Business License Tax
Study Session
Presentation to City Council
Greg Henry, Financial Services Manager
June 26, 2024
Government Code Section 54957.5
SB 343 Item
Agenda: 06/26/2024 REG CC Item
19 Agenda
Methods of Taxation
Current Methods and Revenue
Tax Cap
Updates by Category
Penalty
Q & A
Methods of Taxation
Flat Rate Per Employee
Gross Receipts Per Units
Current Tax
Structures
• Primarily Per Employee Base
• 21 General categories
• Each has separate methods of
calculation
• Tax Cap of $150,866.50
2023 Business License Tax Revenue
Business type Revenue % of
Rev
# of
Businesses
Description of Current
Business License Tax
Professional $1,342,996 54% 477 $226 per associate
General Business 754,917 30% 1,637 Per employee rate, currently $113.50 + $23 per employee/owner
Contractor 281,537 11% 1,300 Flat rate of 226.25 for contractors, $188.25 for subcontractors
% Gross Receipts
64,453 2.6% 13
% of gross receipts
Other 66,257 2.6% 76 Various
Total $2,510,160 100% 3,503
Tax Cap - Considerations
Keep Cap –
150,866.50
1 Set to
$500,000
2 Set to
$750,000
3 Set to
$1,000,000
4 Remove
Cap
5 Tax Cap
Impact
7 Cap Estimated
Tax Revenue Increase
150,866.50 $4,431,193 $1,921,033
500,000.00 $4,780,326 $2,270,166
750,000.00 $5,030,326 $2,520,166
1,000,000.00 $5,280,326 $2,770,166
None $5,540,883 $3,030,723
Professional – Per Associate Rate
$226 $275
8 General Businesses
Proposed Structure, Per
Employee
• Base: $150
# of employees Per Employee
0-4 employees $30
5-9 employees $35
10-19 employees $50
20-49 employees $60
50-99 employees $75
100-249 employees $80
250-499 employees $90
500-999 employees $100
1,000 employees+ $150
Breakdown of Current Businesses
10 # of employees # of
companies
% of total
companies
% of 2023
revenue
% of projected
revenue
0-4 employees 1,050 64.2% 24.2% 2.5%
5-9 employees 253 15.4% 9.9% 2.5%
10-19 employees 162 9.9% 9.9% 4.1%
20-49 employees 116 7.1% 13.1% 8.4%
50-99 employees 33 2.0% 7.4% 6.3%
100-249 employees 17 1.0% 8.4% 8.7%
250-499 employees 3 0.2% 3.0% 3.4%
500-999 employees 2 0.1% 3.8% 5.0%
1,000 employees+ 1 0.1% 20.4% 59.2%
Total 1,637 100% 100% 100%
Impact on Sample Businesses
11 # of
employees
Current Rate Proposed Rate $ Increase
2 159.50 210.00 50.50
7 274.50 375.00 100.50
15 458.50 745.00 286.50
35 918.50 1,905.00 986.50
75 1,838.50 4,695.00 2,856.50
175 4,138.50 12,575.00 8,436.50
375 8,738.50 29,835.00 21,096.50
750 17,363.50 66,095.00 48,731.50
2,500 57,613.50 316,145.00 258,531.50
5,000 115,113.50 691,145.00 576,031.50
10,000 150,886.50 1,441,145.00 1,290,258.50
Construction Contractors
Moving to a Percentage of
valuation
Set at 0.18%.
Increases tax revenue from
$300,000 to $1.5 million
12 Temporary Vendor
13 Daily charge
increased from
$75.25 to $150
Annual Earnings in
SSF, under $500,
exempt from BLT
Short Term Rental
of Residential Real
Property • Remove the 5-unit threshold • $150 base rate • $10 per unit rate • Hotels, Motels • 23% increase 14 Long Term Rental
of Residential Real
Property
• Remove the 5-unit threshold
• No base rate
• $50 per unit rate
• Includes mobile parks
15 Penalty
16 Current - 10% of the tax due
if payment is more than 30
days late with an additional
15% of the tax due if it is
more than 60 days late
Proposed – 10% a month of
the tax due past the first
month up to 100% of the
original amount.
QUESTIONS?