $397.53 $450.00 Small Contractor: 1 Employee and $75K in gross receipts $ 87.50 $100.00 $150.00 $117.67 $100.00 Technology Research Firm: 5 Employees / $800K in gross receipts $ 390.00 $1,170.00 $100.00 $197.53 $325.00 Commercial Rental: 1 Employee, 2 units, / $1.5 million in gross receipts $ 600.00 $90.00 $100.00 $15,035.68 $810.00 Car Dealership: 10 employees / $10 million in gross receipts $ 3,150.00 $75.00 $140.00 $297.58 $220.00 14 | Page
SECTION 2 – Category & Tax Analysis
The City requested that HdL conduct an analysis of the current license structures and explore options for modifying the rates and categories. In Section 1, HdL prepared summaries of each classification and, to the extent data were available, provided a breakout of the number of businesses and their contribution to the local funding for essential City services. We also provided comparisons to neighboring jurisdictions to give an idea of how the various tax structures and markets in nearby municipalities are creating different revenue outcomes.
In this section, we provide potential municipal code reform suggestions to increase administrative efficiencies. Additionally, we provide options for modifying the City's business tax rates and classifications. Using the data compiled in section 1 of this report on current license revenues, we developed models to estimate potential fiscal impacts to the City from the different models.
You can find a summary chart on page 24 that provides a quick look at each proposed model's impact on the City revenues and the business community.
License Classification and Rate Types
We propose that the City adopt five basic categories that are more reflective of Pico Rivera’s economic makeup. The definitions below are general and not meant to be the complete definitions that would appear in the municipal code.
General Commerce/Retail: These are retailers, wholesalers, hoteliers, restaurateurs, and manufacturers. All these businesses are likely to contribute to your tax base in other ways (i.e., property tax and sales tax) and often have lower profit margins.
Rental (Commercial & Residential): This category includes any business that leases, rents, or provides use of real property to another individual or entity for compensation. Examples include but are not limited to commercial leasing, residential rental, parcel leasing, etc.
Service: This is the offering of services that require minimal to no higher education training. This is also the default category for any business that is not specifically defined in one of the other five categories. Examples include but are not limited to hair stylists, gardeners, nail salons, etc.
Professional: This is the offering of services that require a rigorous amount of training through any type or trade, higher education, or vocational institutions that exclusively certifies, complete obtainment of skills and the ability to offer such professional services. Examples include but are not limited to a doctors’ office, a law office, a consulting firm, etc.
Contractors: These are persons or firms that are carrying on the business of a contractor, subcontractor, or builder particularly the construction or repair of any buildings. Examples include but are not limited to construction, plumbing, HVAC, etc.
Table 6: Approximate grouping of City's Businesses by the proposed categories Business Category Type Total Count % of Total Count Total Taxes CONTRACTOR 511 27% $ 86,336
GENERAL COMMERCE/RETAIL 863 45.6% $ 996,427
RENTAL (COMMERCIAL & RESIDENTIAL) 68 3.6% $ 22,734
SERVICE 270 14.3% $ 56,122
PROFESSIONAL 182 9.6% $ 58,101
TOTALS 1,894* 100% $ 1,219,720
*We have excluded exempt businesses
15 | Page
Model 1: Existing Categories with Simple Increases
The City may elect to retain the existing structure while modifying the tax amounts for each category. Keeping the current structure in place would eliminate the need to create different categories and allow for a much simpler implementation for the City and the business community. It would not avoid the need for an election since it would entail an increased tax rate.
Table 7: Estimated revenue from a simple flat-fee increase Number of Businesses Est. FY18/19
Revenue
20%
Increase
40%
Increase
1,894 $ 1,219,720 $1,463,661 $ 1,707,605
Model 1 – Highlights and Impact Review
As indicated in the model above, a simple increase could keep the existing structures in place while yielding higher revenues to the City. A 20%-40% increase across all sectors of industry, can be easily implemented by the City.
The drawback of model 1 is that the tax remains regressive. In fact, because it would increase the minimum fee, it becomes more regressive. And, thus, does not really fit the City's objectives.
Gross Receipts Tax – Replace All Categories with Gross Receipts Tax
We now turn to consider two models that are variations on the theme of a gross-receipts-based tax.
Many California cities use some form of gross receipts tax structure. Many of those cities use a standard rate multiplier to determine the tax amount owed, setting the rate for each business category. For example, a city may choose to charge $1 per thousand dollars of gross receipts (0.001 x Gross) for a retail business while charging a rate of $3.00 per thousand dollars of gross receipts (0.003 x Gross) for service or professional businesses.
The benefits of gross receipts-based taxes are the equity of their effective tax rate, ease of calculation, and potential for capturing revenue from growth in the economy. The drawback is that it exposes city revenues to the fluctuations of gross receipts in the economy.
