The URL can be used to link to this page

Home My WebLink About1996-11-19; City Council; 13916; REVIEW OF BUSINESS LICENSE TAX PENALTIES\ U 0 CITl 1 -t \ r OF CARLSBAD -AGENDA BILL x, 1 r AB# 13yla . .."."_ -. ""."" """" "" MTG. 11/19/96 I PENALTIES I CIN ATTY.(QW - I TITLE: I DEPT HDYJJ- RFVIFW nF RIISINESS LICENSE TAX " ~~~ ~ I DEPT. FIN I I CITY MGR. w I I I I RECOMMENDED ACTION: Direct City Attorney to return to Council with modifications to Municipal Code 5.04.020: 1. Eliminating the delinquent penalty charged to new businesses for late payment of business license tax until noticed. 2. Simplifying penalties charged for late renewal of business license. ITEM EXPLANATION: -. Q 9 8 B GI z *w dcrl 1" 33 5 'df $3 wo5 C.'e ma kQ: w3 'du 4J a, El 2 .. z mc 10 -9 ma 4 'd 40 4z 3 0 0 The Finance department began a review of the city's penalties for late payment oi business license tax in response to complaints from several businesses. Existing late penalties for a City of Carlsbad business license may be perceived by businesses a$ conflicting with the goals of Council and the Economic Development department tc attract new industry, business and investments to the city and promote economic determine if Carlsbad's penalties were comparable with other cities. development in the city. The Finance department review included a survey tc Current Business License Penalties - A new business in Carlsbad, even thougt voluntarily submitting a business license application, may be penalized for late paymen of the tax. Late penalties are also imposed on businesses for failure to renew 2 business license and pay the tax on time. Penalties imposed for late payment o business license tax are included in Chapter 5.04.020 of the Carlsbad Municipal Codc (Exhibit 1) and summarized below. The existing penalties have been in place sincc 1967, when Council adopted a business license ordinance. New Business: The Municipal code requires that a new business must pay cit! business license tax before conducting business within Carlsbad. The tax is delinquen if not paid within 30 days of opening a new business in the city. In general, mos businesses voluntarily comply with the ordinance by directly contacting the Financt department before or shortly after opening a business in the city. In other cases, neu businesses are notified of Carlsbad's business license tax requirement by eithe Finance or Building departments. The code calls for 25% penalty if business license tax is delinquent more than 30 days and increasing 1% per day up to a maximum 50% penalty. (See Exhibit 2, Timeline Business License Penalties). Page 2 of Agenda Bill # .i3;9/62 0 Renewal of a Business License: Penalties are also assessed when a company renew throughout the year depending on when a business originally located in the city. The first week of the month preceding the month of license expiration, a renewal notice is mailed to a business. A company would thus have a minimum of 30 days to remii payment. If payment is not received within 120 days of the initial mailing, the business receives a delinquent notice. conducting business in the City of Carlsbad fails to renew a business license. Licenses Delinquent penalties for business license renewal are 25% of the amount owed if more than 40 days late. The penalty increases 1% per day up to a maximum 50% penalty. (See Exhibit 2, Timeline - Business License Penalties). The business license delinquenl notice mailed at 120 days shows the 50% penalty due. Business License Survey - In order to determine if City of Carlsbad business license penalties were comparable with other agencies, a survey was taken of nine nearbl cities. The cities surveyed included: Del Mar, Encinitas, Escondido, Moreno Valley Oceanside, Poway, San Marcos, Temecula, and Vista. With the exception of Encinitas registration fee, each agency requires businesses to pay business license tax. Thc survey focused only on penalties and enforcement procedures associated with latc payment of business license tax. The survey found no other agency charging late penalties to new'businesses. At 6C days, the other agencies report late penalties to an existing business ranging from none to 50%, with 33% the average of those charging late penalties. At 65 days, Carlsbad? late penalty tops out at 50% of the tax owed. Carlsbad's 50% maximum for late paymen' is low when compared to other cities surveyed. Of the agencies reporting any latc penalty, the average maximum charged was 78%. Maximum penalties ranged from nom (Encinitas, Poway and Temecula), to 100% (Del Mar, Escondido, Moreno Valley anc San Marcos). Survey responses are shown in detail in Exhibit 3. Carlsbads current penalty for late payment of business license tax by an existin( business is commensurate with other cities surveyed. The survey showed that the Cit] of Carlsbad late renewal penalties accrue more quickly than other agencies, but have i lower maximum penalty. Summarized results of the survey: Only the City of Carlsbad charges business license tax penalties for late payment o the initial business license. City of Carlsbad renewal penalties are significantly higher than the average of othe cities when a business is 60 days delinquent. Page 3 of Agenda Bill # j 4, 5 k 6 0 0 0 City of Carlsbad maximum penalty for late renewal is considerably lower than the average of other cities which have a penalty for late renewal. The survey showed maximum late renewal penalties ranging from none to 100%. RECOMMENDATIONS Modify late penalty to new business Staff recommends modifying the current penalty charged to a new business in the City oi Carlsbad for late payment of business license tax. No other nearby city imposes i delinquent penalty on a new business. The small revenue obtained from the penalty is business locating or relocating with the City of Carlsbad. Businesses would still be required to obtain a business license before conducting business in the City of Carlsbad and the tax would remain due and payable beforc opening a business. However, new businesses failing to obtain a business licensc would be charged late penalties only after a one year free penalty period or aftel notification of the City business license requirement. Staff recommends that latc penalties may be waived under certain circumstances at the discretion of the Financc Director. New business late penalties would be applied using the following simplifiec schedule recommended for business license renewal penalties. not sufficient to offset the loss of goodwill when penalties are imposed on a ne\ Simplify late penalties for business license renewal Staff recommends the following penalties for late renewal of an existing busines! license: Retain no penalty at 30 days. Decrease penalty from 45% to 25% at 60 days. Change maximum 50% penalty to 90 days delinquent. The simplified penalties are approximately the average of surveyed cities at 60 days an( 90 days delinquent. Late charges are difficult to explain to the business community an( unwieldy to administrate since Carlsbad's penalties begin on the IOth of the montl following the date due and accrue at 1% per day thereafter. Simplification of latc renewal penalties should result in greater voluntary compliance by Carlsbad's existin! businesses. The recommended changes to penalties for late payment of business license tax woulc comply with the 1996 Council Goals and Objectives to evaluate new and existin! policies, practices, and standards to ensure compatibility with economic goals an( objectives. Page 4 of Agenda Bill # 1 3 ; 9 i 6 0 0 FISCAL IMPACT City business license tax is an important source of .revenue to support General Fund services and programs. In fiscal year 1995-96, approximately 4,400 companies and home-based businesses paid the City of Carlsbad almost $1.5 million in business license tax. In calendar year 1996, 16 new businesses paid $3,000 in late penalties and 66 existinc businesses paid penalties totaling $1 1,000 for late renewal of their business license. The recommended simplification of late renewal penalties and modification of late revenues. penalties for new businesses would not have a significant impact on General Func Exhibits: I. Municipal Code 5.04.020, License Required 2. Timeline - Business License Penalties 3. Survey of Penalties for Late Payment of Business License Fees ~ 0 0 5.04.010 Chapter 5.04 LICENSING BUSINESSES GENERALLY Sections: 5.04.010 5.04.020 5.04.030 5.04.040 5.04.050 5.04.060 5.048070 5.04.080 5.04.085 5.04.090 5.04.100 5.04.110 5.04.120 5.04.130 504,140 Definitions. License required. Violations. License nontransferable except for changed location. Duplicate licenses. Separate license for each place of business. Posting and display of license. Exemptions. .Constitutional apportionment. Appeals to council. Unlawful operation or nuisance. Vested rights. ReEusal to hue to hazardous businesses-Ape. Adjustments. prescribed licenses. Permits or franchises in lieu of 5.04.010 Deiinitions. As used in this title the ’ following words and phrases