Business Tax Update
Ordinance Creating New Business Activity
Classification, Class P – Wholesale, and the
corresponding rates.
FINANCE DEPARTMENT AND CITY ATTORNEY’S OFFICE
FEBRUARY , 2024
Agenda
Background
Business Tax Classifications
Business Tax Rates
Recommended Action
Questions
2 Measure U Background
Measure U Approved by Voters in November 2020
Changed the way the tax is calculated
◦ New Methodology is based on the Business Gross Receipts ◦ Tax is a percentage of the Gross Receipts and changes based on the Business Category and the amount of Gross Receipts
◦ Businesses making less than $250,000 pay the Minimum Tax of $100 Per Year 3 Wholesale Background
Measure U contained no classification for Wholesalers
Staff created Administrative Ruling 1.0 that categorized Wholesale Businesses under Class A - Retail Sales.
Definition of Retail Sales excludes wholesale sales:
“Retail sales” means the sale of goods, wares, or merchandise for any purpose other than resale in
the regular course of business, including restaurants and peddlers. (emphasis added) Definition of Retail Sales excluding wholesale sales creates need for a new Business Tax Class for Wholesale Businesses
Approximately 15 business in Richmond are wholesalers and financial impact is estimated at $10,000 decrease to the General Fund revenues.
If a business does not fall clearly into any class, they are then placed in Class J - Miscellaneous 4 Business Tax Classifications
Class Industry Class Industry
A Retail Sales I Administrative headquarters (payroll
based, not gross receipts)
B Grocers J Miscellaneous
C Automobile Sales, Manufacturing K Residential and Commercial Rentals D Recreation and Entertainment L Cannabis
E Hotel/Motel M Firearms Ammunition
F Construction contractor N Taxi and limousine service
G Business and personal services O Transportation, trucking H Professional/semi-professional service P Wholesale
Current Rates For All Classes
6 Class Industry Under $1M $1M to
$2.5M
$2.5M to
$25M
$25M to
$50M Over $50M
A Retail Sales 0.120% 0.160% 0.200% 0.240% 0.320%
B Grocers 0.060% 0.100% 0.130% 0.015% 0.200%
C Automobile Sales, Manufacturing 0.120% 0.220% 0.310% 0.410% 0.500% D Recreation and Entertainment 0.450% 0.460% 0.470% 0.480% 0.500% E Hotel Motel 0.180% 0.280% 0.380% 0.480% 0.500%
F Construction contractor 0.180% 0.210% 0.240% 0.270% 0.300% G Business and personal services 0.180% 0.270% 0.360% 0.500% 0.540% H Professional/semi-professional service 0.360% 0.410% 0.450% 0.500% 0.680% I Administrative headquarters (payroll based, not gross receipts) 0.120% 0.150% 0.190% 0.220% 0.240%
J Miscellaneous 0.240% 0.310% 0.380% 0.450% 0.480%
K Residential and Commercial Rentals 1.081% if 4 properties or less and 2.880% if 5 properties or more L Cannabis 5.000% 5.000% 5.000% 5.000% 5.000%
M Firearms Ammunition 2.400% 2.400% 2.400% 2.400% 2.400% N Taxi and limousine service $75 for each ambulance or limousine and $180 for each taxicab permit O Transportation, trucking Tax based on current employee total Proposed Rates for Class P
7 Class P . Persons engaged in Class P business activities shall pay a business tax as follows:
If annual gross receipts are: Then the business tax is:
