HomeMy WebLinkAbout2021-05-11; City Council; ; Approval of Resolutions for Business License Tax Appeal Hearing DecisionsMeeting Date: May 11, 2021
To: Mayor and City Council
From: Celia Brewer, City Attorney
Staff Contact: Cindie McMahon, Assistant City Attorney
cindie.mcmahon@carlsbadca.gov, 760-434-2891
Subject: Approval of Resolutions for Business License Tax Appeal Hearing
Decisions
Recommended Action
Adopt resolutions granting in part the business license tax appeals of TaylorMade Golf
Company, Inc. and Callaway Golf Company (Exhibits 1 and 2).
Executive Summary/Discussion
On May 4, 2021, the City Council conducted hearings on the business license tax appeals of
TaylorMade and Callaway. The City Council granted the appeals in part by determining that the
apportionment formula in Administrative Order No. 81 should apply prospectively from Jan. 16,
2019, and by abating penalties for taxes owed prior to then.
The City Council also directed staff to identify and provide the same relief to other similarly
situated businesses and to return to the City Council with an agenda item allowing for a
broader discussion of the business license tax ordinance and the apportionment formula. Staff
is already working on the first task. The timing of the second task will be determined based on
the City Council’s priority guidance.
Fiscal Analysis
The license collector has recalculated the amount owed to be the following:
TAYLOR MADE
Business license
for year ending
Business license
for year ending
Oct. 31.,2019 Oct. 31. 2020
Tax 63,942$ 47,267$
Previously Paid -6,118 -7,001
Penalties 28,912 20,133
Total taxes due with Penalties 86,736$ 60,398$
Total Amount Due 147,135$
CA Review CKM
May 11, 2021
Item #4 Page 1 of 100
Next Steps
Notice of the City Council’s decisions, including copies of the resolutions, will be provided to
TaylorMade and Callaway. The license collector will invoice the companies for the amounts
owed and request the necessary documents to calculate the business license tax for the period
ending Oct. 31, 2021. Once the amounts due for all years owed are paid, the business licenses
will be issued.
Environmental Evaluation (CEQA)
This action does not constitute a “project” within the meaning of the California Environmental
Quality Act under California Public Resources Code Section 21065 in that it has no potential to
cause either a direct physical change in the environment or a reasonably foreseeable indirect
physical change in the environment. Therefore, it does not require environmental review.
Public Notification and Outreach
Public notice of this item was posted in accordance with the Ralph M. Brown Act and it was
available for public viewing and review at least 72 hours before the scheduled meeting date.
Exhibits
1. City Council resolution - TaylorMade Appeal
2. City Council resolution - Callaway Appeal
3. May 4, 2021, staff report - Business License Tax Appeal Hearings of Taylor Made Golf
Company, Inc. and Callaway Golf Company
CALLAWAY
Business license
for year ending
Business license
for year ending
Oct. 31.,2019 Oct. 31. 2020
Tax 141,742$ 142,860$
Previously Paid -5,673 -681
Penalties 68,035 71,089
Total taxes due with Penalties 204,104$ 213,268$
Total Amount Due 417,372$
May 11, 2021
Item #4 Page 2 of 100
RESOLUTION NO. 2021-105
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, GRANTING IN PART THE BUSINESS LICENSE TAX APPEAL OF
TAYLOR MADE GOLF COMPANY, INC.
WHEREAS, on Jan. 16, 2019, the city manager signed Administrative Order No. 81 — Business
License Tax Procedures; and
WHEREAS, Administrative Order No. 81 adopted an apportionment formula based on three
factors: sales, payroll, and property (apportionment formula); and
WHEREAS, the apportionment formula calculates the percentage of a business's sales in
Carlsbad, the percentage of the business's payroll in Carlsbad, and the percentage of the business's
property in Carlsbad, then adds these percentages together and divides them by three to determine
an apportionment percentage, which represents the business's activity in Carlsbad; and
WHEREAS, the apportionment formula's apportionment percentage is applied to the business's
gross receipts to determine the portion of gross receipts taxable in Carlsbad; and
WHEREAS, the apportionment formula is derived from the Uniform Division of Income for Tax
Purposes Act formula, which the United States Supreme Court and the California Supreme Court have
determined is constitutional (Container Corporation of America v. Franchise Tax Board (1983) 463 U.S.