shall have the following meanings: . (1) “Business” includes professions, trades, occu- pations and all and every kind of calling whether or not carried on for profit; (2) “Gross receipts” includes the total amount of the sale price of all sales and the total amount charged or received for the performance of any act or service, of whatever nature it may be, for which a charge is made or credit allowed, whether or not such act or service is done as part of or in connec- tion with the sale of materials, goods, wares or merchandise. Included in gross receipts shall be all receipts, cash, credits and property of any kind or nature without any deduction therefrom on account of the cost of the property sold, the cost of the materials used, labor or service costs, interest paid or payable, or losses or other expenses whatsoever. Gross receipts shall also include all receipts from coin operated vending machines. Excluded from gross receipts shall be cash discounts allowed and taken on sales; any tax required by law to be includ- ed in or added to the purchase price and collected from the customer or purchaser; such part of the sale price of property returned by purchasers upon rescission of the contract of sale as is refunded either in cash or by credit and amounts collected for others where the business is acting as an agent or trustee to the extent that such amounts are paid to those for whom collected. (Ord. 6049 5 1,1973: Ord. 6040 0 6, 1967) 5.04.020 License required. There are imposed upon persons engaged in the specified businesses in this title, within the city limits, license taxes in the amounts hereinafter pre- scribed. The license tax shall be due and payable before the commencement of any new business and delinquent on and after the thirty-first day after commencement of a new business. For all previous- ly licensed businesses the license tax shall be due the month in which the business was originally established and delinquent on the tenth day of the following month. In the event any person fails to pay license tax befoie it becomes delinquent, his tax shall then automatically be increased by a penalty of twenty-five percent of the license tax and thereaf- ter increased one percent per day for each additional delinquent day; provided however, that the amount of such automatic increase over the usual tax shall in no event exceed f@ percent of the amount of the usual license tax due. Nothing contained in this section shall be construed as permitting the opera- tion of a business which is intended to be operated for only a limited period of time and on a nonper- manent basis, such as athletic events, carnivals, etc., without having fwst obtained a busiiess license so to do. Each such license shall show the number of such license, the period of time covered thereby, the name of the person to whom issued, and the loca- tion or place where such business is to be com- menced or conducted, and upon a detachable portion and payable annually in advance on the first day of 113 (carlsbad 1-96) 5.04.020 0 of such license, shalI bo show the number of such license and the amount of the * paid therefor. No error or mistake on the part of the license collector or any other person in the determination, stating or collection of the amount of any license tax shall pfeverrt OI' pjudict the collection by or for the city of what shall be actually due from anyone corn- mencing or conducting any business subject to a license tax, nor shall the issuance of any license under this title aut@orize the commencing or con- . ducting of any business in any zone, district or location within the city, contrary to the provisions of any zoning or other ordinance of the city. Applicabons on forms prescribed by the license collector shall be filed annually by each licensee before the issuance of a license. Any person intend- ing to engage in the business of owning, renting, leasing, operating, maintaining or servicing coin- operated vending machines or newsracks shall in- clude with the application a list of the number, type and location of such machines. For the purposes of determining the correct tax to be collected, the license collector may at any time require a licensee to furnish his books of account and records for inspection and audit and may require the production of other documents and information regarding the business as authorized by law. Refusal by a licensee or applicant to furnish such books of account and records upon request therefor by the license collector shall