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Home My WebLink About2000-06-13; City Council; 15777; Temporary Amnesty For Business Licenses- r 31 “I I CITY OF CARLSBAD - AGENDA BILL - *B# ts T’TLE: BUSINESS LICENSE AMNESTY PERIOD DEPT HD. I@- MTG. 06/13/00 FOR PENALTIES AND ADMINISTRATION CITY AlN@* DEPT. m OF GROSS RECEIPT TAXATION CITY MGR. +g RECOMMENDED ACTION: Introduce Ordinance No. Ns- 54 ‘1 amending Title 5, Chapter 5.04 of the Carlsbad Municipal Code to authorize the City Manager to establish a temporary amnesty period as part of a Public Awareness Campaign, and to clarify administration responsibilities. ITEM EXPLANATION: Business License Plan Overview One of the goals, as set by the Carlsbad City Council, is to develop and implement proactive strategies to ensure the financial health of the Community and the City. One of the City’s many revenue sources is business license tax; a tax imposed upon persons engaged in certain businesses within the City limits. Business license tax guidelines are outlined in Carlsbad Municipal Code Chapters 5.04 and 5.08 (“the Ordinance”). The Ordinance requires that businesses pay an annual fee based either on a flat rate or on gross receipts. Currently, the City’s only way of verifying gross receipt figures and identifying unlicensed businesses is through audits, which are very time intensive and expensive. Our goal is to implement changes in the way business license taxes are administered to: 1. Educate the public as to the requirements of having a business license 2. Actively pursue the licensing of all businesses in Carlsbad 3. Make it easier to calculate the amount of the business license tax due The steps necessary to accomplish these objectives are outlined below. Public Awareness Campaign A key to licensing all businesses doing business in Carlsbad is public awareness. Our goal is to make certain, to the best of our abilities, that each business in Carlsbad realizes that every entity doing business in Carlsbad needs to comply with the business license ordinance. This is to ensure equity within the City; everyone should pay their fair share of taxes. To assist in the education of the business community, a business license educational brochure will be developed. Information within the brochure will include: l Who needs to be licensed in the City - all businesses transacting any business in Carlsbad; l How to get a business license application - City offices at the Faraday Center, downloading the form from the internet, or requesting an application over the phone; l How to calculate the tax due; and l How the City enforces its business license program. After the brochure has been created, staff will invite representatives from various business groups throughout the City to attend a brief meeting to discuss this information. Brochures will be distributed to those attending the meeting, and those representatives will be asked to distribute additional brochures to the business community in Carlsbad. Staff will also be available to speak with organizations (including those in attendance) that could benefit from this information. In addition to the brochures and a staff presentation at a regularly scheduled Council meetino, press releases will - Rage 2 of Agenda Bill # I> J 7 7 7 The second part of the awareness program is the specific identification of potentially unlicensed businesses in Carlsbad. Staff now has available software that will match our database of licensed businesses against a number of other databases, including State of California resale permits, business white pages, the secured property tax roll and the Thomas Register. This will allow us to identify and follow-up on any potentially unlicensed businesses. Proposed Amnesty Prow-am As a result of our awareness program, we expect a number of businesses that were not previously licensed to submit applications. The Ordinance currently requires that penalties be assessed on those businesses submitting their taxes late. In order to encourage voluntary compliance and to not penalize those businesses that were truly unaware of our requirements, staff is recommending that Council institute a temporary amnesty period, beginning upon the adoption of Ordinance No. hl5- 64 q and expiring on September 30, 2000. During this amnesty period, penalties on past due business license taxes would be waived, however, businesses would still be required to pay all business license taxes due the City. The amnesty period would allow those businesses who have not been licensed in the past, to get licensed by the City, without paying the penalties on the taxes for the past years. The amnesty period would noJ apply to currently licensed businesses. Once the amnesty period expires, full penalties would once