159, 170, 183-184; Microsoft Corporation v. Franchise Tax Board (2006) 39 Ca1.4th 750, 756); and
WHEREAS, on Dec. 2, 2019, following an audit, the license collector issued an Initial
Determination finding TaylorMade Golf Company, Inc. (TaylorMade) owed unpaid business license
taxes and penalties of $350,332 for tax years ending 2016 through 2020; and
WHEREAS, on Dec. 11, 2019, TaylorMade requested a hearing on the Initial Determination; and
WHEREAS, on Feb. 27, 2020, the license collector conducted a hearing on the Initial
Determination, at which TaylorMade presented information and arguments in support of its position;
and
WHEREAS, on March 20, 2020, TaylorMade submitted supplemental information for the license
collector's consideration; and
WHEREAS, on July 20, 2020, the license collector issued a Final Determination abating the Initial
Determination as to business license taxes and penalties owed for tax years ending 2016 through 2017
and finding Taylor Made owed unpaid business license taxes and penalties of $218,211 for tax years
ending 2018 through 2020; and
May 11, 2021
Item #4 Page 3 of 100
WHEREAS, on Sept. 16, 2020, TaylorMade filed a notice with the City Clerk's Office appealing
the license collector's Final Determination to the City Council; and
WHEREAS, on May 4, 2021, the City Council conducted a public hearing on TaylorMade's appeal
and heard evidence and arguments from TaylorMade and the license collector; and
WHEREAS, the City Council determined the apportionment formula in Administrative Order
No. 81 should only apply prospectively from Jam 16, 2019, and any penalties for taxes owed by
TaylorMade prior to the then should be abated; and
WHEREAS, based on the City Council's determination, the license collector has recalculated the
business license taxes and penalties owed by TaylorMade to be $147,135 through the period ending
Oct. 31, 2020.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1.The above recitations are true and correct.
2.The apportionment formula in Administrative Order No. 81 is valid and constitutional.
3.The apportionment formula in Administrative Order No. 81 applies prospectively from
Jan. 16, 2019.
4.The penalties for taxes owed by TaylorMade before Jan. 16, 2019 are abated_
5.The business license taxes and penalties owed by TaylorMade through the period ending
Oct. 31, 2020 are $147,135.
6.The time within which judicial review of this decision must be sought is governed by
Code of Civil Procedure, Section 1094.6, which has been made applicable in the City of
Carlsbad by Carlsbad Municipal Code Chapter 1.16. Any petition or other paper seeking
judicial review must be filed in the appropriate court not later than the 90th day
following the date on which this decision becomes final; however, if within 10 days after
the decision becomes final a request for the record of the proceedings accompanied by
the required deposit in an amount sufficient to cover the estimated cost of preparation
of such record is filed with the City Clerk's Office, the time within which such petition
may be filed in court is extended to not later than the 30th day following the date on
which the record is either personally delivered or mailed to the party, or the party's
attorney of record, if the party has one.
May 11, 2021
Item #4 Page 4 of 100
MATT HALL, Mayor
75Ac-
BARBARA ENGLESON, City Clerk
N-17,51-1-1-1).° 1724;'
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 11th day of May, 2021, by the following vote, to wit:
AYES: Blackburn, Acosta, Bhat-Patel, Schumacher.
NAYS: Hall.
ABSENT: None.
(SEAL) oomilsounitio
1. C AN '
:I's- -\ ..••• .......,s, ::-...,.. ° 4N ' ...E- --- •-•-•-....;.....--..-
-....
May 11, 2021
Item #4 Page 5 of 100
RESOLUTION NO. 2021-106
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, GRANTING IN PART THE BUSINESS LICENSE TAX APPEAL OF
CALLA WAY GOLF COMPANY
WHEREAS, on Jan. 16, 2019, the city manager signed Administrative Order No. 81 — Business
License Tax Procedures; and
WHEREAS, Administrative Order No. 81 adopted an apportionment formula based on three
factors: sales, payroll, and property (apportionment formula); and
WHEREAS, the apportionment formula calculates the percentage of a business's sales in
Carlsbad, the percentage of the business's payroll in Carlsbad, and the percentage of the business's
property in Carlsbad, then adds these percentages together and divides them by three to determine
an apportionment percentage, which represents the business's activity in Carlsbad; and
WHEREAS, the apportionment formula's apportionment percentage is applied to the business's
gross receipts to determine the portion of gross receipts taxable in Carlsbad; and
WHEREAS, the apportionment formula is derived from the Uniform Division of Income for Tax
Purposes Act formula, which the United States Supreme Court and the California Supreme Court have
determined is constitutional (Container Corporation of America v. Franchise Tax Board (1983) 463 U.S.
