Business License Tax
Update
Presentation to City Council
Karen Chang, Director of Finance
Greg Henry, Financial Services Manager
July 24, 2024
Current Tax
Structures
Primarily Per Employee Base
21 General categories
Each has separate methods of
calculation
Tax Cap of $150,886.50
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
Topics
Review Current Tax Structure
Major Changes to BLT
Tax Impact Summary – Other Categories
General Business Proposed Structure & Tax Impact
Statistics
Outreach Summary
Council Action
Q&A
Short Term Rental /Hotels
-
Residential Real Property
Per Council discussion: Explore charging
Hotels per employee not per unit
No employee data available
Current: $113.50 +$8/unit
Propose: $150 + $10/unit
For Hotel w/200 rooms: from $1,700 to
2,100
Apartment/Residential units : Flat
$50/unit
Remove the 5-unit threshold
5 Temporary Vendor
Daily charge increased from $75.25
to $150
Annual Gross Receipts in SSF, under
$500, exempt from BLT
Construction Contractors
Moving to a Percentage of
valuation
Set at 0.18%.
Increases tax revenue from
$300,000 to $1.5 million
Employee Definition
“Employee” includes, without limitation, a person designated as a co-employee, nonemployee, independent contractor, or any other classification, so long as the person is working in the business. A person who receives an Internal Revenue Service Form 1099 from a business is an employee of the business.
Professional – Per Associate Rate
$226 $275
Accountant, acupuncturist, advertising, analyst, appraiser, architect, artist, assayer, attorney;
Bacteriologist, bail bond broker, broker, business opportunity broker, business and safety consultant;
Cemetery broker, chemist, chiropodist, chiropractor, collection agency or mercantile agency, commercial artist, commission merchant; Dentist, designer or decorator, discount finance company, drugless practitioner; Electrologist, engineer, entomologist, finance company, Geologist, Herbalist; Illustrator or show card writer, insurance adjuster or claims adjuster, insurance broker, investment and investment trust;
Laboratory, landscape architect, lapidary, Map maker or cartographer, mineralogist, moneylender or money broker, mortician; Naprapath and naturopath, Oculist, oil and gas broker, optometrist, osteopath; Physician, psychiatrist, psychologist; Real estate broker; Stock and bond broker, surveyor;
Tax counselor, taxidermist; Veterinarian; Design professional, including computer or graphic design;
Computer programmer; Planner or architect; Surveyor, inspector, or map professional.
Penalty
10 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.
Tax Change Impact
by Business
Category
Does not include General
Business
Long Term Residential
previously not included in tax
increase, based on census
data.
Business type Current Tax Proposed Tax Increase
Professional 1,342,996 1,634,177 291,181
Contractor 281,537 1,500,000 1,218,463
% Gross Receipts 64,453 64,453 -
Rental Real Property
Hotel/STR 22,000 27,000 5,000
Long Term
Residential - 450,000 450,000
Total 1,710,986 3,675,630 1,964,644
General Businesses - Proposed Structure, Per Employee
# Employees # Companies Rate (Initial
Prop)
# Companies Option 1 Option 2 Option 3
0-4 1,067 $30 1,322 $30 $30 $30 5-9 255 $35
10-19 166 $50
20-49 121 $60 321 $45 $45 $50
50-99 34 $75
100-249 22 $80
29 $55 $75 $90
250-499 4 $90
500-999 2 $100
1,000 + 1 $150
Base: $150
Revenue Summary-General Business
Options General
Category Rev
No Cap
General
Category Rev
Cap - $1M
General Category
Rev
Cap - $750K
General Category
Rev
Cap - $500K
Initial Proposal $2,315,253 $2,054,696 $1,804,696 $1,554,696 Option 1 (30-45-55) 1,442,775 1,442,775 1,442,775 1,442,775 Option 2 (30-45-75) 1,676,175 1,676,175 1,676,175 1,531,730 Option 3 (30-50-90) 1,890,760 1,890,760 1,867,870 1,617,870 Business Impact (with no cap)
# of
employees
Current
Tax
Proposed
Tax
Option 1
Annual
Increase
Opt. 1
Proposed
Tax
Option 2
Annual
Increase
Opt. 2
Proposed
Tax
Option 3
Annual
Increase
Opt. 3
5 $223 $300 $77 $300 $77 $300 $77
50 1,213 2,265 1,052 2,265 1,052 2,470 1,257
200 4,513 10,025 5,512 12,045 7,532 14,010 9,497
500 11,113 26,525 15,412 34,545 23,432 41,010 29,897
1,000 22,113 54,025 31,912 72,045 49,932 86,010 63,897
5,000 110,113 274,025 163,912 372,045 261,932 446,010 335,897 10,000 150,887 549,025 $398,139 $747,045 $596,159 $896,010 $745,124 Tax Cap - Considerations
Keep
• Cap at
150,886.50
Set
• $500,000
• $750,000
• $1,000,000
• Other
Remove
•Cap
Escalate
•CAP
over
time
Business License
Cap
Implementation
Options
If Council chooses to have a cap option:
• Cap will increase by CPI annually
• For any year, Council can elect to adjust the cap by
less than the annual CPI
If annual cap is eliminated:
• Council would have an option to reinstate an annual
cap and modify it by resolution
BLT as % of
General Fund
Rev
City
Licensed Businesses
(Est.)
FY 2023 Revenue per
Business
FY 2023 Revenue as %
of General Fund
Berkeley 13,302 $1,696 8.4%
Burlingame 8,003 $162 1.8%
Daly City 7,763 $753 4.9%
Menlo Park 5,337 $1,066 7.0%
Millbrae 3,390 $985 8.5%
Oakland 71,385 $1,755 5.9%
Redwood City 8,429 $393 1.9%
San Bruno 2,898 $666 3.4%
San Francisco 103,128 $10,330 7.3%
San Jose 57,755 $1,489 4.2%
San Leandro 11,012 $529 4.4%
San Mateo 7,396 $835 3.9%
Santa Clara 12,765 $274 1.4%
Sunnyvale 7,634 $261 1.0%
Vacaville 5,222 $75 0.3%
South San Francisco 3,503 $760 1.9%
Average (Minus Major
Cities) 7,763 $624 3.9%
Neighboring
Cities
Business
License Tax
Cities CAP Structure
Belmont No GR
East Palo Alto No GR
Foster City $250k GR
Menlo Park $8K GR
Mountain View No Per Emp
Palo Alto 500k Sq Ft
Redwood City Current Recomm $500K Per Emp
San Mateo N/A GR
Santa Clara $350k Per Emp
Outreach
Summary
South San Francisco Chamber of Commerce
San Mateo County Economic Development
Association (SAMCEDA)
South San Francisco Conference Center
San Mateo County Association of Realtors (SAMCAR)
California Life Sciences Association
BioCom
Kaiser Permanente
Genentech
Stripe
Action
Select the Business License Tax Options
Submit to November 5 Ballot
Designate Mayor or designee to develop Written Argument/Rebuttal Ballot Measure
To maintain City services, such as: fire protection/paramedic emergency response; neighborhood police patrols and services; pothole, street and road maintenance; parks and recreation programs; library programs and services; and for general government use; shall the City of South San Francisco ordinance be adopted modernizing the business license tax, with increases in rates varying with the size of the business, as described in the ordinance, providing approximately $3.4 million annually, until ended by voters, with annual audits and citizens' oversight?
Yes
No
Q&A