Gross Receipts Tax – Estimates
While we do have information on gross receipts for the City's current businesses, it is important to note that HdL has used multiple assumptions in the options below, which are meant to provide a baseline of the possible impact and should not be relied upon for precise budgeting.
The following information was used as a basis for the tax tables and models in the options below. There were certain categories of businesses that had not reported gross receipts in FY 18-19. To reconcile this, we supplemented that lack of information with the average gross receipts figure for that business type, to generate the total business taxable gross receipts figure listed in Table 8.
16 | Page
Table 8: Key estimates used in the gross-receipts models Number of Businesses Total Business Taxable Gross
Receipts (Est.)
1,894 $3.03 billion
Model 2: Gross Receipts Tax – Single Gross Receipts Rate Model 2 reflects the potential revenues for converting the City tax to a single-rate, gross-receipts model. This model is simple to administer—everyone is charged the same rate—but it allows the City to increase revenue. Model 2 also lowers the annual base rate to a uniform $25, to more accurately reflect, annual base rates of neighboring cities.
Table 9: Model 2—Potential Tax Structure
Tax Basis Tax Rate
Base Rate $25 Flat Rate (first $25,000 Gross Receipts)
Gross Receipts Tax + $0.75 per thousand dollars of Gross Receipts (0.00075 x Gross Receipts)
Model 2 Estimates Table
The table below indicates the potential revenues from implementing a gross receipts tax with two options, $0.75 per thousand and $1.00 per thousand. Information for the estimates comes from the data in the section above.
Table 10: Model 2 – Rough Estimates from a simple gross receipts structure Number of Accts Taxable Gross
Receipts
Base Rate @ $25 per
Account
Tax Amount
$.75/ thousand
-Over $25,000-
Tax Amount
$1.00/ thousand
-Over $25,000-
1,894 $3.03 billion $47,350 $2,238,405 $2,984,540
TOTAL $2,285,755 $3,031,890
Model 2 – Highlights and Impact Review
The "single rate" method of taxing on gross receipts provides an even distribution of the effective tax rate because all businesses subject to the tax will pay the same rate. Under this method, no cap is put in place, and therefore most of the revenues are received from the highest-grossing businesses.
Model 2 expands revenue while keeping the tax structure simple and easy to understand for businesses and helping to decrease the effective tax rate on smaller businesses while asking larger businesses to pay their fair share.
17 | Page
0.075625%
0.076250%
0.079167%
0.100000%
0.100000%
0.100000%
0.035000%
0.039998%
0.083333%
0.00% 0.02% 0.04% 0.06% 0.08% 0.10% 0.12%
Large Business
Medium Business
Small Business
Current vs. New Effective Tax Rates
Current Tax Structure
$1.00/Thousand-Over $25,000
$0.75/Thousand-Over $25,0000
Chart 10: Estimated Effective Tax Rates Under A Simple Gross Receipt Model
18 | Page
Model 3: Gross Receipts Tax – Classification-Based Rates Model 3, as indicated below, would create different rates for different business classifications. The City may, for example, choose to implement a rate for the retail/wholesale/miscellaneous business activities at a base rate of 0.001, recognizing the higher costs of goods sold and lower profit margins for these types of business as well as their contribution to other City revenues such as sales tax. Conversely, the City could consider implementing a higher rate for professionals due to the nature of their business model. This model affords the most flexibility for increasing revenues while accommodating certain business categories. Model 3 utilizes the same base rate as the previous model to resemble the base rate of neighboring cities.
Tax Structure and Estimated Revenue
The following table illustrates how gross receipts rates can vary by categories giving flexibility to the tax structure. The structure provided is just one example of how the City might utilize a gross receipt model. Should the City decide to use a gross receipts tax model, HdL will work with the staff to finalize a structure that best serves the City's goals.
Table 11: Basic tax structure for classification-based gross receipts Categories Base Rate Gross Receipts Tax Rate
CONTRACTOR
$25 Flat Rate per
Business (first $25,000
in Gross)
0.002 X Gross
GENERAL COMMERCE/RETAIL 0.001 X Gross
RENTAL (COMMERCIAL &
RESIDENTIAL) 0.003 X Gross
SERVICE 0.001 X Gross
PROFESSIONAL 0.003 X Gross
Table 12: Estimated revenue from classification-based gross receipts Business Type
Number
of Accts
Est. Taxable Gross
Receipts
Base Rate
$25 per
business
Total Est.