Not over $1,000,000 $1.20 per $1,000 of annual gross receipts Over $1,000,000 but not over $2,500,000 $1,200, plus $1.50 per $1,000 of annual gross receipts over $1,000,000
Over $2,500,000 but not over $25,000,000 $3,450, plus $1.90 per $1,000 of annual gross receipts over $2,500,000
Over $25,000,000 but not over $50,000,000 $46,200, plus $2.20 per $1,000 of annual gross receipts over $25,000,000
Over $50,000,000 $101,200, plus $2.40 per $1,000 of annual gross receipts over $50,000,000
Rates For All Classes including Class P
8 Class Industry Under $1M $1M to
$2.5M
$2.5M to
$25M
$25M to
$50M Over $50M
A Retail Sales 0.120% 0.160% 0.200% 0.240% 0.320%
B Grocers 0.060% 0.100% 0.130% 0.015% 0.200%
C Automobile Sales, Manufacturing 0.120% 0.220% 0.310% 0.410% 0.500% D Recreation and Entertainment 0.450% 0.460% 0.470% 0.480% 0.500% E Hotel Motel 0.180% 0.280% 0.380% 0.480% 0.500%
F Construction contractor 0.180% 0.210% 0.240% 0.270% 0.300% G Business and personal services 0.180% 0.270% 0.360% 0.500% 0.540% H Professional/semi-professional service 0.360% 0.410% 0.450% 0.500% 0.680% I Administrative headquarters (payroll based, not gross receipts) 0.120% 0.150% 0.190% 0.220% 0.240% J Miscellaneous 0.240% 0.310% 0.380% 0.450% 0.480%
K Residential and Commercial Rentals 1.081% if 4 properties or less and 2.880% if 5 properties or more L Cannabis 5.000% 5.000% 5.000% 5.000% 5.000%
M Firearms Ammunition 2.400% 2.400% 2.400% 2.400% 2.400% N Taxi and limousine service $75 for each ambulance or limousine and $180 for each taxicab permit O Transportation, trucking Tax based on current employee total P Wholesale 0.120% 0.150% 0.190% 0.220% 0.240%
Proposed Rates for Class P
9 Current Richmond Rates
Class Industry $250k to
$1M
$1M to
$2.5M
$2.5M to
$25M
$25M to
$50M Over $50M
A Retail Sales 0.120% 0.160% 0.200% 0.240% 0.320%
P Proposed Wholesales 0.120% 0.150% 0.190% 0.220% 0.240% Approved Oakland Rates in 2022 with Measure T - effective 1/1/2023 Industry Under $1M $1M to
$2.5M
$2.5M to
$20M
$20M to
$50M Over $50M
Retail Sales 0.090% 0.110% 0.200% 0.220% 0.240%
Wholesales 0.110% 0.120% 0.180% 0.200% 0.250%
Current San Francisco Rates updated with Proposition F in 2020 Industry Under $1M $1M to
$2.5M
$2.5M to
$20M
$25M to
$50M Over $50M
Retail Sales 0.053% 0.070% 0.095% 0.224% 0.224%
Wholesale Trade 0.105% 0.140% 0.189% 0.224% 0.224%
Current Berkeley Rates
Industry Under $1M $1M to
$2.5M
$2.5M to
$20M
$25M to
$50M Over $50M
Retail Sales 0.120% 0.120% 0.120% 0.120% 0.120%
Wholesale Trade 0.120% 0.120% 0.120% 0.120% 0.120%
Examples of Business Tax
Proposed Oakland
Gross
Receipts
Class A -
Retail Sales
Class P -
Wholesale
Class J -
Miscellaneous Wholesale
$900,000 $1,080 $1,080 $2,160 $990
$2,000,000 $2,800 $2,700 $5,500 $2,300
$3,000,000 $4,600 $4,400 $8,950 $3,800
$10,000,000 $18,600 $17,700 $35,550 $16,400
$25,000,000 $48,600 $46,200 $92,550 $44,400
$50,000,000 $108,600 $101,200 $205,050 $94,400
Recommended Action to
City Council on February 6th Meeting
INTRODUCE an Ordinance (first reading) amending
Chapter 7.04.103 of the Richmond Municipal Code to
create a new Business Activity Classification, Class P – Wholesale, and provide the corresponding rates.
Questions?
12