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Home My WebLink About2007-01-23; City Council; 18875; Appeal of Business License Tax Late PenaltyCITY OF CARLSBAD - AGENDA BILL AB# 18,875 MTG. 1/23/07 DEPT. FIN APPEAL OF BUSINESS LICENSE TAX 1 ATC n^hl A 1 T\7LATE PENALTY DEPT. HEAD,-^& CITYATTY. /® CITYMGR. "~£}O RECOMMENDED ACTION: Adopt Resolution No. 2007-016 denying the appeal by K2 Inc. of the penalties on Business License Tax for the tax years which began on March 1, 2003, 2004 and 2005. ITEM EXPLANATION: The Carlsbad Municipal Code (Chapter 5.04) requires all businesses operating in the City of Carlsbad to obtain a business license from the City of Carlsbad and to pay the business license tax for the ensuing twelve month tax period. There is also included in the Municipal Code a provision for the businesses that fail to obtain their business license in a timely fashion to be assessed late and delinquent penalties to be paid in addition to the business license tax for that respective period. K2 Inc. commenced business in the City of Carlsbad on March 1, 2003. In 2005, K2 Inc. was billed for a police security alarm response. Routinely, after a Carlsbad company is billed for an alarm response, the Finance Clerk checks to see if the company has a current business license. When staff noted that K2 Inc. was not currently licensed, the company was advised that a business license was required and of the requirement to pay penalties in addition to the business license tax. After being notified, K2 paid the business license taxes due, but did not pay the penalties. Mr. Rob Moyan, Corporate Director of Human Resources, is appealing to the City Council for dismissal of the late penalties. His written appeal (Exhibit 2) states the following: 1. The company assumed no business license was necessary, as it is the corporate headquarters and generates no sales. 2. When informed that the company needed to pay a business license tax, they paid the taxes in a timely manner. The Code states that the Finance Director or his/her designee shall have the discretion to waive all or a portion of penalties imposed for failure to obtain or renew a business license upon a showing of good cause. This is a fairly common request from businesses and in the recent past, relief has been given only to companies showing great hardship, such as the owner being hospitalized. In this case, staff has not been able to make the finding that such hardship exists. DEPARTMENT CONTACT: Colette Wengenroth 760-602-2430 cwenq@ci.carlsbad.ca.us FOR CITY CLERKS USE ONL Y. COUNCIL ACTION:APPROVED DENIED D CONTINUED D WITHDRAWN D AMENDED D CONTINUED TO DATE SPECIFIC D CONTINUED TO DATE UNKNOWN D RETURNED TO STAFF D OTHER - SEE MINUTES D Page 2 The Carlsbad Municipal Code allows a business owner to appeal the determination of the license collector (Finance Director or designee) to the City Council. The Code states in part: 5.04.090 Appeals to council. In the event of a dispute between an applicant or licensee and the license collector regarding the classification of any business under this title or the amount of the license fee to be paid therefor, then any such applicant or licensee or the license collector/city attorney, may appeal to the city council to hear and determine such matter... K2 has asked that the decision of the license collector be appealed to the City Council for a final determination. FISCAL IMPACT: Below is a summary of late fees that have been assessed K2 Inc. and have not been paid to date. Tax Year 2003-2004 2004-2005 2005-2006 Total Late Fees Late Fee $1 ,624 $1,624 $2,392 $5,640 If the appeal were granted, it would result in the loss of $5,640 in business license revenue for the Fiscal Year 2006-2007. ENVIRONMENTAL IMPACT: None EXHIBITS: 1. Resolution No. 2007-016 denying the appeal of penalties on business license taxes. 2. Letter from K2 Inc. dated December 06, 2006. Exhibit 1 1 RESOLUTION NO. 2007-016 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, DENYING THE APPEAL OF 3 PANALTIES ON BUSINESS LICENSE TAXES 4 5 WHEREAS, the City has received a request to appeal the penalties on a 6 business license issued by the City of Carlsbad; and 7 WHEREAS, Chapter 5.04 of the Carlsbad Municipal code requires all businesses 8 operating in the City of Carlsbad to obtain a business license and provides for penalties 9 to be assessed for any delinquent taxes; and 10 WHEREAS, the business taxes paid by K2 Inc were delinquent for the tax years 11 beginning March 1, 2003, 2004, and 2005. 12 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 15 1, That the above recitations are true and correct. 16 2. That the appeal of the penalties by K2, Inc. is denied. 17 18 19 20 21 22 23 24 25 26 27 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 23rd day of January, 2007, by the following vote: AYES: Council Members Lewis, Hall, Packard, Sigafoose. NOES: None. ABSENT: Council Member Kulchin. MAUDE A LEWIS, Wayw ATTEST: LORRAINE M. (SEAL) OOD, City Clerk r EXHIBIT 2 December 6, 2006 Jim Elliot City of Carlsbad 1635 Faraday Avenue Carlsbad, CA 92008 Dear Jim, Pursuant to our most recent conversation, I am sending you this letter, to request in writing, consideration for the relief of business license penalties currently levied against K2 Inc. by the City of Carlsbad. As we have discussed over the past several months, the penalties currently showing due are a result of K2 Inds failure to obtain and remit payment for a business license in conjunction with the relocation of our corporate headquarters office in early 2003. It was not until July 2005 that K2 Inc. was notified by the City of Carlsbad of this obligation, upon which; K2 Inc. promptly remitted payment for the requisite licenses for the years 2003, 2004 and 2005. At the same time K2 Inc. was also notified that 50% penalties were being levied against the company due to the late payment. These penalties are the subject of our objection and request for relief. The amount of the cumulative penalties is $5,639.58, which to be perfectly honest, is not the issue. K2 Inc., one of the top 6 publicly traded companies in San Diego County, moved to Carlsbad in early 2003 with no requests or negotiation of special considerations to do so. The fact that K2 Inc. did not obtain a business license was an honest mistake on the company's part. As the corporate headquarters generates no sales, it was assumed that no business license would be necessary...admittedly we were wrong. However, as soon as K2 Inc. was contacted by the city and made aware of the requirement to do so and the fee basis for such license, K2 Inc. responded with no objection and paid for each period requested. Clearly, K2 Inc. intentions were not to avoid payment of such a fee. K2 Inc's prompt attention to the City's notification should serve to demonstrate the "good faith" nature of the error. At this point, my understanding is that all business license fees have been paid and that the only outstanding amount is for the penalties dating back to the original notification in July of 2005. Naturally, K2 Inc. requests to be relieved of these penalties. I have attached the spreadsheet provided to K2 by the City of Carlsbad which identifies the source of the penalties. K2 Inc. is not debating the fee amounts, simply that the application of the penalties seems punitive in a manner inappropriate to the circumstances. Please call me with any questions regarding the above and thank you again for your consideration of this request. Rob Moynan K2 Inc. Corporate Director of Human Resources 760-494-1060 rob.movnan@k2inc.net CC: Ed Davidson - Code Enforcement Officer City of Carlsbad K2 Inc. Corporate Headquarters 5818 El Camino Real Carlsbad, California 92008 Phone 760 494 1000 Fax 760494 1099 www.k2inc.net EXHIBIT 2 K2 Inc. Business License - City of Carlsbad Year 2003-2004 2004-2005 2005-2006 Total $ $ $ $ Business License Fees 3,247 3,247 4,785 11,279 $ $ $ $ Penalty 1,624 1,624 2,393 5,640 $ $ $ $ Total 4,871 4,871 7,178 16,919 Paid $ To pay $ (4,785) 6,494 $ 0 $ 5,640 $ (4,785) 12,134 LP