Annual Gross
Receipts Tax
Current Taxes
CONTRACTOR 511 $ 74,802,650 $ 12,775 $ 124,055 $ 86,336 GENERAL COMMERCE/RETAIL 863 $ 2,763,467,249 $ 21,575 $ 2,741,892 $ 996,427
RENTAL (COMMERCIAL &
RESIDENTIAL)
68 $ 16,269,772 $ 1,700 $ 43,709 $22,734
SERVICE 270 $ 71,511,671 $ 6,750 $ 64,762 $ 56,122
PROFESSIONAL 182 $ 105,838,195 $ 4,550 $ 304,865 $ 58,101 1,894 $3.03 billion $47,350 $ 3,278,283
TOTAL $ 3,325,633 $ 1,219,720
Model 3 – Highlights and Impact Review
This option has the benefit of spreading the burden of an increase across multiple business types. The City has the option of modifying the rates and reassigning business types to different categories to account for concerns about impacts on different parts of the economy. The model above includes basic rate increases for standard categories but can be further expanded or contracted to accommodate a different method of the City's choosing. As you can see in this example model, the majority of the City's businesses would fall within the lowest rate, which could generate substantial revenue as well as minimize negative economic impacts on the operational costs on the businesses within the community. 19 | Page
Model 4: Gross Receipts Tax – Classification-Based Rates-Expanded Model 4 adds an additional layer of flexibility by allowing the City to specifically assess a higher or lower rate for a given industry. The goal may be to recuperate City maintenance costs due to sizable business volume conducted in the City. Most notably industries that utilize transportation with high tonnage disproportionately impact the quality of the City’s roadways and public infrastructure.
In the model we isolated business activity based on the volume of traffic generated as a result of their business model. The “Industrial” category combines “Warehouse/Distribution, Manufacturing, Wholesale, and Mining” at a rate of $5 per thousand, while the remaining table stays the same as Model Three.
Table 13: Basic tax structure for classification-based gross receipts Categories Base Rate Gross Receipts Tax Rate
CONTRACTOR
$25 Flat Rate per
Business (first $25,000
in Gross)
0.002 X Gross
GENERAL COMMERCE/RETAIL 0.001 X Gross
RENTAL (COMMERCIAL &
RESIDENTIAL) 0.003 X Gross
SERVICE 0.001 X Gross
PROFESSIONAL 0.003 X Gross
INDUSTRIAL 0.005 X Gross
Table 14: Estimated revenue from classification-based gross receipts Business Type
Number of
Accts
Est. Taxable Gross
Receipts
Base Rate
$25 per
business
Total Est.
Annual Gross
Receipts Tax
CONTRACTOR 511 $ 74,802,650 $ 12,775 $ 124,055
GENERAL COMMERCE/RETAIL 680 $ 2,166,120,063 $ 17,000 $ 2,149,120
RENTAL (COMMERCIAL &
RESIDENTIAL)
68 $ 16,269,772 $ 1,700 $ 43,709
SERVICE 269 $ 71,511,671 $ 6,725 $ 64,787
PROFESSIONAL 182 $ 105,838,195 $ 4,550 $ 303,865
INDUSTRIAL 184 $ 597,347,185 $4,600 $2,963,736
1,894 $3.03 billion $47,350 $ 5,649,272
TOTAL $ 5,696,622
Model 4 – Highlights and Impact Review
Similar to the previous model, the City could use a much higher rate for specific businesses activities that have a high contribution to City expenses. The City could also choose to lower the rate for those business types that contribute to City revenue through other taxes.
20 | Page
Model 5: Combination Approach
For model 5 we have combined the gross-receipts approach with Model 4 and then structured the tax on warehousing and industrial services around square footage. As you can see below, estimated revenue yield would be substantial enough to address public infrastructure and road improvement needs. These gains, however, assume a few things. First, they assume that the square footage is reasonably accurate. We have drawn from property tax data but these figures remain estimates.
Second, these gains assume that aggressive taxation on industrial activities do not cause a significant number of businesses to relocate. We discuss this risk in more detail below and recommend a concerted effort in the region to mitigate this risk.
Business Type
Number
of Accts
Est. Taxable
Gross Receipts
Base Rate
$25 per
business
Total Est.
Annual Gross
Receipts Tax
CONTRACTOR 511 $ 74,802,650 $ 12,775 $ 124,055
GENERAL COMMERCE/RETAIL 680 $ 2,166,120,063 $ 21,575 $ 2,741,892
RENTAL (COMMERCIAL &
RESIDENTIAL)
68 $ 16,269,772 $ 1,700 $ 43,709
SERVICE 269 $ 71,511,671 $ 6,750 $ 64,762
PROFESSIONAL 182 $ 105,838,195 $ 4,550 $ 304,865
1,710 $2.43 billion $42,750 $ 3,279,283
TOTAL $ 3,326,633
Business Type Base Rate $25 per
business
Est. Industrial Business
Square Feet
Rate per
square
foot
Total Est.
Square Feet
Tax Revenue
INDUSTRIAL $4,600 10,630,926 $ 0.35 $ 3,720,824
Revenue Type Total Est. Square Feet Tax Revenue
Total Est. Square Feet Revenue $ 3,720,824
Total Est. Gross Receipts Revenue $ 3,279,283
Total Est. Annual Base Rate Revenue $ 47,350
GRAND TOTAL
$ 7,047,457
Model 5 – Highlights and Impact Review
Similar to the previous model, the City could adopt a combination of gross receipts classification and square footage tax. A differing square footage rate for industrial businesses would remedy the cost of repairing damaged roads that are the result of industrial-related transportation activities.