again apply to all businesses operating in Carlsbad without a business license. This will provide an incentive for existing unlicensed businesses to bring their organization compliant with the City’s ordinance. Business License Administration In addition, though the Ordinance requires certain businesses to pay taxes on their annual gross receipts, the Ordinance does not specify the procedures to be used for calculating and verifying gross receipts. In the past, the calculation has been based on estimated gross receipts and the verification has been done by audit. Staff believes compliance would be easier and enforcement would be more effective if the calculation were based on actual gross receipts, which can be more readily verified with tax returns or similar financial documents. To clarify that such a change in procedures is authorized and to avoid the need to amend the Ordinance each time a change in procedures is warranted, staff is recommending that Council add section 5.04.150 of the Ordinance to indicate that the City Manager is authorized to establish written procedures which are necessary and consistent with the purposes of this Ordinance. The proposed amendments, if adopted, would go into effect immediately; per Government Code section 36937, which states that ordinances relating to taxes for the usual and current expenses of the City take effect immediately. FISCAL IMPACT: The creation of an amnesty period should increase the net business license revenue to the City since formerly unlicensed businesses will now be paying their annual business license fee. Staff believes this increased revenue will more than offset the waiver of penalties and interest during the amnesty period. The change in gross receipt reporting will not affect the tax rates or the basis for the taxes. Based on the results from other municipalities, it is estimated that these program changes will increase business license revenues by approximately ten percent in the first year. EXHIBITS: 1. Ordinance No. fls-54 9 , amending Carlsbad Municipal Code chapter 5.04. ORDINANCE NO. Ns-549 1 2 3 4 5 6 7' AN ORDINANCE OF THE Cl-W COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AMENDING TITLE 5, CHAPTER 5.64 OF THE CARLSBAD MUNICIPAL CODE TO ESTABLISH A TEMPORARY AMNESTY PERIOD AND TO DELEGATE ADMINISTRATION AND ENFORCEMENT RESPONSIBILITY TO THE CITY MANAGER. The City Council of the City of Cadsbad, California does ordain as follows: 10 11 12 0 SECTION I: That Chapter 5.04 of the Carlsbad Municipal Code is 9 amended by the addition of section 504.025 to read as follows: 18 amended by the addition of section 5.04.150 to read as follows: 19 20 21 22 “5.04.150 Administration. The city manager shall be responsible for the administration and enforcement of this chapter and may adopt such written procedures as are necessary for its efficient administration. The city manager’s decisions may be appealed within ten (IO) calendar days of the date of the decision to the city council, whose decision shall be final. Fees for appeal shall be established by resolution of the city council.” 23 24 EFFECTIVE DATE: This ordinance relates to taxes for the usual and ‘5.04.025 Temporarv Amnestv Period. . To encourage voluntary compliance with this chapter during the city’s Public Awareness Campaign, the city hereby establishes a temporary amnesty period for persons or entities currently engaged in a business that should have been but has not previously been licensed under this chapter. Such persons or entities will not be subject to the penalties specified in section 5.04.020(A) provided they obtain a business license prior to the end of this amnesty period and prior to being cited for a violation under section 5.04.030. This section and the amnesty period shall be operative until September 30, 2000, at which time this section and the amnesty period shall be automatically repealed.” SECTION II: That Chapter 5.04 of the Carlsbad Municipal Code is current expenses of the City and, pursuant to California Government Code section 25 26 36937(d), shall be effective immediately upon its adoption, The City Clerk shall certify 27 the adoption of this ordinance and cause it to be published at least once in a 28 Ordinance No. Ns-549 Page 1 of 2 r ‘ 5 6 7 0 9 10 11 12 18 19 20 21 22 23 24 25 26 27 28 newspaper of general circulation in the City of Carlsbad within fifteen days after its adoption. INTRODUCED AND FIRST READ at a regular meeting of the Carlsbad City Council on the 13th day of June ,2000, and thereafter. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Carkbad on the day of , 2000, by the following vote, to wit: , AYES: NOES: ABSENT: CLAUDE A, LEWIS, -MAYOR ATTEST: LORRAINE M. WOOD, CITY CLERK (SEAL) Ordinance No. Ns-549 Page 2 of 2