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SR-8-A (36) . t>~IfFr . i-A- ~Ri ~lt 1~ California CA:RMM:moxBO/hpw City Counci1 Meeting 4-24-90 Santa Monica, :; ,P. -r_:~ CO / v '-- STAFF REPORT 2or~tJ / TO: Mayor and City council FROM: City Attorney Ordinance Repealing Various sections of Chapters 1 and 2 of Article VI of the Santa Monica Municipal Code and Adding Subchapters LA, 18, lC, and 10 to Article VI of the Santa Monica Municipal Code Relating to Business License Taxes SUBJECT: At its meeting on March 27, 1990, the city Council directed the City Attorney to prepare an ordinance making substantive and technical changes to the city's Business License Tax Ordinance. In response to this direction, the accompanying ordinance has been prepared and is presented to the City Council for its consideration. The accompanying ordinance makes various substantive changes in the City's Business License Tax Ordinance by providing for new business license classifications and a new tax rate structure. All provisions of the current Code relating to business license tax administration, license classifications, and tax rates have been reorganized into a new chapter consisting of four subchapters. A subsequent ordinance will be returned to the City Council that makes various technical and housekeeping changes to remaining provisions of Article VI, such as police permit requirements and other regulatory provisions. The revision of these sections have no bUdgetary impact. The city Manager and - 1 - ?-A APR fn 4 J990 M~V 10qO "- '" . . 207--100/ city Attorney agreed that separate ordinances were appropriate because a single ordinance would have been well over 100 pages, making review by the city Council and the public more difficult. The tax rate changes made by the accompanying ordinance are summarized in Attachment 1. SECTION-BY-SECTION ANALYSIS Section 6000. Defini tions . The section was previously Section 6100. Several changes have been made to this Section, including: the definition of business has been expanded; a definition of City has been added; the definition of "evidence of doing business" has been changed; former Sections 6116B has been moved into this Section as a definition of "gross receipts"; and a new definition has been given to the term "independent contractor." The definition of business has been expanded to include commercial enterprise, vocation or other means of livelihood, whether or not they are carried on for gain or profi t. Receipts from subleasing have been included as gross receipts under the expanded definition of gross receipts, a new exempt category of fees for actual costs of governmental requirements paid by a licensee on behalf of a third party has been added, and former exclusions from the definition of gross receipts ( i . e., cash discounts; receipts of persons acting as agents or brokers; sales within a single business entity; income from incidental activities) have been deleted. Section 6001. License Required. This Section was formerly Section 6103 and has been amende.d to provide that a person operating any business specified in the Code must pay the - 2 - . . Z- t!/7--CJo/ required business tax and obtain the appropriate permits whether or not the business is carried on for qain or profit. Section 6002. Taxinq Power. This Section was formerly section 6104 and the only amendment was to qive this section a title. section 6003. Issuance of Licenses. This Section was formerly Section 6106, and has been amended to include a title for the entire section and for each subsection thereof. The fee for duplicate licenses has been increased to $10.00. Section 6004. Payment of License Fees. A new subsection (b) has been added to this section to require a charge of $10.00 for any check returned for lack of sufficient funds. Section 6005. Separate License for Each Place of Business. This Section was formerly part of Section 6107A. Clarification has been added that this provision is not applicable to businesses licensed under the classification of "Auto Dealers" per section 6052B. Section 6006. Separate License for Each Type of Business Activity. This section is new and provides that a separate business license is required for each business activity which comes within the purview of Chapter lB. Section 6007. Contractor Engaged in Business. This section was formerly Section 62120 and remains unchanged, except for a new title. section 6008. City Licensinq Requirements for Contractors or Owner-Builders. This Section was formerly section 6212D1 and remains unchanged, except for a new title. - 3 - . . ;ZO-:?-;-CJtJ I ~ection 6009. Builder Owners. This section was formerly Section 6212A and remains unchanged. Section 6010. Term of License. This Section was formerly section 6107B through O. This Section was amended to delete weekly licenses. Section 6011. Portion of License Period, No Pro-Ration. This Section was formerly part of section 6108. It has been revised to provide that no pro-ration shall be allowed for any type of license issued, whether annual, monthly or daily. Section 6012. Bond Requirement. This Section was formerly Section 6107E and remains unchanged. section 6013. Determination of Date Payment Made. This is a new Section which sets forth the method by which the City will determine the date of payment of license fees. Section 6014. Renewals. This is a new Section which provides that all delinquent business license taxes must be paid prior to renewal of a business license. In addition, it is the licensee's responsibility to obtain and pay for a renewal license, whether or not the licensee receives a renewal notice from the city. section 6015. Penalties for Late Payment and Non-Payment. This Section was formerly Sections 6109 and 6112. The Section combines the two sections into one and adds late payment provisions, including a penalty of 10% of the original license fee for each month that a license fee remains unpaid. Section 6016. Disabled Persons, Exemption. This Section was formerly Section 6100 and has been revised to provide that a person who is disabled within the meaning of any federal or state - 4 - . . 