In most cases, the business tax is not sufficiently large to merit a price increase to the customer and thus may not be part of the marginal analysis of businesses in the City. For example, if you go to a City with a high business tax rate and one without a business tax rate and go to a large retailer, you will not typically see any difference in the price of goods sold. 21 | Page
In this case, however, the aggressive tax on industrial businesses may change that result. The current Southern California market for industrial space and warehousing has more demand than supply, presumably mitigating the impact of higher rates. But at these high rates, there is a non-trivial risk of businesses locating elsewhere or converting their square footage to some other use.
Additionally, property is not mobile, but services may be. For that reason, we have recommended a fairly low gross receipts rate on services while recommending that the industrial sectors of the economy shoulder more of the burden. If the costs of services and goods stay reasonable, the location is desirable, and there is not a wealth of other options, the City should be able to ask the industrial base to shoulder more of the responsibility for repairing the damage that their businesses have done to infrastructure and ensuring a future for the entire community.
One way to mitigate the risk of businesses leaving would be to coordinate a regional effort to ensure that industrial businesses in the region bear their fair share of infrastructure costs. A regional approach could increase the parity between co-located cities, which could decrease the risk of businesses relocating. 22 | Page
Proposed Rates Comparison
Table 15: Comparing Gross-Receipt Models By Hypothetical Business Type
Sample Business
City's
Current
Rates
Model 2
Gross Receipt
$1 / Thousand
Model 3
Gross Receipts
$1 - $3 /
Thousand
Model 4
Gross Receipts
$1 - $5/
Thousand
Model 5
Combination: GR
& Sq Ft
Small Business: 1 employee /
<$20,000
$ 65 $ 25 $ 25 $ 25 $ 25
Restaurant: 4 Employees / $150,000 $ 163 $ 150 $ 150 $ 150 $ 150 Hair Salon: 15 Employees / $500,000 $ 300 $ 500 $ 500 $ 500 $ 500 Large Retail Store: 50 Employees /
$1,500,000
$ 600 $ 1,500 $ 1,500 $ 1,500 $ 1,500
Doctors Office: 20 Employees (4
doctors) / $2,000,000
$ 750 $ 2,000 $ 5,950 $ 5,950 $ 5,950
Commercial Rental: 1 Employee, 2
units / $1,500,000
$ 600 $1,500 $4,450 $4,450 $4,450
Professional Engineering Firm: 15
employees (8 professional) /
$1,100,000
$ 480 $ 1,100 $ 3,250 $ 3,250 $ 3,250
Car Dealership: 20 employees
/$3,000,000
$ 1,050 $ 3,000 $3,000 $3,000 $3,000
Freight Warehouse: 25 Employees /
$12,000,000 / 100,000 Sq ft
$ 3,750 $ 12,000 $ 12,000 $ 59,900 $ 3,525
Small Contractor: 25 Employees /
$12,000,000 / 40,000 Sq ft
$ 150 $ 200 $ 375 $ 375 $ 375
Estimated Totals $7,908 $ 21,975 $ 31,200 $ 79,100 $ 22,725 23 | Page
Chart 11: Average Revenue Yield Models By Business Category $-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
CONTRACTORS GENERAL
COMMERCE/RETAIL
RENTAL
(COMMERCIAL &
RESIDENTIAL)
SERVICE PROFESSIONAL INDUSTRIAL
Model 2 Model 3 Model 4 Model 5
24 | Page
Chart 12: Equity of Models
0.350500%
0.195000%
0.100000%
0.525000%
0.195000%
0.100000%
0.295000%
0.195000%
0.100000%
0.075625%
0.076250%
0.079167%
0.042000%
0.047990%
0.100000%
0.035000%
0.039998%
0.083333%
0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60%
Large Business
Medium Business
Small Business
Current vs. New Effective Tax Rates
Current Tax Structure
Model 1 Tax Rate Structure
Model 2 Tax Rate Structure
Model 3 Tax Rate Structure
Model 4 Tax Structure
Model 5 Tax Structure
25 | Page
Appendices
City Detail Rates
West Covina, CA
Demographics:
Population: 108,455
County: Los Angeles County
Incorporation: February 17, 1923
Estimated Median Household Income: $94,550
Land Area: 16.04 square miles
Population Density: 6,723.21 people per square mile
Rate Structures And Fees - Renewal Cycles: 14-67:
All registration taxes due hereunder shall be paid in advance, in the lawful money of the United States of America, and shall be due and payable as follows:
Annual registration, due on January 1 and all licenses issued shall expire on December 31 of each year.