159, 170, 183-184; Microsoft Corporation v. Franchise Tax Board (2006) 39 Cal.4th 750, 756); and
WHEREAS, on Dec. 13, 2019, following an audit, the license collector issued an Initial
Determination finding Callaway Golf Company (Callaway) owed unpaid business license taxes and
penalties of $1,029,274 for tax years ending 2016 through 2020; and
WHEREAS, on Dec. 19, 2019, Callaway requested a hearing on the Initial Determination; and
WHEREAS, on Feb. 27, 2020, the license collector conducted a hearing on the Initial
Determination, at which Callaway presented information and arguments in support of its position; and
WHEREAS, on March 19, 2020, Callaway submitted supplemental information for the license
collector's consideration; and
WHEREAS, on July 20, 2020, the license collector issued a Final Determination abating the Initial
Determination as to business license taxes and penalties owed for tax years ending 2016 through 2017
and finding Callaway owed unpaid business license taxes and penalties of $544,479 for tax years ending
2018 through 2020; and
May 11, 2021
Item #4 Page 6 of 100
WHEREAS, on Sept. 16, 2020, Callaway filed a notice with the City Clerk's Office appealing the
license collector's Final Determination to the City Council; and
WHEREAS, on May 4, 2021, the City Council conducted a public hearing on Callaway's appeal
and heard evidence and arguments from Callaway and the license collector; and
WHEREAS, the City Council determined the apportionment formula in Administrative Order
No. 81 should only apply prospectively from Jan. 16, 2019, and any penalties for taxes owed by
Callaway prior to then should be abated; and
WHEREAS, based on the City Council's determination, the license collector has recalculated the
business license taxes and penalties owed by Callaway to be $413,372 through the period ending
Oct. 31, 2020.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1.The above recitations are true and correct.
2.The apportionment formula is in Administrative Order No. 81 is valid and constitutional.
3.The apportionment formula in Administrative Order No. 81 applies prospectively from
Jan. 16, 2019
4.The penalties for taxes owed by Callaway before Jan. 16, 2019 are abated.
5_ The business licenses taxes and penalties owed by Callaway through the period ending
Oct. 31, 2020 are $417,372.
6. The time within which judicial review of this decision must be sought is governed by
Code of Civil Procedure, Section 1094.6, which has been made applicable in the City of
Carlsbad by Carlsbad Municipal Code Chapter 1.16. Any petition or other paper seeking
judicial review must be filed in the appropriate court not later than the 90th day
following the date on which this decision becomes final; however, if within 10 days after
the decision becomes final a request for the record of the proceedings accompanied by
the required deposit in an amount sufficient to cover the estimated cost of preparation
of such record is filed with the City Clerk's Office, the time within which such petition
may be filed in court is extended to not later than the 30th day following the date on
which the record is either personally delivered or mailed to the party, or the party's
attorney of record, if the party has one.
May 11, 2021
Item #4 Page 7 of 100
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City
of Carlsbad on the 11th day of May, 2021, by the following vote, to wit:
AYES: Blackburn, Acosta, Bhat-Patel, Schumacher.
NAYS: Hall.
ABSENT: None.