2.tJ?,.t?o I law may request and be issued a certificate of exemption from the payment of the business license for any retail, manufacturing, or wholesaling business in which he or she is engaged if the gross receipts of the business are less than Sixty Thousand Dollars ($60,000.00). section 6017. Exemption for Non-Profit Entity. This section was formerly Section 6111 and has been revised and expanded. References to "charity corporation or organization" have been changed to "non-profit corporation or organization" throughout this Section. In addition, a definition of non-profit corporation or organization has been added to this Section, as well as a paragraph which allows the Director of Finance to require documentation evidencing the non-profit status of an applicant. section 6018. Refunds. This section combines former sections 6113 and 6114, and makes two changes. The first change is that the period after which refunds may not be given has been extended from 90 days to one year to comply with state law. In addition, a subsection (c) has been added to provide that refunds will not be given on a business license if there are any delinquent fees outstanding, and any overpayment of business license fees shall first be applied to any delinquent fees. Section 6019. Effect of Prosecution. This Section was formerly Section 6115. Section 6020. Annual statement of Licensee. This Section was formerly Section 6116 and has been amended. Former Section 6116(b) has been deleted, which dealt with closely related businesses and non-related businesses at one location. A new - 5 - . . 7-0?-lJ ()/ provision has been added to provide that if a business is subject to a business license tax based upon qross receipts, an additional fee shall be charged based upon the annual qross receipts of the business at the time of license renewal. Section 6021. License Decals Required on Taxes and Vehicles for Hire. This Section was formerly Section 6119 and has been revised to eliminate references to City Clerk and substitute the Director of Finance. The location for affixing the required decal has also been amended. Section 6022. Gross Receipts Reporting Period. This Section was formerly Section 6116B(b) (1) and has been revised to remove the reference to 1986, thus making this Section apply to all taxes due. Section 6023. Apportionment. This Section was formerly section 6116(b) (d) (1)-(3) and remains unchanged. Section 6024. Revocation of License. This Section was formerly Section 6117 and remains unchanged. Section 6025. License to be Posted. This section was formerly Section 6118 and remains unchanged. section 6026. Business Tax Audit Proqram. This Section was formerly Section 6129 and remains unchanged. section 6030. Operation of 1990 Business License Tax Amendments. This is a new section that provides that the repeal of various Sections does not affect the prosecution for violations thereof which were commi tted prior to the date of repeal, nor will it affect the payment of any taxes due prior to the effective date of the Ordinance. This section provides that - 6 - . . 2 Pr.-tJ{) I the new license tax rates shall apply to all taxes due on or after July 1, 1990. section 6050. This Section describes the function of the new Chapter 1B, "Business Classifications," to the Santa Monica Municipal Code. section 6051. Determination of Business Classification. This is a new Section which provides that the Director of Finance will determine business classifications. section 6052. Business Taxed on Gross Receipts. This Section is new and provides that business classifications set forth in sections 6052A through 6052N shall pay a business license fee based upon gross receipts. sections 6052A. Aqent/Broker. This is a new Section which adds a new classification of Agent/Broker to the list of classifications which must pay business license fees based upon gross receipts. section 6052B. Auto Dealers. This is a new Section which adds a new classification of Auto Dealers to the list of classifications which must pay business license fees based upon gross receipts. Section Engineering). unchanged. Section 60520. Sub or Specialty Contractors and Building Trades. This Section was formerly Section 6212B and has been amended to include electrical contractor and plumbing as building trades falling within this classification. In addition, the 6052C. Contractors (General Building and This section was formerly section 6212 and remains - 7 - . . Z-t}?- 00/ surety bond for businesses engaged in the sewer trade has been increased from $1,000 to $5,000. section 6052E. Corporate or Administrative Headquarters. This is a new Section which adds the new classification of corporate or administrative headquarters to the list of businesses which must pay a business license fee based upon gross receipts. Section 6052F. Manufacturers. This Section was formerly part of Section 6226 and remains unchanged. section 6052G. Professions. This Section was formerly Section 6236 and the list of professions included within this classification has been modified by moving several professions to other classifications such as Services and Agent/Broker. Section 6052H. Recreation and Entertainment. This is a new Section which adds a new classification of recreation and entertainment to the list of businesses which must pay a business license fee based upon gross receipts. Section 60521. Rental of Non-Residential Property (Commercial Property). This Section was formerly Section 6219A and has been revised to include persons or entities who/which sublease. In addition, a provision has been added to require that gross receipts include 100$ of gross receipts from the rental of property and that separate licenses are required for each rental property. Section 6052J. Rental of Residential Property (Apartment, Hotel, Motel, Rooming House, Trailer Court, Auto Court). This Section was formerly Section 6129 and has been revised to include joint ventures and subleasing as activities included within this - 8 - . . 