Rate Structures And Fees – Penalties: 14-43 Renewal Cycles: 14-43:
For failure to pay a license tax within 30 days after it becomes due, a penalty of 10% of the tax is added. An additional 10% is added each month it remains delinquent thereafter. The maximum penalty incurred does not exceed 100% of the license tax.
City Of West Covina Business License Tax Rates & Fees: 14-68:
Business Type – Manufacturers, Retail & Wholesale Annual Fee Base fee (includes 1 owner/ manager) $97.68
Employees in excess of owner + $19.99 per additional employee Business Type – Professionals Annual Fee
Base fee (includes 1 owner/ manager) $97.68
Employees in excess of owner + $19.99 per additional employee Additional corporation tax + $97.68 to calculations above if business is incorporated
26 | Page
Business Type – Contractors Annual Fee
If pulling permits $19.99
If not pulling permits $117.67
Business Type – Residential Property Rentals Annual Fee Residential Property Rentals $97.68 (first 2 units) + $19.99 per unit over 2 Business Type – Gardeners Annual Fee
Base fee $59.41 per vehicle
Business Type - Office and
Commercial Rentals Gross Receipts Tax Rate
$0 – $5,000 in gross receipts $85.68
In excess of $5,000 + $10 per $1,000 gross receipts in
excess of $5,000
27 | Page
Santa Fe Springs, CA
Demographics:
Population: 17,810
County: San Mateo County
Incorporation: May 15, 1957
Estimated Median Household Income: $68,685
Land Area: 8.91 square miles
Population Density: 1,986 people per square mile
Rate Structures And Fees - Renewal Cycles: 110.09:
Licensees operating under the provisions of this chapter shall be required to secure an annual renewal of the license on the anniversary date of its issuance.
Rate Structures And Fees – Penalties: 110.58 and 110.59:
For failure to pay a fee when due for initial or renewal of license, a penalty of ten percent of such fee shall be added on the last day of each month after the due date thereof, provided, the amount of the penalty to be added shall in no event exceed fifty prevent of the amount of the fee due.
City Of Santa Fe Springs Business License Tax Rates & Fees: Title XI.
Business Type (Inside the City) Number of Employees Tax Rate 0 – 5 employees $100
General Business 6 – 300 employees $100 + $4 per employee 300 employees or more $100 + 2 per employee over 299
Business Type Tax Rate
General Contractor $150
Sub-Contractor $100
28 | Page
Business Type (Outside the City) Tax Rate
Advertising $75 + $25 per structure
Bench Ads $35 + $4 per bench
Catering Truck $100 per vehicle
Delivery $100 per vehicle
Misc. – Out of City $100
Recyclable Dealers $300
Solicitors $250
Taxi Company $25 per cab
Vending Machine $36
Business Type Number of Units Tax Rate
1 – 9 Units $100
10 – 14 Units $200
Hotel/Motel/Apartments 15 – 19 Units $300
20 – 30 Units $400
31+ Units $500
Business Type Number of Spaces Tax Rate
Mobile Home Park
First 5 spaces $100
Over 5 spaces $100 + $5 per additional space
29 | Page
Downey, CA
Demographics:
Population: 111,126
County: Los Angeles County
Incorporation: October 23, 1873
Estimated Median Household Income: $75,878
Land Area: 12.41 square miles
Population Density: 9,008 people per square mile
Rate Structures And Fees - Renewal Cycles: Sec. 6214
Annual registration is due on January 1 of each year, unless otherwise specified. Ever annual license issued expires on December 31, following the date of its issuance.
Rate Structures And Fees – Penalties: Sec. 6214, Sec. 6215, & Sec. 6216 Failure to pay any license fee at the time required by this chapter, the Tax Collector shall add a penalty of twenty percent (20%) of the license fee or ten dollars ($10.00), whichever is greater, to said license fee on the last day of month following the due date, and thereafter, on the last day of each succeeding month twenty percent (20%) of the license fee shall be added providing, however, that the amount of the penalty shall at no time exceed the total amount of the tax due.