MATT HALL, Mayor
fl'ifIVi71
BARBARA ENGLESON, City lerk
(SEAL) 04111111 I UM/1N%
. ....... ,
May 11, 2021
Item #4 Page 8 of 100
Exhibit 3
May 11, 2021
Item #4 Page 9 of 100
May 11, 2021
Item #4 Page 10 of 100
May 11, 2021
Item #4 Page 11 of 100
May 11, 2021
Item #4 Page 12 of 100
May 11, 2021
Item #4 Page 13 of 100
May 11, 2021
Item #4 Page 14 of 100
May 11, 2021
Item #4 Page 15 of 100
May 11, 2021
Item #4 Page 16 of 100
May 11, 2021
Item #4 Page 17 of 100
May 11, 2021
Item #4 Page 18 of 100
May 11, 2021
Item #4 Page 19 of 100
May 11, 2021
Item #4 Page 20 of 100
May 11, 2021
Item #4 Page 21 of 100
May 11, 2021
Item #4 Page 22 of 100
May 11, 2021
Item #4 Page 23 of 100
May 11, 2021
Item #4 Page 24 of 100
May 11, 2021
Item #4 Page 25 of 100
May 11, 2021
Item #4 Page 26 of 100
May 11, 2021
Item #4 Page 27 of 100
May 11, 2021
Item #4 Page 28 of 100
May 11, 2021
Item #4 Page 29 of 100
May 11, 2021
Item #4 Page 30 of 100
May 11, 2021 Item #4 Page 31 of 100
May 11, 2021
Item #4 Page 32 of 100
May 11, 2021
Item #4 Page 33 of 100
May 11, 2021
Item #4 Page 34 of 100
May 11, 2021
Item #4 Page 35 of 100
May 11, 2021
Item #4 Page 36 of 100
May 11, 2021
Item #4 Page 37 of 100
May 11, 2021
Item #4 Page 38 of 100
May 11, 2021
Item #4 Page 39 of 100
May 11, 2021
Item #4 Page 40 of 100
May 11, 2021
Item #4 Page 41 of 100
May 11, 2021
Item #4 Page 42 of 100
May 11, 2021
Item #4 Page 43 of 100
May 11, 2021
Item #4 Page 44 of 100
May 11, 2021
Item #4 Page 45 of 100
May 11, 2021
Item #4 Page 46 of 100
May 11, 2021
Item #4 Page 47 of 100
May 11, 2021
Item #4 Page 48 of 100
May 11, 2021
Item #4 Page 49 of 100
May 11, 2021
Item #4 Page 50 of 100
May 11, 2021
Item #4 Page 51 of 100
May 11, 2021
Item #4 Page 52 of 100
May 11, 2021
Item #4 Page 53 of 100
May 11, 2021
Item #4 Page 54 of 100
May 11, 2021 Item #4 Page 55 of 100
May 11, 2021
Item #4 Page 56 of 100
May 11, 2021
Item #4 Page 57 of 100
May 11, 2021
Item #4 Page 58 of 100
May 11, 2021
Item #4 Page 59 of 100
May 11, 2021
Item #4 Page 60 of 100
May 11, 2021
Item #4 Page 61 of 100
May 11, 2021
Item #4 Page 62 of 100
May 11, 2021
Item #4 Page 63 of 100
May 11, 2021
Item #4 Page 64 of 100
May 11, 2021
Item #4 Page 65 of 100
May 11, 2021
Item #4 Page 66 of 100
May 11, 2021
Item #4 Page 67 of 100
May 11, 2021
Item #4 Page 68 of 100
May 11, 2021
Item #4 Page 69 of 100
May 11, 2021
Item #4 Page 70 of 100
May 11, 2021
Item #4 Page 71 of 100
May 11, 2021
Item #4 Page 72 of 100
May 11, 2021
Item #4 Page 73 of 100
May 11, 2021
Item #4 Page 74 of 100
May 11, 2021
Item #4 Page 75 of 100
May 11, 2021
Item #4 Page 76 of 100
May 11, 2021
Item #4 Page 77 of 100
May 11, 2021 Item #4 Page 78 of 100
May 11, 2021
Item #4 Page 79 of 100
May 11, 2021
Item #4 Page 80 of 100
May 11, 2021
Item #4 Page 81 of 100
May 11, 2021
Item #4 Page 82 of 100
May 11, 2021
Item #4 Page 83 of 100
May 11, 2021
Item #4 Page 84 of 100
May 11, 2021
Item #4 Page 85 of 100
May 11, 2021
Item #4 Page 86 of 100
May 11, 2021
Item #4 Page 87 of 100
May 11, 2021
Item #4 Page 88 of 100
May 11, 2021
Item #4 Page 89 of 100
May 11, 2021
Item #4 Page 90 of 100
May 11, 2021
Item #4 Page 91 of 100
May 11, 2021
Item #4 Page 92 of 100
May 11, 2021
Item #4 Page 93 of 100
May 11, 2021
Item #4 Page 94 of 100
May 11, 2021
Item #4 Page 95 of 100
May 11, 2021
Item #4 Page 96 of 100
May 11, 2021
Item #4 Page 97 of 100
May 11, 2021
Item #4 Page 98 of 100
May 11, 2021
Item #4 Page 99 of 100
May 11, 2021 Item #4 Page 100 of 100