December 5, 2023
Finance Department
DATE: December 5, 2023
TO: Mayor Martinez and Members of the City Council
FROM:
Nickie Mastay, Deputy City Manager, Internal Services
Andrea Miller, Director of Finance
Mubeen Qader, Deputy Director of Finance
Antonio Banuelos, Accounting Manager
Subject:
Ordinance changing the due date of the Business Tax for businesses (excluding rental businesses) from July 1st to April 1st and adding a section allowing for a thirty-day grace period before late fees are assessed.
FINANCIAL IMPACT: There is no financial impact with changing the due date for businesses (excluding rental businesses) from July 1 to April 1 nor with allowing a thirty-day grace period
before late fees are assessed.
PREVIOUS COUNCIL
ACTION:
N/A
STATEMENT OF THE
ISSUE:
The proposed Ordinance will change the due date for the business tax (excluding those due from rental
businesses) from July 1 to April 1 and add a section
allowing for a thirty-day grace period before late fees are assessed.
RECOMMENDED ACTION: ADOPT an ordinance (second reading) changing the due date for the business tax (excluding those due from rental businesses) from July 1 to April 1, and add a section
allowing for a thirty-day grace period before late fees are assessed – Finance Department (Nickie Mastay/Andrea
Miller/Mubeen Qader/Antonio Banuelos 510-620-6741).
DISCUSSION:
AGENDA
REPORT
December 5, 2023
City Council placed a measure on the November 3, 2020 ballot that was approved by the voters, which changed the Business Tax calculation methodology to be based on gross receipts instead of the prior method based upon the number of employees employed by a business.
The current ordinance states that July 1 is the business tax due date for all businesses except those involving property rentals. City staff is requesting to amend the due date as stated in section 7.04.300 (D) of the Richmond Municipal Code as follows:
7.04.300 Certificates—Issuance, Declaration, Content, Due Date
(D) Due Date—All Other Businesses. With respect to any persons engaging in any business activities other than residential and non -residential rental businesses activities, annual declarations and business tax payments shall be due by or before July April 1 of each calendar year for which a person is issued a business tax certificate, unless the city council, in its discretion, declares a different due date.
There are a few reasons for this request.
First, it is closer to the expiration date of December 31. Many business owners have expressed a desire for that window – expiration date and due date – to be shorter.
Second, receiving payments earlier in the year means that payments are received and processed during the actual fiscal year. Currently, payments received in late June and in July result in the payment needing to be accrued. This past year, with the due date of July 1, 2023, the City received a little over $2 million after July 1, 2023, in business tax that accrued to fiscal year 2023-24. These payments came from 1,375 different businesses. Additionally, City staff deem it better to receive the funds earlier in the year for both forecasting reasons and cash flow needs. Finally, the more payments Finance staff can process before July, the more they are available to focus on year-end closing and audit requests.
With the due date for rental property business tax as March 1 and with the proposed due date for all other businesses to April 1, we are also requesting to add language giving business owners an extra 30 days to submit payments before late fees are assessed. City staff is requesting to amend the due date as stated in section 7.04.400 (d) of the Richmond Municipal Code as follows:
7.04.400 Penalty for nonpayment.
A. The following non-payments are declared delinquent:
1. Every annual business tax or portion thereof that is not paid on or before the deadline to make such payment;
December 5, 2023
2. Every registration fee and portion thereof for a newly established business, that is not paid within thirty (30) days after commencing business; and
3. Any other tax, penalty, fee, or interest, or portion thereof, that is not paid by any date and time established or declared pursuant to this chapter.
4. Any person who fails to file any required statement and/or fails to pay the amount of the tax prescribed in this chapter within thirty (30) days after it becomes due, shall be deemed delinquent.
54. Any person whose non-payments are deemed delinquent shall pay a penalty as follows:
(a) Ten percent (10%) of the total amount that remains delinquent as of the expiration of the deadline to make such payment; plus (b) Twenty-five percent (25%) of the total amount that remains delinquent as of the expiration of sixty (60) days after the deadline to make such payment, not including any penalty amount. For the purpose of this subsection, any partial payments shall be first credited against any outstanding penalties and then against the principal delinquent amount.
65. Proof of payment of Business Tax or Registration Fee. If a dispute arises regarding the date a payment was received by the city, the burden of proof is on the taxpayer to demonstrate that the taxpayer made and the city received timely payment.
Next Steps
Finance staff recently began mailing out the 2024 renewal notices for rental property businesses. The due date for the notices is March 1, 2024. During the next few weeks, Finance staff will start mailing out the 2024 renewal notices for all other businesses. The Finance Department is providing augmented business tax services to the Richmond business community in person, via phone calls, through our online payment portal, and through virtual online appointments.
The community can leave questions for staff on the business tax hotline at 510-620- 5555 or send an email to [email protected].
DOCUMENTS ATTACHED:
Attachment 1 – Ordinance