2 tJr/()() / category. In addition, gross receipts for these businesses shall include loot of gross receipts from such rentals, as well as all monies received from rental of furniture, parking spaces, and the like, monies received for payment of utilities, and monies received in connection with providing additional amenities. section 6052K. Retail. This section was formerly Section 6225, Included in this business classification are persons defined as "itinerant peddlers." A definition of "itinerant peddler I' is provided. section 6052L. Services. This Section was formerly Section 6240 and has been revised to include additional kinds of services within this business classification as well as revises definitions of some of the services listed. Section 6052M. Wholesalers. This Section was formerly part of section 6226 and remains unchanged. section 6052N. utilities. This Section was formerly section 6225A and remains unchanged. Section 6053. Businesses Taxed at Flat Rates. This is a new section which provides that the business classifications set forth in Sections 6053A through 60530 shall pay a business license tax based upon the flat annual rate indicated. Section 6053A. Delivery Pick-Up. This Section was formerly Section 6214 and remains unchanged. Section 6053B. Special Event. This Section adds a new classification of business which must pay a business license tax based upon gross receipts. This section applies to recreation, entertainment, cultural, and educational events and exhibitions - 9 - . . t-& 7--- O() I conducted from a non-permanent location for a limited period of time. Section 6053C. Taxi Cabs. This section was formerly section 6400(a) and remains unchanged. Section 6060. This Section is new and sets forth the schedule of license fees by business classifieation and tax rate groups. All license fees have been increased. The tax rate for Tax Rate Group I is $75.00 for less than $60,000 of gross receipts with an additional $1.25 for each $1,000 of gross receipts over $60,000. Businesses includes in this Tax Rate Group are: auto dealers, corporation or administrative headquarters, manufacturers, recreation and entertainment, rental of non-residential property, rental of residential property, retail, utilities, and wholesalers. The tax rate for Tax Rate Group II is $75.00 for less than $60,000 of gross receipts with an additional $3.00 for each $1,000 of gross receipts over $60,000. The businesses included in this Tax Rate Group are: agent/brokers, contractors, builder - owners, services, and sub or specialty contractors. The tax rate for Tax Rate Group III is $75.00 for less than $60,000 of gross receipts with an additional $5.00 for each $1,000 of gross receipts over $60,000. Included in this Tax Rate Group are all businesses included within the "professions" business classification. The tax rate for Tax Rate Group IV is $150 for each day or fraction of any day in which business is conducted. All business categories included in the "special event" business classification are included in this Tax Rate Group. - 10 - . . 'Z07--oD( The tax rate for Tax Rate Group V is $50 per vehicle per year. The "delivery pick-up" business classification is included in this Tax Rate Group. The tax rate for Tax Rate Group VI is $250 per vehicle per year. The "taxi cab" business classification is included in this Tax Rate Group. section 6070. Appeals. This section was formerly Section 6124 and has been amended to add a new subsection (b), which provides that there is no right of appeal as to the determination as to the business classification designated and as to the amount of any tax, fee, interest, or penalties due. Section 6071. Void License or Permit. This Section was former Section 6125 and remains unchanged. Section 6072. Appeal Procedure. This Section was former Section 6126 and remains unchanged. SECTION 2. This section repeals various Sections of Article VI of the Santa Monica Municipal Code pertaining to the business license regulations of the City. The Sections which conflict with the above set forth new Sections have been repealed. SECTIONS 3, 4 r AND 5. These sections are the standard ordinance sections pertaining to inconsistency, unconstitutionality, and effective date of the ordinance. RECOMMENDATION It is respectfully recommended that the accompanying ordinance be introduced for first reading. PREPARED BY: Robert M. Myers, City Attorney Linda A. Moxon, Deputy City Attorney - 11 - . ATTACHMENT 1 . j-O 7--0 0 I . . ~ o"'r-OO I 0 S Q 8 0 8: 0 0 0 0 8 g 0 0 <::I 0 0 0 <::I <::I 0 <::I <::I 0 0 0 = 0 0 0 <::I ..0 '" '" ..0 ..0 '" '" '" '" ..,. ..,. 0- ..,. ..,. 0 <t)o ..,. <J> ^ ^ ^ ^ ^ ^ ^ ^ ^ 8: <:I 8. 8: 8 8 8 0 8: 8: <:I O. ~ O. Q. Q. ... .... ... ... .... ... .... ... - 00 ..,. <h 00 00 0 00 <J> 00 ..... ..... ...... ..... ..... ..... ...... ..... ..... '" .... .... .... ", .... 8 Q 0 N N ~ N. ~ .... Q 0 I - - ... ... - ... 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