City Of Downey Business License Tax Rates & Fees: Sec. 6225 - Sec. 6272 Business Type Tax Rate
Property Rental $20 for 4 units or under
$20 for 4 units + $6 per unit over 4
30 | Page
Business Type Tax Rate
$64.40: 0 – 5 Employees
$92.74: 6 – 10 Employees
$123.64: 11 – 15 Employees
$149.41: 16 – 20 Employees
$175.01: 21 – 25 Employees
Functional Corporate and Administrative
Office
$200.92: 26 – 30 Employees
$211.22: 31 – 40 Employees
$237.00: 41 – 50 Employees
$237.00: 51 – 60 Employees
$262.73: 51 – 60 Employees
$288.50: 61 – 70 Employees
$314.27: 71 – 80 Employees
$340.01: 91 – 100 Employees
$368.34: over 100 Employees + $1 for
each employee over 101
Business Type Gross Receipt Total Tax Rate
<$50,000 $30
$50,000 - $200,000 $36 + $0.12 per thousand of gross
receipts over $50,000
Miscellaneous Businesses Over $200,000 to $500,000 $54 + $0.18 per thousand of gross receipts over $200,000
Over $500,000 to $1,500,000 $108 + $0.24 per thousand of gross receipts over $500,000
Over $1,500,000 $348 + $0.26 per thousand of gross
receipts over $1,500,000
31 | Page
Business Type Tax Rate
Professionals $193.20 + $10.31 per employee
Contractors (within the city) $159.72
Sub-Contractors (outside of the city) $128.79
Delivery By Vehicles $64.40 per vehicle
Business Type Gross Receipt Total Tax Rate
<$50,000 $30
$50,000 - $200,000 $40 + $0.08 per thousand of gross
receipts over $50,000
Wholesale Over $200,000 to $500,000 $52 + $0.09 per thousand of gross receipts over $200,000
Over $500,000 to $1,500,000 $79 + $0.11 per thousand of gross receipts over $500,000
Over $1,500,000 $189 + $0.12 per thousand of gross
receipts over $1,500,000
32 | Page
Gardena, CA
Demographics:
Population: 61,027
County: Los Angeles
Incorporation: September 11, 1930
Estimated Median Household Income: $58,447
Land Area: 5.83 square miles
Population Density: 1,954 people square mile
Rate Structures And Fees - Renewal Cycles: 5.04.130A:
The annual license fees provided for in this chapter shall be due and payable in advance. All license fees shall be due and payable on the first day of January of each year.
Rate Structures And Fees – Penalties: 5.04.130C:
If such annual license fee paid under the gross revenue schedules provided for in Chapter 5.08 of this code is unpaid at the end of the day when due and remains unpaid at the end of the second calendar month after the same becomes due and payable under the provisions of this chapter, a penalty of ten percent shall be added to the same and collected by the license collector. All other annual license fees provided for in this chapter paid on a fixed fee basis shall become due and payable on the date of expiration of the license, and, if remaining unpaid at the end of the calendar month after the same becomes due and payable, the penalty provisions of this section shall apply. For each calendar month of delinquency thereafter, an additional penalty of ten percent on the original license fee due shall be added in the same manner as provided in subsection (C)(1) of this section; provided, however, when such penalty on any annual license amounts to fifty percent of the license fee therefor, no further penalty shall accrue on such license fee.
City of Gardena Business License Tax Rates & Fees: 5.08
Business Type Tax Rate
General Contractors $150 + $1 per thousand of gross receipts Subcontractor, Plumbing, Electrical Contractors $75
33 | Page
Business Type Tax Rate
General Retail, Manufacturing, Warehousing,
Wholesale, Hotels & Motels, Hospitals, Sanitariums,
Rest Homes, Vending Machines, Services Machines
$75: Gross receipts less than $50,000
$75: + $0.50 per thousand of gross receipts when
gross receipts are more than $50,000
Business Type Tax Rate
Professionals and Services $150: Gross receipts less than $50,000 $150: + $1 per thousand of gross receipts when gross
receipts are more than $50,000
Business Type Tax Rate
Nonresidential Property Rentals $50: 0 – 5,000 sq ft
$50 + $0.01 per sq ft for property rentals over 5,000
sq ft
Business Type Tax Rate
Residential Property Rentals $50: for first four units
$50: for first four units + $10 for each unit over four in number
34 | Page
La Mirada, CA
Demographics:
Population: 48,008
County: Los Angeles
Incorporation: March 23, 1960
Estimated Median Household Income: $95,685
Land Area: 7.8 square miles
Population Density: 6,124 people per square mile
Rate Structures And Fees - Renewal Cycles: 5.04.050:
Except in cases specifically provided for otherwise in this title, the license term for licenses issued under this title shall be for a term of twelve months commencing from the first day of the calendar year quarter in which the license is issued. Unless specified otherwise in this title all licenses shall be subject to renewal upon the anniversary date of the license and the fee for the same shall then be immediately due and owing Rate Structures And Fees – Penalties: 5.04.060:
Every person failing to pay the license fee on the date due shall become subject to a penalty of ten percent of the amount of such license for each thirty days thereafter up to a maximum of one hundred percent of the license fee due and owing.