automatically revoke any then existing business license, and shall require the li- cense collector to refuse to issue any further busi- ness licenses to the person so refusing. Any and all books of account and records furnished pursuant hereto, and any and all statements made by a licens- ee for the purpose of obtaining a business license shall be confidential in character and shall not be subject to public inspection or' disclosure, except in the proper proceedings before the city council or a competent court or tribunal. It is unlawful for any person to cause to be disclosed, except as provided in this title, any of the information required to be furnished hereunder to the license collector for purposes of determining the correct tax to be col- lected. (Ord. NS-324 3 1, 1995; Ord. 6073 0 1, 1983; Ord. 6061 8 1 (part), 1980; Ord. 6049 8 2, 1973: Ord. 6040 0 2, 1967) 5.04.030 Violations. It is unlawful for any person to conduct any tained from the city a license so to do, and each day or portion thereof of conduct of such business con- stitutes a separate violation of this title. It is unlawful for any person wilfully to make any false statement or representation for the purpose of obtaining a business license pursuant to the provi- sions of this title. (Ord. 6040 0 3, 1967) 5.04.040 License nontransferable except business within the city without first having ob- for changed location. No license issued pursuant to this title shall be transferable; provided, that where a license is issued authorizing a person to transact and carry on a busi- ness at a particular place, such licensee may upon application therefor and the paying a fee of one dollar have the Iicense amended to authorize the transacting and carrying on of such business under the license at some other location to which the business is or is to be moved. (Ord. 6040 0 4,1967) 5.04.050 Duplicate licenses. Upon receipt of an &davit filed in the office of the license collector, by or on behalf of any licens- ee, stating that any license has been lost or de- stroyed, the license collector shall issue a duplicate of such license to the licensee therein named. A charge of one dollar shall be made for each such duplicate license issued, which sum shall be paid into the treasury of the city to the credit of the general fund. (Ord. 6061 Q 1 (part), 1980; Ord. 6040 9 5, 1967) 5.04.060 Separate license for each place of business., A separate license must be obtained for each branch establishment or separate place of business in which the business licensed is commenced or conducted within the city, except that in the case of vending machines and newsracks only one license (Carlsbad 1-96) 114 I .* a A m kl 4 I4 z w e( L4 m z u w il ti m m w z a p? 3 I E 3 z # 3 a (d i2 -.I 2 -2 0 .- u 3 2 s 0 m- 2 & s a L sT 01 _I .. - P 2 - e v, 01 -1 3 01 - - 1 3 3 Y rA v) v) W ~ z Gj ZW PJ mz zs 2 2 3 ii s ‘r 8 a 0 rA v) 0 0 z F v) E W 3 W z W E e EXHIBIT 2 3 m \ 2 3 5 8 2 0 G 43 3 E cd a 3 .3 c, - cd a z g vr M c .e rA rA 0 rA 9 8 E Y m b 4 I \ 3 d g 1 m v, 9 8 s M a a 3 sf c\1 v, 1 3 c\1 1 \ ;I: v) w2 3- 8 0 1 *; v) WE 5% ZE mz 0 z - S 0 0 EXHIBIT 3 zi G E s 2 $ m m 2 a .m m F4 43 0 c, g E i? a Q) Y 2 k e zi .m Y m cd g 8 & 43 0 P a m 6- QI $2 2% 23 i ti zz ..Q 8 gG E, 2 d2 Y Q s 5 W g.; Wj 5 os; eo -g Wj .3 m > a) e .- 2 Y 5 s 0 .sg F 5 5 .s s s cc 2 .g 0 ,E .o m 2 SLd Q 22 E 2 .a z .E I g Es gy 0 s.gy gc‘3 D -25 3 :s .gg ssg 2% c .- - Q 2.m ”$a % 0 $2 ‘3 c.2 $3 3 2% e, $5 %&> 2 Ba VI ad22 ‘cr $E a) 3 $a .s-g *m 0 bJl$ I -2 0; .2Gc z3 2 -0 v) 5 tg L?e gze -3 G e 5% .y .- 52 02-5“ 5 ‘= 5 Ea E gg 2 =x2 22 8 2- 0 3 2.2 2z.g hZ g 32 ,o E 6 m E.$ 4 .I? 2 ”.’$ .g - Ec ,v% crlz a.s - e.2 e $2 s Y 76 :$g zg 3.2 cf 62 cj au &ZG, I nv E .r: 8 d 6 .3 0 m -m Ldc .- Y e, 0 0 Y Y - Y 2g 3m c E: 0 3% 9 ._ Y .- 2 B sw 0 .2 cs 0 v) & sg 2 P .P 6% I En c.E g ; az gw n m n m n m 6 h m - m n m $1 $g $8 6 $8 5 $3 6 , $8 6 6 d 5 8E ’ .gz$ em EE EE 2: EE ‘ so !q mz d 00 d Ld * Ld ln Ld - Ld Y v W of * W .y W Ld * v W Y Ld dm 8 a0 d. m - N d- c”o$ g s In ,E I g s m s m I s m iv & WB g 29 el ;g g N d t;jQ G - a e,n o W 2 2 2 2 $ s s fl ZN W e, N ln 0 c,g 0 m j a8 g 22.2 E5 e, ‘2 a 8 2 B B B 2; Eg z z” z” 2 z” E z z z i2g E?j g% 8 e, a s 3 Y Y en - 6 0 .- 0 - 5 m #$ - ‘8 8 8 g 2 3 %a” E .g ,z s s $ B z 2 v-=l !a $2 2 2 li 3 a) 6 WLd - u d+ w E 0 z Ul B c-.> 83 s?l ;; s WV dd mo .s .g EE Eg ss mr- 00 mln gg $$ Nrcl vrm bN 2s 2 00 .- e, b) W E g $3 $ 2 .5 can $3 G .z ; gs8 b8: h53 I4 2.2 m $u 0 c a) 3.2 $2 ”.“a; w E78 a 2 9 (r: w- w- L% E n ! F U 3 (