City of La Mirada Business License Tax Rates & Fees: 5.06.010 – 5.06.080 Business Type Gross Receipt Total Tax Rate
$1 - $50,000 $50
General Business $50,001 - $500,000 $50 + $0.20 per thousand of gross receipts
$500,001 or more $50 + $0.10 per thousand of gross
receipts
Business Type Gross Receipt Total Tax Rate
$1 - $50,000 $50
Professionals $50,001 - $500,000 $50 + $0.20 per thousand of gross receipts
$500,001 or more $50 + $0.10 per thousand of gross
receipts
35 | Page
Business Type Gross Receipt Total Tax Rate
$1 - $50,000 $50
Services $50,001 - $500,000 $50 + $0.20 per thousand of gross receipts
$500,001 or more $50 + $0.10 per thousand of gross
receipts
Business Type Gross Receipt Total Tax Rate
$1 - $50,000 $50
Contractors $50,001 - $500,000 $50 + $0.20 per thousand of gross receipts
$500,001 or more $50 + $0.10 per thousand of gross
receipts
Business Type Number of Rental Properties + Gross
Receipts Tax Rate
1 rental property + $0 in gross
receipts No fee
Property Rental (Commercial &
Residential)
2 or more rental property + $1 to
$50,000 in gross receipts
$50
2 or more rental property + $50,001
to $500,000 in gross receipts
$50 + $0.20 per thousand of gross
receipts
2 or more rental property + $500,001
or more in gross receipts
$140 + $0.10 per thousand of gross
receipts
Business Type Gross Receipt Total Tax Rate
Coin Operated Machines (Located in
the City) $1 - $10,000 $75 + $0.001 per sq ft
$10,001 and above $0.01 per thousand of gross receipts
36 | Page
San Bruno, CA
Demographics:
Population: 29,864
County: San Mateo County
Incorporation: July 08, 1925
Estimated Median Household Income: $135,220
Land Area: 5.51 square miles
Population Density: 5,368 people per square mile
Rate Structures And Fees - Renewal Cycles: 3.12.110:
Annual Licenses. Unless otherwise specifically provided in this article, all annual license taxes shall be due and payable on the first day of August of each year and delinquent on the first day of September of each year.
Rate Structures And Fees - Penalties 3.12.120:
If a person responsible for payment of a business license tax fails to pay such tax when due, there shall be added a penalty of twenty percent of such license tax on the last day of each month after the due date thereof. The amount of the penalty to be added shall not exceed one hundred percent of the amount of the license tax due. If, after a payment is made to the tax collector, the records of the taxpayer are examined, audited, or inspected and it is determined by the tax collector that the amount paid was, in fact, less than the amount due, the penalty applicable for failure to pay the tax when due shall begin to apply from the date the amount of the deficiency was delinquent rather than from the date of notice by the tax collector of the deficiency.
City of San Bruno Business License Tax Rates & Fees: 3.16:
Business Type Gross Receipts Annual Tax
General Business Less than $75,000 $75
$75,000 or more, but less than $100,000 $100
Over $100,000 to $500,000 $110 + $5.25 per $5,000
Over $500,000 to $1,000,000 $530 + $4.00 per $5,000
Over $1,000,000 to $5,000,000 $930 + $2.75 per $5,000
Over $5,000,000 $3,130 + $1.65 per $5,000
37 | Page
Business Type Area of Place of Business Occupied Annual Tax Central Administrative Offices—
Auxiliary units—Manufacturing.
999 square feet or less $150
1,000 – 2,499 square feet $250
2,500 – 4,999 square feet $350
5,000 – 9,999 square feet $550
10,000 square feet or more $850
Business Type Number of Employees Additional Annual Tax Central Administrative Offices—
Auxiliary units—Manufacturing
(continued).
1 – 10 $7.50 per employee
11 – 25 $75 + $5 for each employee in
excess of 10
26 – 50 $195 + $4 for each employee in
excess of 10
51 or more $75 + $3 for each employee in
excess of 10
Business Type Type of Concession Quarterly Tax
Amusement concessions Merry-go-round, Ferris wheel, dodgem, swing or other mechanical device for the carrying of passengers $75
Ball and ring throwing games, spin-the-wheel, mechanical and electrical games, shooting gallery, keno, lotto and similar games of chance
$50
C. Sales of merchandise or foodstuffs, not in connection with any game of chance $30
Business Type Quarterly Tax
Apartments and rooming houses $50 (base) + $1 per room
(minimum 3 rooms)
Commercial property rental. $50 (base) +$10 per 1,000 sqft Bowling alleys and similar games $40 for each alley
Boxing or wrestling exhibitions $200 for each exhibition Carnivals and circuses $300 for the first day + $75 for each addl. day Electrical musical devices $25 per device
Mechanical, electronic, and video amusement devices $30 per device Nonresident Contractors and other businesses
(Every person not having a fixed place of business in the city) $75 Peddlers and solicitors $40 per day + $10 per each addl. day Public Dances – Place of public dance
> dancing is accompanied by mechanized music
> dancing is accompanied by live or unmechanized music
$200
$450
Shuffleboards $15 per game
Vehicle Vendor $75
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Montebello, CA
Demographics:
Population: 62,742
County: Los Angeles
Incorporation: October 16, 1920
Estimated Median Household Income: $56,150
Land Area: 8.33 square miles
Population Density: 7,435 people per square mile
Rate Structures And Fees – Renewal Cycles: 5.04.120:
Annual license shall date from the day of issue thereof, and shall be in effect for a period of one year thereafter.
Rate Structures and Fees – Penalties: 5.04.180:
All annual license taxes imposed hereunder, shall be due and payable in lawful money of the United States, in advance, not later than the anniversary of issuance of such license.
City of Montebello Business License Tax Rates & Fees: Chapter: 5.08.010 – 5.08.060:
Business Type Tax Rate
General Contractors $292.16 + tax on gross receipts as listed in “All Businesses” table below
Junk Dealer, Automobile or Truck Dismantler $568.52 + tax on gross receipts as listed in “All Businesses” table below
Peddler, Solicitor, or Itinerant Vendor $284.26 + tax on gross receipts as listed in “All Businesses” table below
Auctions $152 per day + tax on gross receipts as listed in “All Businesses” table below
Business Type Number of Dwelling Units Tax Rate
Rental of Real Property 1 – 3 $515.22 + tax on gross receipts as listed in “All Businesses” table below
Business By Vehicle: All Others 3 or more
$515.22 + $171.74 for each
additional unit + tax on gross receipts
as listed in “All Businesses” table
below
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Business Type Tax Rate
Business By Vehicle: Refuse Trucks $647.07 + tax on gross receipts as listed in “All Businesses” table below
Business By Vehicle: All Others $568.52 + tax on gross receipts as listed in “All Businesses” table below
Business Type Gross Receipt Total Tax Rate
$1 - $25,000 $133.25
$25,001 - $50,000 $154.96
$50,001 - $100,000 $210.24
$100,001 - $150,000 $260.57
$150,001 - $200,000 $311.90
All Businesses $200,001 - $300,000 $362.23
$300,001 - $400,000 $414.54
$400,001 - $600,000 $520.15
$600,001 - $800,000 $691.89
$800,001 - $1,000,000 $1,038.33
$1,000,001 and over $1,380.82
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Whittier, CA
Demographics:
Population: 87,306
County: Los Angeles
Incorporation: February 25, 1898
Estimated median household income: $77,270
Land area: 14.7 square miles
Population Density: 5,960 people per square mile
Rate Structures And Fees – Renewal Cycles: 5.04.070:
The annual license taxes provided in this chapter for gross receipts shall be due and payable to the city on the first day of February of each year, but the first annual license shall be issued for the unexpired period of the year, except as otherwise specifically provided in this chapter. All other annual license taxes shall be for a term twelve months from issue.
Rate Structures And Fees – Penalties: 5.04.110:
A tax certificate that is not renewed by payment one month past due date, will have an additional ten percent penalty of added to the license renewal. This means that ten percent of the total renewal rate, will be added to the renewal fee that is due. A tax certificate that is not renewed by payment two months past due date, will have an additional twenty-five percent penalty of added to the license renewal. This means that twenty-five percent of the total renewal rate, will be added to the renewal fee that is due. A tax certificate that is not renewed by payment three months past due date, will have an additional fifty percent penalty of added to the license renewal. This means that fifty percent of the total renewal rate, will be added to the renewal fee that is due. A tax certificate that is not renewed by payment four months past due date, will have an additional seventy-five percent penalty of added to the license renewal. This means that seventy-five percent of the total renewal rate, will be added to the renewal fee that is due. A tax certificate that is not renewed by payment five or more months past due date, will have an additional one hundred percent penalty of added to the license renewal. This means that one hundred percent of the total renewal rate, will be added to the renewal fee that is due.
License Tax Imposed: 5.04.010:
It is unlawful for any person, either for himself or for any person, to commence or carry on any business in the City, without first having paid the applicable business taxes and having obtained the tax certificate provided for in this title as proof of payment to the City, to do so, or without complying with any and all regulations of such business, contained in this title.
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City of Whittier Business License Tax Rates & Fees: 5.04.120:
Business Type Gross Receipt Total Tax Rate
$0 - $20,000 $50
$20,000 - $50,000 $50 + $1 per thousand of gross
receipts
General Business License $50,000 - $200,000 $80 + $0.70 per thousand of gross receipts
$200,000 - $500,000 $185 + $0.50 per thousand of gross
receipts
$500,000 - $1,000,000 $335 + $0.35 per thousand of gross receipts
Over $1,000,000 $510 + $0.20 per thousand of gross
receipts
Business Type Tax Rate
Professionals
$100: 1 professional,
$200: 2 professionals
$300: 3 professionals + $25 per
professional over 2
Contractors $100
Barbershop $75 + $15 ea. chair and manicurist
Cosmetologically $75 + $15 ea. employee and
manicurist
Automobile Retail Sales $100 + $0.20 per thousand of gross receipts up to $600,000
Manufacturing
$25: first employee then $2 for each
employee count totaling 2 – 25; then
$1 for each employee count totaling
over 25